Barry Schwartz

DEPOSITION OF BARRY S. SCHWARTZ

LEGALINK-HOUSTON 713-426-0400

Page 11 IN THE DISTRICT COURT OF HARRIS COUNTY

2 IN AND FOR THE STATE OF TEXAS

3 ------------------------------x

4 WELLS FARGO BANK MINNESOTA, x

5 N.A., et al., x

6 Plaintiffs x Cause No.

7 v. x 2202-13057

8 MONDONA RAFIZADEH, et al., x

9 Defendants x

10 ------------------------------x

11 AND RELATED COUNTERCLAIM x

12 ------------------------------x

13

14 Videotaped Corporate Deposition of Wells Fargo

15 Bank Minnesota, N.A., by and through its

16 Corporate Designee,

17 BARRY S. SCHWARTZ

18 Columbia, Maryland

19 Monday, January 5, 2004

20 9:12 A.M.

21

22 Job No. 22-27801

23 Pages 1 - 176

24 Reported by: Sharon D. Livingston, CSR-RPR

25 Videotaped by: Larry Newman



Page 21 Videotaped Corporate Deposition of Wells

2 Fargo Bank Minnesota, N.A., by and through its

3 Corporate Designee, BARRY S. SCHWARTZ, held at the

4 offices of:

5

6 WELLS FARGO BANK MINNESOTA, N.A.

7 9062 Old Annapolis Road

8 Columbia, Maryland 21045-1951

9 (410) 884-2000

10

11 Pursuant to Notice, Court Order and

12 Agreement, before Sharon D. Livingston, Registered

13 Professional Reporter and Notary Public in and for

14 the State of Maryland.

15

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25



Page 31 A P P E A R A N C E S

2

3 ON BEHALF OF THE PLAINTIFFS AND

4 COUNTERDEFENDANTS:

5 PAUL SIMON, ESQUIRE

6 WINSTEAD, SECHREST & MINICK, P.C.

7 2400 Bank One Center

8 910 Travis Street

9 Houston, Texas 77002

10 (713) 650-2663

11

12 ON BEHALF OF THE DEFENDANTS AND

13 COUNTERPLAINTIFFS:

14 MATT E. RUBIN, ESQUIRE

15 WILLIAMS, BIRNBERG & ANDERSON, LLP

16 6671 Southwest Freeway, Suite 303

17 Houston, Texas 77074-2284

18 (713) 981-9595

19

20 Also Present: Schumann Rafizadeh

21

22

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24

25



Page 41 C O N T E N T S

2 EXAMINATION OF BARRY S. SCHWARTZ PAGE

3 By Mr. Rubin 7

4

5 E X H I B I T S

6 (Attached to Deposition Transcript)

7 WELLS FARGO EXHIBITS PAGE

8 WF-1 Letter 4-8-03 from Simon to Rubin 15

9 WF-2 Consolidated Reports of Condition and 23

10 Income for a Bank with Domestic and

11 Foreign Offices FFIEC 031

12 WF-3 Consolidated Reports of Condition and 24

13 Income for a Bank with Domestic and

14 Foreign Offices FFIEC 031

15 WF-4 Wells Fargo & Company Policy CBKG 800 24

16 Problem Asset Management

17 WF-5 Wells Fargo & Company Annual Report 34

18 2002

19 WF-6 Downloaded pages from Wells Fargo 40

20 website

21 WF-7 Wells Fargo Bank Minnesota, N.A.'s 48

22 Objections and Answers to Defendant

23 Cyrus II Partnership's First

24 Interrogatories and Requests for

25 Production



Page 51 C O N T E N T S C O N T I N U E D

2 E X H I B I T S

3 (Attached to Deposition Transcript)

4 WELLS FARGO EXHIBITS PAGE

5 WF-8 Amended Notice to Take Videotaped 81

6 Oral Deposition

7 WF-9 Fitch Ratings Structured Finance 88

8 document

9 WF-10 Merrill Lynch Mortgage Pass-Through 102

10 Certificates Series 1999 C1

11 WF-11 Affidavit of Brian Smith 107

12 WF-12 CMBS Basic Overview 167

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25



Page 61 P R O C E E D I N G S

2 THE VIDEOGRAPHER: Here begins tape number

3 1 in the deposition of Mr. Barry Schwartz, in the

4 matter of Wells Fargo, et al. versus Rafizadeh, et

5 al., in the District Court of Harris County, Texas,

6 Case Number 2002-13057. Today's date is Monday,

7 January 5th, 2004. The time is 9:12 A.M. The video

8 operator today is Larry Newman, contracted by

9 LegaLink Houston. This video deposition is taking

10 place at 9062 Old Annapolis Road, Columbia, Maryland

11 21045, and was noticed by Matt Rubin, counsel for the

12 defendants.

13 Would counsel please identify themselves

14 and state whom they represent.

15 MR. RUBIN: Yes. My name is Matt Rubin. I

16 represent the defendants, Cyrus II Partnership, Bahar

17 Development and Mondona Rafizadeh, defendants and

18 counterplaintiffs to be precise.

19 MR. SIMON: My name is Paul Simon. I

20 represent Wells Fargo and ORIX, plaintiffs and

21 counterdefendants.

22 THE VIDEOGRAPHER: Our court reporter today

23 is Sharon Livingston, contracted by LegaLink

24 Houston.

25 BARRY S. SCHWARTZ,



Page 71 having been duly sworn, testified as follows:

2 EXAMINATION BY COUNSEL FOR

3 DEFENDANTS AND COUNTERPLAINTIFFS

4 BY MR. RUBIN:

5 Q Will you please give us your full name.

6 A Barry Spencer Schwartz.

7 Q Good morning, Mr. Schwartz. My name is

8 Matt Rubin. You and I have just met for the first

9 time about 15 minutes ago here at the offices of

10 Wells Fargo in Columbia, Maryland, and I understand

11 that you are here today as the designated

12 representative to testify on behalf of the plaintiff

13 and counterdefendant, Wells Fargo Bank Minnesota,

14 N.A. Is that your understanding?

15 A Yes.

16 Q All right, sir. Let's go through a few

17 preliminaries before we actually get into the

18 substance of the questioning.

19 First, have you ever given a deposition

20 before?

21 A Yes.

22 Q On about how many occasions?

23 A Two different separate -- two different

24 occasions.

25 Q And was that for Wells Fargo?



Page 81 A Yes.

2 Q Can you tell me what kind of cases or

3 circumstances those were in which you gave prior

4 depositions?

5 A I'm not sure what you're asking.

6 Q Were you a corporate representative? Were

7 you involved in a particular loan? Why were you

8 being deposed in those two cases, in other words?

9 A I was in one matter being deposed, there

10 was some issue relating to an individual loan.

11 Another matter, it was litigation relating to some

12 hazard insurance matters on an individual loan.

13 Q Have you ever given testimony in the

14 capacity or the role, if you will, as a designated

15 corporate representative for Wells Fargo Bank?

16 A I honestly don't recall.

17 Q Fair enough. Having been through this a

18 couple of times then, I presume you have at least

19 some understanding of the nature of the deposition

20 proceeding, what it is we're doing here today?

21 A Yes.

22 Q You understand that the videographer is

23 videotaping your testimony, the court reporter is

24 transcribing it, and that this can be used in court

25 in accordance with the Texas rules as though you were



Page 91 testifying live?

2 A Yes.

3 Q Do you understand that the oath you have

4 given to the court reporter is exactly the same as

5 the one you would give in court; it carries with it

6 the same obligations of truthfulness and candor and

7 the same penalties of perjury if your testimony is

8 not truthful?

9 A Yes, I understand that.

10 Q I'm not suggesting that it won't be, just

11 that that's the way this proceeding progresses.

12 This is not meant to be an inquisition,

13 any kind of endurance contest. This is a fairly

14 informal setting, and I'll be happy to accommodate

15 any reasonable request you might have. If you need

16 to take a break, get some coffee, use the rest room,

17 whatever, just ask me, and I'm sure we can

18 accommodate. The only exception I would make to that

19 is if I have a question out there, I would like you

20 to answer it before we break. All right?

21 A I understand.

22 Q Good. You're doing very well so far in

23 answering your questions. The court reporter needs a

24 verbal answer; a yes, a no, an explanation, as

25 opposed to a nod or a shake or whatever, because they



Page 101 don't have a key that will record that. So if you

2 will make an effort to make your answers verbal, and

3 we'll have a cleaner record that way.

4 A I understand.

5 Q Good. And then finally, all that we're

6 trying to do here is ascertain what you know on

7 behalf of the Wells Fargo entity on certain matters

8 related to this lawsuit. I want this record to be as

9 accurate as possible. To do that, I want to be

10 comfortable that you have understood what it is that

11 I'm asking before you answer any question.

12 So will you agree with me that if there's

13 something you don't understand, you're not

14 comfortable with, you want clarification, you will

15 stop me and ask me to rephrase it?

16 A Yes.

17 Q Can we assume then that any question that

18 you answer today you're comfortable, you understand,

19 and that you're prepared to answer?

20 A Yes.

21 Q Great. All right. Let's go ahead then and

22 get some basic information established.

23 First, do you understand how it is that you

24 came to be selected as the corporate representative

25 to speak on behalf of Wells Fargo Bank today?



Page 111 A Yes.

2 Q Please tell me about that.

3 A Well, it has to do with my role in the

4 organization relative to the matter at hand.

5 Q All right. Let's follow up on that then.

6 What is your role in the organization

7 relative to this particular lawsuit and this

8 particular dispute?

9 A I'm responsible for the coordination of the

10 services we provide as trustee for commercial

11 mortgage-backed securities.

12 Q Now, we see in a lot of the documents the

13 initials CMBS. I take it that's the commercial

14 mortgage-backed securities? Is that an acronym for

15 it?

16 A Yes, that's what that acronym stands for,

17 yeah.

18 Q Okay. And what is your actual position or

19 title, Mr. Schwartz?

20 A Vice president.

21 Q Of what?

22 A Well, vice president and client manager of

23 CMBS.

24 Q And for what entity do you actually work?

25 A Wells Fargo Bank Minnesota, N.A.



Page 121 Q All right. What is the nature as far as

2 you know it of the organization of Wells Fargo Bank

3 Minnesota, N.A.? What kind of entity is it?

4 A It's a national banking association.

5 Q And we have seen in a number of the

6 documents a reference to Norwest Bank of Minnesota as

7 somehow having been involved both with this loan and

8 with the pool of which this loan is a part.

9 Do you have any understanding of the nature

10 of the relationship if any between Wells Fargo Bank

11 Minnesota, N.A. and the Norwest Bank?

12 MR. SIMON: Objection, form.

13 A Yes.

14 Q What's the connection between the two?

15 A Norwest Bank Minnesota, N.A. changed its

16 name to Wells Fargo Bank Minnesota, N.A. We are in

17 fact the same entity.

18 Q Okay.

19 A We were formerly known as Norwest Bank

20 Minnesota, N.A.

21 Q Very good. That's what I thought, but I

22 wanted to make sure about that.

23 Now, let me ask you something about the

24 capacity or the function of Wells Fargo Bank

25 Minnesota.



Page 131 Is there a separate legal entity known as

2 Wells Fargo Bank Minnesota, N.A., trustee, as far as

3 you know?

4 A No.

5 Q Has there ever been a separate legal entity

6 known as Wells Fargo Bank Minnesota, N.A., trustee,

7 as far as you know?

8 A No.

9 Q Would it be fair to say that the trustee

10 designation in the caption of this case and on the

11 documents simply describes a capacity in which Wells

12 Fargo Bank is serving or performing certain

13 functions?

14 A Because I'm not a lawyer, I'm not really

15 sure.

16 Q Give me your best understanding.


18 A I'm not sure that I understand what you're

19 asking. We do provide the service as trustee, and I

20 understand that there's some legal connection in the

21 sense that when we say Wells Fargo Bank Minnesota,

22 N.A. as trustee, it means as trustee on behalf of

23 certain investors, and we're acting in the capacity

24 representing the trust.

25 Q Yes, sir. I understand. I'll object to



Page 141 that as nonresponsive.

2 Let's try and get to it this way.

3 You've said there has never been to your

4 knowledge any separate legal entity, Wells Fargo Bank

5 of Minnesota, N.A., trustee, correct?

6 A Yes.

7 Q All right. So we have an entity --

8 Well, does Wells Fargo Bank of Minnesota

9 engage in banking activities other than the type of

10 CMBS securitizations in which you're involved?

11 A Yes.

12 Q What else do they do?

13 A I don't have complete knowledge of

14 everything that Wells Fargo Bank Minnesota, N.A.

15 does.

16 Q Tell me what you do know.

17 A Well, I know that we're a nationally

18 chartered banking association. We provide, I know,

19 retail banking services, and we also provide banking

20 services to commercial customers, and we have a

21 number of fee-based businesses, service businesses,

22 in addition to that.

23 Q Where does the CMBS services, if you

24 will -- is it a division, department? What term

25 would you be comfortable with?



Page 151 A Are you referring to the set of my

2 responsibilities?

3 Q I'm trying to find out if there's a

4 separate division, department, organization within

5 Wells Fargo Bank of Minnesota, N.A. that is

6 responsible for or handles the CMBS transactions.

7 Just trying to get an organizational structure sense

8 at this point.

9 A Okay. There's a division known as

10 corporate trust services.

11 Q And is that the division with which you are

12 associated?

13 A That's correct.

14 Q Very good.

15 (Exhibit WF-1 was marked for identification

16 and attached to deposition transcript.)

17 BY MR. RUBIN:

18 Q Mr. Schwartz, let me show you what I've

19 marked as Exhibit WF-1, WF for Wells Fargo. It's an

20 April 8th, or to be precise, a copy of an April 8th,

21 2003 fax to me from Paul Simon.

22 I've got a copy for you, Paul.

23 And if you'll take a look at that, read

24 through it, and I'll have a couple of questions for

25 you.



Page 161 A Okay.

2 Q All right. I can tell you the background

3 of this.

4 Well, first, let me ask you have you ever

5 seen this before, this particular letter?

6 A I don't think so.

7 Q The background of it arose from some

8 discovery issues in this case about both parties

9 being ordered by the court to produce certain

10 documents, and in response to the court's order, I

11 received this letter from Mr. Simon purporting to

12 clarify certain issues about who the plaintiff was

13 and what documents the plaintiff had. Mr. Simon

14 says, first, we do not represent and have never

15 represented Wells Fargo Bank Minnesota, N.A. in

16 connection with this litigation.

17 Is that your understanding?


19 A I'm not sure where -- let me find where

20 you're talking about.

21 Q Yes, sir. It's the concluding sentence of

22 the first paragraph.

23 A And what is your question?

24 Q The direct question is does the Winstead

25 firm represent the national banking association of



Page 171 Wells Fargo Bank Minnesota, N.A. in this case?

2 A Yes.

3 Q So the statement that we do not represent

4 and have never represented Wells Fargo Bank

5 Minnesota, N.A. in connection with this litigation is

6 not accurate --


8 BY MR. RUBIN:

9 Q -- as you understand it?

10 MR. SIMON: Matt, hold on a second.

11 MR. RUBIN: Sure.

12 MR. SIMON: He's answered this question

13 about three different ways. He said the statement is

14 inaccurate. I don't know how much you want to beat

15 him up about this. There's a subsequent letter that

16 clarifies this point.

17 MR. RUBIN: Paul.

18 MR. SIMON: This is about the third

19 question you've asked him on this same subject.

20 MR. RUBIN: Let's make our objections

21 according to the rules. Okay? I understand, but

22 let's just do it the right way.

23 MR. SIMON: Okay. Objection, form. Don't

24 answer it.

25 MR. RUBIN: All right.



Page 181 MR. SIMON: I think you have your answer.

2 MR. RUBIN: I understand your point.

3 BY MR. RUBIN:

4 Q Continuing, the April 8th letter says,

5 quote, a representative of the trustee has now

6 advised that, number one, the trust and the bank are

7 separate legal entities, unquote.

8 Is that an accurate or an inaccurate

9 statement that the trust and the bank are separate

10 legal entities?


12 A Well, I'm not a lawyer, as I said before,

13 but Wells Fargo Bank Minnesota is a trustee -- I

14 mean -- I'm sorry -- Wells Fargo Bank Minnesota is a

15 bank, and we do provide trustee services and act as a

16 trustee.

17 Q Right. But the statement as far as you

18 know that the trust and the bank are separate legal

19 entities is simply not correct, is it?


21 A I do understand based upon a letter that I

22 saw, my counsel gave recently, that that's not

23 correct.

24 Q All right. It wasn't correct on April 8th

25 of 2003, was it?



Page 191 MR. SIMON: That's the sixth time you've

2 asked this question, Matt. Can we move along?

3 MR. RUBIN: If we want to make our plane,

4 Paul, it would be helpful if I just got the questions

5 and he answered them. I know it's not comfortable,

6 but --

7 MR. SIMON: I don't car.

8 MR. RUBIN: -- my clients have answered

9 plenty of uncomfortable questions too.

10 MR. SIMON: This letter's been clarified.

11 You've asked him about six times whether the trust

12 and the trustee are separate legal entities. He's

13 answered that question. He's not a lawyer. He

14 doesn't know the answer. He's given you the answer

15 that he's given you.

16 MR. RUBIN: But he's here to testify about

17 document production, and this includes the

18 completeness or complete -- the responsiveness of the

19 correct plaintiff to the document production order.

20 MR. SIMON: Fair enough, but the letter

21 that I just sent you last week clarifies this one in

22 sum and substance.

23 MR. RUBIN: Paul, this is not proper, and

24 you know it, on the record to do this.

25 MR. SIMON: Do you want to go off the



Page 201 record and do it?

2 MR. RUBIN: I know what your letter says,

3 and I'm trying to get an explanation for why for nine

4 months there was this confusion, and I'm entitled to

5 get into it. Okay?

6 MR. SIMON: Just move along.

7 MR. RUBIN: Because as you know, I have

8 taken the position all along that it's preposterous

9 for this entity to claim it's a separate entity, and

10 that apparently is true, and I want to find out how

11 it happened.

12 MR. SIMON: Let's go off the record.

13 MR. RUBIN: Okay.

14 THE VIDEOGRAPHER: The time is 9:29. We'll

15 go off the video record.

16 (Discussion off video and written records.)

17 THE VIDEOGRAPHER: The time is 9:30. We're

18 back on the video record.

19 BY MR. RUBIN:

20 Q Do you know if Wells Fargo Bank -- I'm

21 sorry -- if Norwest Bank of Minnesota ever made

22 commercial loans secured by real property?

23 A Can I clarify something, please?

24 Q Sure.

25 A There's no of in the name of the entity



Page 211 that I represent. So I just wanted to clarify it's

2 Wells Fargo Bank Minnesota.

3 Q Didn't I refer to Norwest? I'm sorry.

4 A Yeah, I believe you referred to Norwest

5 Bank of Minnesota.

6 Q Is it just Norwest Bank?

7 A It's Norwest Bank Minnesota.

8 Q Thank you for that clarification.

9 A Okay. What is your question? I'm sorry.

10 Q Do you know if Norwest Bank Minnesota ever

11 made commercial loans secured by real estate?

12 A I believe that they have.

13 Q Do you know if Norwest Bank Minnesota had

14 any policies or procedures in place governing the

15 servicing or the administration of such loans?

16 A Yes.

17 Q They did?

18 A Yes.

19 Q Have those been produced in this case?

20 A Yes.

21 Q The entirety of the Norwest policies and

22 procedures have been produced in this case?

23 A I guess I'm confused that you're referring

24 to Norwest. We're the same entity, so it's really

25 one and the same corporate entity. So I don't



Page 221 understand the distinction between Wells Fargo and

2 Norwest.

3 Q All right. Let me ask it this way.

4 Is Wells Fargo Bank Minnesota, N.A. subject

5 to the same policies, practices, procedures that are

6 promulgated by the Wells Fargo parent company for the

7 administration and operation of its banks?

8 A I don't know.

9 Q Are there any policies, practices or

10 procedures promulgated by Wells Fargo & Company

11 dealing with loan administration, loan servicing or

12 CMBS servicing?

13 A I don't know.

14 Q Who would know?

15 MR. SIMON: Matt, can you ask the question

16 again? Are you asking has Wells Fargo Bank

17 promulgated such policies?

18 MR. RUBIN: I'm talking about the parent

19 company.

20 MR. SIMON: Right. He's not here on behalf

21 of the parent company.

22 MR. RUBIN: He might know.

23 A Yeah, a representative. In answer to your

24 question, a representative of Wells Fargo Bank &

25 Company, the parent of Wells Fargo Bank Minnesota,



Page 231 N.A., would know that, or else people who are

2 involved with Wells Fargo Bank Minnesota, N.A. in the

3 actual administration of commercial mortgage loans

4 would know that.

5 Q So there would be people who are employed

6 by the named plaintiff, Wells Fargo Bank Minnesota,

7 N.A., in commercial loan servicing?

8 MR. SIMON: Objection to form. He didn't

9 say that.

10 A I'd have to clarify that I used the word

11 administration of such loans. As far as I

12 understand, Wells Fargo Bank Minnesota, N.A. does not

13 service commercial mortgage loans.

14 Q Do you have any idea of the volume or face

15 amount of commercial loans that Wells Fargo Bank

16 Minnesota has in its portfolio?

17 A No.



20 BY MR. RUBIN:

21 Q Let me show you what I've marked as Exhibit

22 WF-2. It's a copy of the 12-31, 2002 consolidated

23 report of condition, the FFIEC 031 form.

24 I've got one for you, Paul.

25 MR. SIMON: Thank you.



Page 241 MR. RUBIN: Yeah, sure. You're welcome.

2 That's the income statement, and there's a balance

3 sheet.

4 (Exhibits WF-3 and WF-4 were marked for

5 identification and attached to deposition

6 transcript.)

7 BY MR. RUBIN:

8 Q And I'll show you as Wells Fargo 4 a

9 document with the production code in this case WFB

10 001133, something called Problem Asset Management,

11 and let me ask you some questions about those

12 documents.

13 First, do you recognize what WF-2 and WF-3

14 are?

15 A No.

16 Q All right.

17 A I don't believe I've ever seen anything

18 like these documents.

19 Q All right. Well, I'll tell you they came

20 from the SEC website --

21 MR. RUBIN: Was it SEC?

22 MR. RAFIZADEH: Uh-huh.

23 BY MR. RUBIN:

24 Q -- filed on behalf of the entity, Wells

25 Fargo Bank Minnesota, National Association, with FDI



Page 251 certificate numbers for the 12-31-02 close of

2 business. Wells Fargo 3, the balance sheet, reflects

3 21 billion, 79 million, 237 thousand dollars in loans

4 and leases held for sale.

5 Do you have any --

6 MR. SIMON: Where are you reading from,

7 Matt?

8 MR. RUBIN: It's Exhibit 3, Schedule RC,

9 line 4A.

10 BY MR. RUBIN:

11 Q Do you see that?

12 A I do see that, yeah.

13 Q Have any reason to doubt that that figure

14 is accurate?

15 MR. SIMON: Objection to form.

16 A I have no knowledge of what goes into that.

17 Q Isn't it part of Wells Fargo's policies to

18 accurately report financial data and information to

19 regulatory agencies?


21 A I don't know all of the bank's policies.

22 Q Let me ask you what you do know about the

23 bank's policies. Is there a --


25 BY MR. RUBIN:



Page 261 Q Well, is there some sort of master list of

2 policies or some master policies and procedures

3 manual that's available to Wells Fargo Bank

4 Minnesota, N.A.?

5 A There is a policy manual.

6 Q All right. And tell me what does it look

7 like? What's it called? How big is it?

8 A Couldn't tell you how big it is. I've only

9 ever accessed it electronically. And it's called the

10 policy manual as far as I know.

11 Q How would you access that electronically?

12 A Through internal bank, you know, computer

13 records. I don't know exactly how to say it. It's

14 on our internal network.

15 Q Is it just an icon or a file you click and

16 access into it, something like that?

17 A There's a way to access it in our secure

18 environment.

19 Q All right. Do you know if there's a hard

20 copy that exists any place?

21 A I don't know.

22 Q Do you know how it is categorized or

23 subdivided, different sections, different headings,

24 different topics?

25 A Not off the top of my head. I've looked at



Page 271 it briefly, but it's not something that's referred to

2 regularly in the course of my business dealings.

3 Q Is the entire policy manual accessible to

4 you?

5 A I believe so.

6 Q So it's not like you only can access

7 certain portions of it that may be germane to CMBS

8 activities?

9 A That's correct.

10 Q All you have to do is go into it, find the

11 right section, enter whatever security code you need

12 to enter, and you can access it. Would that be

13 correct?

14 A Yeah, that's pretty much it.

15 Q And does this set of policies, policy

16 manual, apply as far as you know to the operations

17 and conduct of the plaintiff, Wells Fargo Bank

18 Minnesota, N.A.?

19 A Yes.

20 MR. SIMON: Excuse me. Objection. Can you

21 clarify what you're asking there? You say does it

22 apply to them?

23 MR. RUBIN: Sure.

24 MR. SIMON: In their role as trustee or in

25 general?



Page 281 MR. RUBIN: You know, Paul, that I have a

2 problem with this role of trustee.

3 BY MR. RUBIN:

4 Q I think the witness has answered that this

5 policy manual applies to the -- generally to the

6 operations and activities of Wells Fargo Bank

7 Minnesota, N.A., does it not?

8 A Yes, the policy manual of Wells Fargo Bank

9 Minnesota, N.A. does relate to how we conduct our

10 business certainly. That's why it's there.

11 Q That makes perfect sense.

12 Is there a policy manual or policy set --

13 Let me ask it this way.

14 Is that the only set of policies that apply

15 as far as you know to the conduct and activities of

16 Wells Fargo Bank Minnesota, N.A.?

17 A No.

18 Q What else does?

19 A I believe that individual divisions of the

20 bank have their own policy manuals depending upon

21 their line of business.

22 Q Does your --

23 A We're a very large organization with many

24 lines of business. I'm certainly not familiar with

25 how each of them operate.



Page 291 Q Fair enough.

2 Does your corporate trust services division

3 that handles the CMBS transactions have any policies

4 or procedures in existence?

5 A Yes.

6 Q What are those called?

7 A Corporate trust policy manual.

8 Q And to what extent does that deal with CMBS

9 activities, if you can give me a general sense?

10 A Well, I believe it deals with the general

11 activities of a corporate trustee, but I don't

12 believe anything in that manual is specific to the

13 CMBS product.

14 Q Tell me what you know about the general

15 promulgation of policies by Wells Fargo & Company,

16 the parent. You recognize that's the parent entity,

17 right?

18 A Yes.

19 Q Do you know if Wells Fargo & Company has

20 policies that it regards as being applicable to the

21 operations of all subsidiaries?

22 A I don't know the answer to that.

23 Q Have you ever seen any policies that were

24 not specific to Wells Fargo Bank Minnesota, N.A. that

25 apply to that bank's operations?



Page 301 A I'm not sure I understand the question.

2 Q I'm trying to find out if there is some

3 sort of master set of policies that would have been

4 distributed or promulgated by the parent that apply

5 to the operations of subsidiaries, including

6 Wells Fargo Minnesota.

7 A I don't know the answer. I just don't know

8 that.

9 Q Who would know that?

10 A I -- somebody -- I don't know who would

11 know that. I'm sure that there are people in

12 Wells Fargo & Company, the parent company, that would

13 know how that's done.

14 Q But as the designated representative of

15 Wells Fargo Minnesota today, you can't say the extent

16 to which the parent's policies are supposed to apply

17 to this subsidiary; is that right?


19 A This subsidiary that you're referring to is


21 Q That's my understanding, sir.

22 A Okay. Yes. Okay. I just wanted to make

23 sure that I understood what we're talking about here.

24 Q Sure.

25 A I do not know at the level of policies that



Page 311 are promulgated by the parent company to what extent

2 they apply or don't apply to the individual Wells

3 Fargo Bank Minnesota entity.

4 Q Do you think that Wells Fargo & Company,

5 the parent, is a prudent and reasonable institution?


7 A Yes.

8 Q Do you think that its policies, practices

9 and procedures are prudent and reasonable to the

10 extent that you have any knowledge of what they are?

11 A I did not hear the end of your question.

12 Q Let me ask it again.

13 Would you expect that the commercial

14 lending and servicing practices of Wells Fargo &

15 Company would be reasonable and prudent and in

16 conformity with industry standards?

17 MR. SIMON: Matt?

18 MR. RUBIN: Yes.

19 MR. SIMON: Is this one of the topics on

20 your list here?

21 MR. RUBIN: I think it is, Paul. Let him

22 answer the question, and I'll tell you where it fits

23 in.

24 A I think you're asking me to conjecture, and

25 I'm not sure that that's appropriate in this forum.



Page 321 Q Well, sir, the question of the servicing

2 standard and how this loan was supposed to be

3 administered and how any master or special servicer

4 is supposed to administer loans is essential, it's

5 central to this case, in all candor, and I don't mind

6 telling you what I'm trying to find out.

7 Do you think that Wells Fargo, the parent,

8 in its administration of its mortgage servicing

9 portfolio engages in practices that are reasonable,

10 prudent and in conformity with prevailing industry

11 standards?

12 MR. SIMON: Okay. Hold on a second. You

13 said you would let him answer, and then you would

14 tell me how this fits in. I'm not sure where Wells

15 -- where he's here to testify about what Wells Fargo

16 does or whether they're reasonable fits in.

17 MR. RUBIN: It all goes -- it's all part of

18 number 9. It's all part of number 9, the standards

19 to be utilized, employed or complied within the

20 administration or servicing of loans included in the

21 trust.

22 MR. SIMON: Which has nothing to do with

23 whether or not he thinks that they're reasonable and

24 prudent in their administration of a loan.

25 MR. RUBIN: Paul, are you going to let him



Page 331 answer it, or are we going to have to go back on

2 this? I mean he can answer the question.

3 MR. SIMON: He's already answered it. He

4 said he doesn't know. Actually he said yes, he

5 thought that they were.

6 BY MR. RUBIN:

7 Q Is that your testimony? You think that

8 the parent company is going to be commercially

9 reasonable in the way it administers loans?

10 A The parent company? I don't know that the

11 parent company administers loans.

12 Q All right.

13 A I mean I believe that you had asked me

14 about whether I believed that the policies of

15 Wells Fargo & Company would be prudent.

16 Q Are you aware, sir, that according to the

17 most recent annual report, that the consolidated

18 Wells Fargo entities distributed, they've got more

19 than 600 billion dollars in mortgage servicing -- or

20 mortgage serviced loans?

21 A I do know that we have a large --

22 MR. SIMON: Are you asking about Wells

23 Fargo Bank again?

24 BY MR. RUBIN:

25 Q Here's the problem.



Page 341 Are you aware that the Wells Fargo Banks

2 submit or prepare a consolidated annual report and

3 financial statement?

4 A Yes.

5 Q Okay. We're trying to find out at this

6 stage of the deposition about servicing standards,

7 and we'll get into a lot more detail about that

8 later, I promise you, but to the extent that

9 according -- and I'll mark this as the next exhibit

10 -- according to the December 31, 2002 annual report

11 of the consolidated Wells Fargo companies -- and

12 Paul, I do not have an extra copy of this one.



15 BY MR. RUBIN:

16 Q Mr. Schwartz, I've handed you what's been

17 marked as Wells Fargo 5.

18 Do you recognize this as the 2002 report?

19 A Yes.

20 Q Okay. Fancy printing and all, this is the

21 real deal, right?

22 A I'm not sure what that means.

23 Q It's an authentic copy of the December 2002

24 report for the consolidated Wells Fargo entities?

25 A It appears to be.



Page 351 Q All right. Turn with me, if you will, to

2 page 96 of the annual report. It's entitled, Note

3 22: Mortgage Banking Activities.

4 A Okay.

5 Q If you will look with me at the first full

6 paragraph after that table in the left-hand column,

7 it says, quote, the managed mortgage servicing

8 portfolio totaled 613 billion at December 31, 2002,

9 525 billion at December 31, 2001, and 468 billion at

10 December 31, 2000 --

11 A Uh-huh.

12 Q -- and included loans subserviced for

13 others of 36 billion, 63 billion and 85 billion

14 respectively.

15 That's what it says, right?

16 A Yeah. I believe you read it accurately.

17 Q Okay. Thank you.

18 And you have no reason to question the

19 accuracy of those figures, do you?

20 A No.

21 Q All right. So we now see that the

22 consolidated Wells Fargo entities have a mortgage

23 servicing portfolio of more than 600 billion dollars

24 as of the most recent reporting and subservicing of

25 36 billion dollars for others.



Page 361 My question is are there any policies,

2 practices or procedures in place as far as you know

3 that govern the administration of that 600 billion

4 dollars in the mortgage servicing portfolio?


6 A I can only conjecture. I don't know of any

7 policies that would relate to servicing mortgage

8 loans.

9 Q Is it really your testimony, sir, that in

10 the entire Wells Fargo organization there's not a

11 single policy that governs, constrains or addresses

12 how 600 billion dollars worth of loans are going to

13 be serviced?

14 MR. SIMON: Don't answer that question.

15 He's not here to talk about the entire Wells Fargo

16 organization, and you know that. The question asked

17 and the argument that we had before Judge Halbach was

18 whether or not he knew the extent to which these

19 policies would apply, and I told you he wouldn't

20 know. Judge Halbach said then he can say that. He's

21 given you that answer. If you don't like it, go back

22 to Judge Halbach.

23 MR. RUBIN: Are you instructing him not to

24 answer?

25 MR. SIMON: He's given you his answer,



Page 371 Matt.

2 MR. RUBIN: Well, he didn't answer that

3 question I don't think, unless I missed it. Could we

4 read that back?

5 MR. SIMON: Why don't you read the three

6 questions back from before.

7 MR. RUBIN: Well, now, Paul, look. That's

8 exactly --

9 MR. SIMON: Let's go back off the record,

10 Matt. We're going to close this thing down. Let's

11 go off the record for a second.

12 THE VIDEOGRAPHER: Our time is 9:52. We'll

13 go off the video record.




17 BY MR. RUBIN:

18 Q Mr. Schwartz, we're talking about

19 Wells Fargo and the extent to which any Wells Fargo

20 entities have mortgage servicing rights, obligations,

21 activities.

22 Based upon your years of experience in the

23 banking industry, would you expect that if there's a

24 600 billion dollar portfolio of serviced mortgage

25 loans in Wells Fargo, somewhere in Wells Fargo &



Page 381 Company, including the subsidiaries, that somewhere

2 there are policies, practices and procedures

3 addressing the servicing and administration of those

4 loans?


6 A I believe you asked me if I would expect

7 something. That seems to call for conjecture.

8 Do you want me to do that?

9 Q I'm not going to argue with you, sir.

10 Wouldn't it be reasonable to expect that if

11 there's a 600 billion dollar mortgage servicing

12 portfolio, that there are policies, practices and

13 procedures in place that govern the administration of

14 that portfolio?


16 A I'm not in a position to determine what

17 would be reasonable or not. I can certainly tell you

18 what I factually understand.

19 Q Can you tell me it would be commercially

20 reasonable and prudent in your years of experience in

21 the banking industry to have a 600 billion dollar

22 portfolio that has absolutely no policies, practices

23 or procedures in place governing its administration?


25 A I'm not sure that I know how to answer that



Page 391 question other than to conjecture.

2 Are you asking me to use my judgment and

3 give you an opinion? Because that's what it sounds

4 like.

5 MR. SIMON: He's asking you for an expert

6 answer.

7 BY MR. RUBIN:

8 Q No, no. What I'm asking you to do is just

9 tell us if Wells Fargo & Company has got 600 billion

10 dollars in loans, that there's some sort of policy

11 manual out there some place that tells the

12 administrators what they're supposed to do to service

13 it.

14 MR. SIMON: And that's not on your list of

15 questions to answer.

16 A I don't have firsthand knowledge. I don't

17 know.

18 Q Do you have any opinion as to whether it's

19 likely that there is such a policy manual?

20 MR. SIMON: Objection, form. Don't answer

21 it. You're asking him for opinion testimony.

22 MR. RUBIN: No, Paul.

23 MR. SIMON: You're asking him for Wells

24 Fargo.

25 MR. RUBIN: I'm trying to find out why it



Page 401 is that Wells Fargo is so petrified to let me find

2 out what their loan administration servicing

3 standards are because they won't give them to me.

4 MR. SIMON: Take Wells Fargo's deposition,

5 but don't take Wells Fargo Bank Minnesota's

6 deposition and ask them what Wells Fargo Bank does or

7 doesn't do.

8 MR. RAFIZADEH: They're one and the same.

9 MR. RUBIN: Hold on, Schumann. All right.

10 Let me approach it this way.

11 BY MR. RUBIN:

12 Q On the database that you can access that

13 you've told us about, can you access the policies,

14 practices and procedures of any other Wells Fargo

15 entity?

16 A I never tried.

17 Q So you don't know?

18 A No, I don't know.



21 BY MR. RUBIN:

22 Q Let me show you, Mr. Schwartz, some pages

23 that I have downloaded from the Wells Fargo internet

24 site on January 3rd, 2004. I'll call this

25 Wells Fargo 6.



Page 411 Paul, here's a set for you.

2 And specifically this is from the website

3 WWW dot Wells Fargo dot com, the tab about, subtab

4 corporate, and then subtab code of ethics and

5 business conduct.

6 Have you ever had occasion to read the

7 Wells Fargo code of ethics and business conduct?

8 A Yes.

9 Q And we see on the first page of Exhibit

10 Wells Fargo 6, footnote number 1, the references to

11 Wells Fargo, it says, quote, Wells Fargo expects its

12 team members to adhere to the highest possible

13 standards of ethics and business conduct with

14 customers, team members, stockholders and the

15 communities it serves, and to comply with all

16 applicable laws, rules and regulations that govern

17 our businesses.

18 And the footnote we see at the bottom says,

19 quote, Wells Fargo or Wells Fargo companies as used

20 throughout this code means Wells Fargo & Company and

21 each of its subsidiaries and affiliates, doesn't it?

22 A That's what it says, yes.

23 Q Do you understand that to mean that Wells

24 Fargo Bank Minnesota, as a Wells Fargo & Company

25 subsidiary, is expected to comply with the provisions



Page 421 of this code of ethics and business conduct?

2 A Yes.

3 Q And is to adhere to the highest possible

4 standards of ethics and business conduct?

5 A Yes.

6 Q Would that include the highest possible

7 standards of servicing of commercial mortgage-backed

8 securitized loans?

9 A I don't know how to answer that question.

10 Wells Fargo Bank Minnesota does not service

11 commercial -- securitized commercial mortgage-backed

12 loans, so --

13 Q Would you expect the servicer of any loan

14 pool that Wells Fargo Bank is the trustee on to

15 adhere to the highest possible standards of ethics

16 and business conduct then?

17 A I have no reason to expect their actions in

18 that regard one way or the other. I think you're

19 referring to an entity outside of Wells Fargo?

20 Q Is it your testimony then, sir, that

21 Wells Fargo has no expectation -- and by that, I mean

22 Wells Fargo Bank Minnesota, N.A. -- has no

23 expectation at all as to how its master and special

24 servicer are supposed to conduct themselves?

25 A You used the phrase our master and special



Page 431 servicer, and I think that's probably an

2 inappropriate reference. The master and special

3 servicer of commercial mortgage-backed securities

4 transactions serve the investors -- the trust and the

5 investors that own the interests in that trust. They

6 do not serve Wells Fargo Bank Minnesota.

7 Q Objection, nonresponsive. If there was

8 any lack of clarity in the question, I apologize.

9 I'll try it again.

10 Does Wells Fargo Bank Minnesota, N.A. have

11 any expectation at all as to what standard the master

12 or special servicer is to comply with in performing

13 its services in a CMBS pool?

14 A Yes.

15 Q And what is that expectation?

16 A That they will comply with the provisions

17 of the pooling and servicing agreement.

18 Q All right. Take a look then, if you will,

19 with me at that stack of the ORIX exhibits in front

20 of you, that bound book.

21 A Yeah.

22 Q In there -- no, no, no, sir. That one.

23 A Yeah. I'm just moving the other papers

24 aside for a moment.

25 Q Gotcha. It does get kind of confusing,



Page 441 doesn't it.

2 A Well, not confusing, just a little messy.

3 Q I stand correct. Exhibit 2 is the one I'm

4 interested in, and that is in fact something that's

5 been identified with the OCM 007562 document stamp as

6 the pooling and servicing agreement for this

7 particular pool of loans of which my client's loan is

8 a constituent part.

9 Do you happen to recognize the Series 1991

10 reference as being this particular pool?

11 A Yeah, I believe that's the pool that this

12 loan is part of.

13 Q Let me ask you something.

14 Do you know anything at all about the

15 Arlington Apartments loans involved in this lawsuit?

16 A Yes.

17 Q Tell me what you know.

18 MR. SIMON: Wait a minute. Don't answer

19 that question to the extent it calls for the

20 communications that we've had.

21 MR. RUBIN: That's appropriate of course.

22 A Well, is it appropriate to discuss what

23 I've read in the -- I mean anything that I know I

24 read in documents that I read in preparation for this

25 deposition, documents that you would have copies of.



Page 451 So I could try to recite what I recall from those

2 documents if that's what you're asking.

3 Q Well, tell you what. Let's sidetrack here

4 for just a minute. I should have asked you this

5 before.

6 Tell me, if you would, what you did to

7 prepare for this deposition. Now, don't relate any

8 conversations with counsel. That's none of my

9 business. But in terms of what you reviewed, what

10 you did, please walk me through that.

11 A Okay. I asked a member of my staff to

12 review the trust file for any documents that we had

13 that related to the loan in question. I gave him

14 examples of what would be appropriate documents, and

15 he provided me copies of any such documents we had in

16 our trust file.

17 Q What was that, your colleague's name, your

18 assistant's name?

19 A His name is Greg Drake.

20 Q Okay. Who is Brian Smith?

21 A Brian Smith is an employee of Wells Fargo

22 Bank Minnesota.

23 Q What's his position?

24 A Currently he works in a different

25 department than the CMBS department.



Page 461 Q Okay. Is he still employed up here in

2 Maryland?

3 A Yes.

4 Q What was his position with CMBS if you

5 know?

6 A Yes. He was a direct report of mine as a

7 title of supervisor or operations manager 3.

8 Q Okay. We'll go back to Mr. Smith in just a

9 minute, but continue, if you would. Tell me what you

10 did to prepare for the deposition.

11 A Okay. So I familiarized myself with the

12 documents that were presented to me by Greg Drake.

13 In addition, I sought to determine the nature and

14 extent of commercial mortgage lending that is done by

15 Wells Fargo Bank Minnesota, N.A., and I read the

16 petition, and I reviewed other documents that were

17 part of the actual litigation, Wells Fargo's

18 responses to various discovery items.

19 Q All right. Anything else?

20 A Not that I recall.

21 Q Can you tell me with any greater

22 specificity what discovery responses or what

23 documents you would have reviewed?

24 A Well, I don't remember the exact list.

25 There were a few documents that our legal firm had, I



Page 471 guess, presented in response to requests for

2 interrogatory answers and requests for production of

3 documents.

4 MR. SIMON: I can tell you, Matt, what

5 those are if you'd like. It has to do with this

6 letter. It's the request for productions that we

7 amended pursuant to the court order dated circa March

8 28, 2003 --

9 MR. RUBIN: Okay.

10 MR. SIMON: -- as well as the original

11 requests thereto.

12 BY MR. RUBIN:

13 Q All right. In that context, if you would,

14 please, take a look with me at this ORIX Exhibit 2,

15 which is the pooling and servicing agreement in that

16 file in front of you, or that binder, to be precise.

17 At page 53, article 3 is entitled, Administration and

18 Servicing of the Trust Fund.

19 Did you happen to read any parts of the

20 pooling and servicing agreement in preparing for your

21 deposition?

22 A No.

23 Q So as you sit here today, you really know

24 nothing about the applicable standard for the

25 servicing of this loan?



Page 481 MR. SIMON: Objection to form.

2 A I don't think that's a correct statement.

3 Q All right. What do you know about the

4 standard that was to be applied in the servicing of

5 this loan?

6 A I know that there was -- I believe there

7 was an excerpt from the pooling and servicing

8 agreement that was in one of the -- I guess it was an

9 interrogatory that came from defendants that was an

10 excerpt that was, I believe, from this section

11 talking about the responsibilities of the servicer or

12 the standards of the servicer.

13 Q I think I know what you're talking about,

14 but let's go ahead and mark it just to make sure.



17 BY MR. RUBIN:

18 Q I'll show you Exhibit Wells Fargo Number

19 7 --

20 MR. RUBIN: Do you need this, Paul?

21 MR. SIMON: No.

22 BY MR. RUBIN:

23 Q -- which is a copy of the answers and

24 objections of Wells Fargo Bank Minnesota, N.A. to the

25 interrogatories and document requests of defendant



Page 491 Cyrus II Partnership. And there is a request for

2 production number 4 dealing with the servicing

3 standard.

4 Is that what you're talking about --

5 A Yeah.

6 Q -- at page 6?

7 A That's exactly the paragraph I was

8 referring to, yes.

9 Q All right. Now, looking either at that or

10 at the servicing -- the pooling and servicing

11 agreement itself, Section 3.01 A of the pooling and

12 servicing agreement --

13 And by the way, what's your understanding

14 of the function of the pooling and servicing

15 agreement as between the trustee and the servicer?

16 What's it supposed to do?

17 A It serves to govern the services that are

18 provided to or on behalf of the trust. It enumerates

19 certain duties that are the servicer's duties and

20 certain duties that are the trustee's duties. There

21 are certainly other parties that have obligations in

22 there as well.

23 Q Sure.

24 Would you agree with me that to the extent

25 there's a servicing standard set forth in the pooling



Page 501 and servicing agreement, that's the standard that

2 ORIX, as master and special servicer, is supposed to

3 meet?


5 A Generally, yes. Specifically I'm not

6 intimately familiar with every aspect of this pooling

7 and servicing agreement.

8 Q Did you even read it before the deposition

9 today?

10 A No. I already testified that I did not.

11 Q Okay. I just wasn't sure.

12 Does Wells Fargo as the -- and that's Wells

13 Fargo Bank Minnesota -- as the trustee for this

14 particular pool, which I believe is, in round

15 numbers, 530 million dollars worth of loans, ever

16 review or evaluate the actions or conduct of its --

17 of ORIX as its master or special servicer?

18 A Can you clarify the question? I believe

19 you said does Wells Fargo ever, and I'm not sure what

20 that means.

21 Q Okay. I'm just trying to find out if

22 Wells Fargo, as the trustee of this pool, this trust,

23 ever has occasion to review or evaluate the actions

24 or conduct of ORIX that are taken on its behalf as

25 the master or the special servicer.



Page 511 MR. SIMON: Are you asking did they or

2 could they?

3 BY MR. RUBIN:

4 Q I'm asking actually both. Could they is a

5 legal conclusion in the documents. I'm asking if you

6 ever actually did.

7 A Okay. No, no, we have not. Well, wait a

8 minute. There was part of your question that I think

9 was inaccurate, something referring to ORIX acting on

10 Wells Fargo's behalf. Wells Fargo acts on behalf of

11 the trust. I'm sorry. ORIX acts on behalf of the

12 trust. I misspoke when I just said Wells Fargo.

13 Although it's true, that's not what I meant to say.

14 Q So does Wells -- do I understand then that

15 Wells Fargo simply accepts whatever it is that ORIX

16 does and never questions, disagrees, reviews,

17 criticizes --


19 BY MR. RUBIN:

20 Q -- ever?

21 A Are you asking if we have ever reviewed

22 ORIX's actions relative to performing their services

23 under this trust?

24 Q Yes.

25 A And I can say no.



Page 521 Q Why not?

2 A Because it's not our duty to do so.

3 Q So whatever they do you just accept; is

4 that right?


6 A We have no duty to oversee them.

7 Q Does it make any difference to Wells Fargo

8 what they do on behalf of the trust in administering

9 these loans?

10 A Can you clarify that? What do you mean by

11 make a difference to Wells Fargo?

12 Q Well, let me ask it specifically.

13 Does Wells Fargo Bank Minnesota, N.A.

14 expect ORIX to comply with the servicing standards

15 set forth in Section 3.01 of the servicing and

16 pooling agreement?

17 A Yes.

18 Q All right. Let's look specifically at some

19 language in that section then, and that's

20 specifically subsection A where the master and

21 special servicer are required to use the same care,

22 skill, prudence and diligence with which the master

23 servicer or special servicer, as the case may be,

24 services and administers similar mortgage loans for

25 other third party portfolios giving due consideration



Page 531 to the customary and usual standards of practice of

2 prudent institutional, commercial, multifamily and

3 manufactured housing mortgage lenders servicing their

4 own mortgage loans. That's number 1. I'll ask you

5 about number 2 in a second.

6 Now, would you think that Wells Fargo &

7 Company is a prudent institutional, commercial,

8 multifamily or manufactured housing mortgage lender,

9 the Wells Fargo entities?

10 MR. SIMON: I'm sorry. Could you repeat

11 your question? I didn't hear your question, Matt.

12 A You said something at the end about

13 Wells Fargo entities?

14 Q I'll try it again. This is something I'd

15 asked you earlier, and I think I got kind of a

16 partial answer. I'll try to get a more specific

17 answer in the context of the servicing standard.

18 Do you believe that Wells Fargo & Company

19 is a prudent institutional, commercial, multifamily

20 and manufactured housing mortgage lender?


22 A You're asking about the parent company?

23 Q To the extent that as the code of ethics

24 and business conduct defines Wells Fargo to mean

25 Wells Fargo & Company and its subsidiaries or



Page 541 affiliates, do you think that they are commercial --

2 excuse me -- prudent commercial lenders, mortgage

3 lenders?

4 A I don't know what the code of ethics has to

5 do with our prudency or with my parent's prudency as

6 a commercial mortgage lender.

7 Q Do you think it's a prudent mortgage lender

8 or not, or do you have any opinion either way?

9 A What entity are you referring to?

10 Q Wells Fargo & Company.

11 A I don't have an opinion about Wells Fargo &

12 Company in that sense.

13 Q All right. Do you have any opinion as to

14 what the customary and usual standards of practice of



17 own mortgage loans would be as set forth here in

18 paragraph -- Section 3.01 A of the pooling and

19 servicing agreement?

20 MR. SIMON: Objection to form. Are you

21 really asking for what his opinion is, or do you want

22 him to testify as to what factual knowledge he has?

23 MR. RUBIN: I'm asking him to testify as

24 the designated representative of the plaintiff on

25 that specific subject, and that one is -- I'll mark



Page 551 this in just a minute, but that one is specifically

2 here.

3 MR. SIMON: You're asking him for his

4 opinion is my question. Your question said do you

5 have an opinion? And I don't think he's here to

6 offer any opinion testimony.

7 MR. RUBIN: Paul, come on. This is getting

8 silly. I think he understands what I want.

9 MR. SIMON: If you're asking for fact-based

10 answers, you can go ahead and answer it. Don't give

11 him your opinion.

12 A I can say that I believe that Wells Fargo

13 Bank Minnesota is prudent in all of its lending

14 activities.

15 Q Objection, nonresponsive. This is

16 something I couldn't get a straight answer from ORIX

17 either on this. I'm trying to find out what does

18 Wells Fargo Bank Minnesota, N.A. regard as the,

19 quote, customary and usual standards of practice of a



22 own mortgage loans? What is that?

23 MR. SIMON: Objection to the side bar at

24 the beginning of your question.

25 A Now I'm confused. Wells Fargo Bank



Page 561 Minnesota, N.A. does not service commercial mortgage

2 loans on behalf of third parties.

3 Q Objection, nonresponsive. I understand

4 that, but that's not what this says. Now, I'm trying

5 to find out -- let me ask it this way.

6 Would the trustee, Wells Fargo Bank

7 Minnesota, expect ORIX to comply with the same

8 standards that would be applicable to mortgage loans

9 that were made or serviced by any other Wells Fargo

10 entity?

11 A Not specifically.

12 Q Then, sir, what --

13 A Only to the extent that they are part of

14 the broad discussion in this sentence.

15 Q What is -- I'm going to keep asking this

16 till I get an answer. This servicing standard

17 requires the servicer to give due consideration to

18 the customary and usual standards of practice of



21 own mortgage loans, not third party servicing, but

22 their own.

23 No one from ORIX would tell me what the

24 customary and usual standards were, and I want to

25 find out if the plaintiff, Wells Fargo Bank



Page 571 Minnesota, has any idea as to what the customary and

2 usual standards of practice of prudent institutional,

3 commercial, multifamily and manufactured housing

4 mortgage lenders servicing their own mortgage loans

5 are. What is that standard?

6 MR. SIMON: I'll object to the side bar

7 portion, the argumentative portion of your question,

8 Matt. And you're not going to keep asking him this

9 question until you get the answer you want. You can

10 ask him until he gives you an answer.

11 MR. RUBIN: No. I will ask him till he

12 gives me a responsive answer, Paul. ORIX pulled the

13 same nonsense. They wouldn't give me an answer. And

14 he is here to testify on subject --

15 MR. SIMON: I know what subject it is.

16 MR. RUBIN: -- number 9 -- number 8 and

17 number 9. And I'm going to get an answer.

18 MR. SIMON: And Judge Halbach said a

19 perfectly acceptable answer would be I don't know.

20 MR. RUBIN: Not on this one. No, he

21 didn't.

22 MR. SIMON: Yes, he did. Because Wells

23 Fargo Bank Minnesota doesn't service this stuff. He

24 said they can give you that answer. If he knows it,

25 he can answer it, but you can't get blood from a



Page 581 turnip, Matt.

2 MR. RUBIN: No. I need to get someone

3 who's educated and can respond because someone is

4 going to tell me what this means. ORIX pulled a

5 bunch of nonsense and wouldn't do it. I'm going to

6 find out what Wells Fargo's position is.

7 BY MR. RUBIN:

8 Q Now, we've had our little argument on the

9 record. Do you even remember the question at this

10 point?

11 A No. Please ask it again.

12 MR. RUBIN: Would you read it back, please.

13 (Record read by reporter.)

14 A Yes, Wells Fargo Bank Minnesota has some

15 ideas, but that's kind of a broad question. I'm not

16 quite sure, when you say any idea, what that means.

17 Q Sir, what I'm trying to find out, there is

18 a reference in the pooling and servicing agreement to

19 which Wells Fargo Bank Minnesota, N.A. is a party --

20 A Yes.

21 Q -- that you have admitted or you've

22 acknowledged is to govern the standard by which

23 ORIX's conduct is to be measured, right, in the

24 servicing of the loans?

25 A I believe that that's what that section of



Page 591 the PSA is intended to do, yes.

2 Q Exactly. And it imposes upon ORIX, as the

3 master and special servicer, the obligation to give

4 due consideration to the customary and usual

5 standards of practice of prudent institutional,


7 mortgage lenders servicing their own mortgage loans.

8 I presume this language means something in

9 this pooling and servicing agreement, does it not?

10 A I can make the same presumption.

11 Q Good. We finally agree on something.

12 Let me ask, first, do you have any position

13 either way as to whether Wells Fargo & Company abides

14 by or complies with customary and usual standards of

15 practice of prudent institutional or commercial

16 housing -- I'm sorry -- mortgage lenders?

17 MR. SIMON: You're now asking about the

18 parent?

19 MR. RUBIN: I'm getting there indirectly,

20 yes.

21 A Yeah. I don't know about the parent.

22 Q What about any of the subsidiaries?

23 A I can only speak to what -- I mean I can

24 tell you what the corporate trust services division's

25 perspective on this might be.



Page 601 Q But not the entire bank, Wells Fargo Bank

2 Minnesota, N.A., correct, because you just don't

3 know?


5 BY MR. RUBIN:

6 Q Isn't that true, Mr. Schwartz? You just

7 don't know?

8 A I'm afraid I'm a little lost. I don't

9 really understand the exact question because there

10 are so many commas in the sentence that you keep

11 reading, that it gets a little confusing.

12 Could you narrow it down to a more direct

13 statement?

14 Q I'll get there eventually.

15 A I'm honestly trying to be responsive to

16 your questions --

17 Q Fine. Here's my question.

18 A -- but I just don't understand.

19 Q Here's my question.

20 What is the customary and usual standard of

21 practice of a prudent institutional, commercial,

22 multifamily or manufactured housing mortgage lender

23 servicing their own mortgage loans with which ORIX

24 was supposed to comply in administering this pool?

25 What is the standard?



Page 611 A I don't know.

2 MR. SIMON: Are you asking like -- can we

3 go off the record again?

4 MR. RUBIN: No.

5 MR. SIMON: Okay. Let me ask you a

6 question. Are you asking what is the term for the

7 standard? I mean you really want him to say what all

8 the policies and procedures? The standard is such --

9 MR. RUBIN: Yeah, I want the policies and

10 procedures that Wells Fargo won't give me. I've been

11 trying to get them for two years. That's what I want.

12 MR. SIMON: This is an industry policy,

13 Matt.

14 BY MR. RUBIN:

15 Q All right. So you don't know what those

16 standards are.

17 A If I could clarify something.

18 Q Sure. Try. Go right ahead.

19 A This clause 1 refers to servicing and

20 administration of similar mortgage loans for other

21 third party portfolios. Wells Fargo Bank Minnesota

22 does not service commercial mortgage loans for third

23 party portfolios.

24 Q Well, sir, I hate to argue with you, but

25 you're wrong. That's not what it says. It says that



Page 621 the master servicer or special servicer is governed

2 to that extent to which it administers similar

3 mortgage loans for other third party portfolios and

4 then continues, giving due consideration to the

5 customary and usual standards that prudent

6 institutional and commercial lenders employ servicing

7 their own mortgage loans. So as I read it, it

8 incorporates --

9 A Okay.

10 Q -- whatever they do internally into a third

11 party servicing standard.

12 A Okay.

13 Q Isn't that what it says?

14 A That makes sense to me.

15 Q Okay. And really, sir, I hate to argue

16 with you, but all I'm trying to find out is how does

17 Wells Fargo do it? How do the Wells Fargo Banks

18 administer their own mortgage loans?

19 A Okay. I can answer that question first. I

20 believe we gave a document that was responsive to

21 that, which was the policy document you presented

22 back to me.

23 THE WITNESS: Paul, can you help me? What

24 exhibit number?

25 MR. SIMON: Number 4 I believe.



Page 631 A Yes, Exhibit Number 4 in this deposition.

2 That document answers your question.

3 Q And this is what we have, this policy

4 entitled, Problem Asset Management?

5 A Right. That's the --

6 Q That's WFB 001133?

7 A That's the only policy that I'm aware of

8 that Wells Fargo Bank Minnesota uses in the

9 administration of commercial mortgage loans for our

10 own portfolio, and I can say to the best of my

11 knowledge that is the only policy that governs that

12 conduct.

13 Q Is that within Wells Fargo Bank Minnesota

14 or any of the other Wells Fargo entities that engage

15 in commercial lending? Because what you've said is

16 that Wells Fargo Bank Minnesota doesn't engage in

17 this kind of commercial lending.

18 A I did not say that actually. What I said

19 was we don't service commercial mortgage loans for

20 third party portfolios.

21 Q Does Wells Fargo Bank Minnesota engage in

22 commercial lending with real estate as security?

23 A Yes.

24 Q Are there other portions of the policy and

25 procedures manual that deal with the administration



Page 641 or the handling of those types of loans?

2 A Not directly. This I believe is the most

3 responsive document to your question. This is the

4 only corporate governance guidance, if you will, that

5 directs how Wells Fargo Bank Minnesota will

6 administer a commercial mortgage loan for its own

7 portfolio.

8 Q Well, sir, now I see at the bottom of

9 Exhibit 4 that it is promulgated by Wells Fargo &

10 Company, correct? That's what the little --

11 A It says Wells Fargo & Company at the

12 bottom.

13 Q Right. And this came from the corporate

14 level, didn't it? It was prepared by and

15 disseminated by Wells Fargo & Company to the

16 subsidiaries, was it not?

17 A This was directly taken from the

18 Wells Fargo Bank Minnesota policy manual.

19 Q Did you all write it, or did Wells Fargo &

20 Company write it?

21 A I'm sorry. What was your question?

22 Q Who authored it?

23 A Who authored it? I don't know.

24 Q And do you know whether Wells Fargo &

25 Company as we see here at the bottom of Exhibit 4 has



Page 651 any other policies, practices or procedures that deal

2 with the customary or usual standards of practice in

3 how it, the Wells Fargo companies, service their own

4 mortgage loans?


6 A I don't know.

7 Q Okay. That one I can live with.

8 Now, this one says policy effective 1-1,

9 2004, which is nice, but not the relevant time frame

10 for this particular litigation.

11 MR. SIMON: Objection.

12 BY MR. RUBIN:

13 Q Is there any way to access the earlier

14 versions of this particular policy?

15 A Not that I know of.

16 Q Did you make any effort to do so?

17 A No, but I do believe that this policy is

18 currently in effect notwithstanding the date at the

19 bottom of this document. I directly took it from the

20 policy manual that's our current corporate guidance.

21 Q Yes, I understand that.

22 A And I have reason to believe that there was

23 no predecessor policy that was more encompassing or

24 materially different than this.

25 Q Really. Do you remember what the prior



Page 661 policy said?

2 A No.

3 Q Because it does say policy replaces 11-24,

4 2003, right?

5 A I don't see where that reference is.

6 Q If you look at the initial column under

7 Problem Asset Management, it specifically says policy

8 replaces 11-24, 2003.

9 A Yeah, I see where it says that.

10 Q Okay. And you have no recollection I trust

11 of what the 11-24, 2003 policy manual said?

12 A I would say that I have no knowledge of

13 that. I only recently obtained this knowledge.

14 Q All right. Let me go back to where I was

15 before. Can you tell me what are the customary and



18 mortgage lenders servicing their own mortgage loans?


20 A Beyond this policy document, no.

21 Q Have you personally ever been involved in

22 servicing mortgage loans?

23 A No.

24 Q So you really wouldn't know what the

25 standards were, would you?



Page 671 MR. SIMON: Objection to form.

2 A What do you mean I wouldn't know? I

3 already testified that I don't know.

4 Q Okay. Does anyone on behalf of Wells Fargo

5 Bank Minnesota, N.A. know what the customary and



8 mortgage lenders servicing their own mortgage loans

9 would be?

10 A I don't think that any one person in any

11 one entity would know that. This is referring to a

12 collective industry standard that is not written down

13 anywhere. It's a general guideline that's used to

14 direct the servicer in terms of what standard they

15 need to follow.

16 Q All right. And are you prepared to testify

17 today as to what that standard is?

18 A No.

19 MR. SIMON: He's already answered that

20 question.

21 A I told you that neither I nor I believe

22 anybody else as an individual would know that entire

23 standard or could even recite it.

24 Q Then why is this language even in the

25 pooling and servicing agreement then?



Page 681 MR. SIMON: Objection, form.

2 A I can't speak to why the lawyers that put

3 this document together felt that this was a necessary

4 component. I can only conjecture or guess as to

5 that.

6 Q Would you expect ORIX to deal with

7 borrowers on these mortgage loans in a manner

8 materially different from the way Wells Fargo

9 would -- any Wells Fargo entity that you know of that

10 makes these type of commercial loans -- would deal

11 with them in the same or similar circumstances?


13 A Can you repeat the question?

14 MR. RUBIN: Read that back, please.


16 A I don't know.

17 Q And why don't you know?


19 A Because I don't know the industry standard

20 as a whole concept. It's a theory.

21 Q Is it meaningless?

22 A I don't believe it's meaningless. I just

23 believe that I cannot individually define it.

24 Q Would you be comfortable with the notion

25 that if there is a set of policies that Wells Fargo &



Page 691 Company promulgates dealing with the servicing of its

2 mortgage loans, that that would be something that

3 would reflect or could reflect customary and usual

4 standards of practice?


6 A It could be part of that broad industry

7 knowledge --

8 Q Okay.

9 A -- that I referred to.

10 Q I mean Wells Fargo's a big bank, isn't it?

11 A It's a matter of perspective.

12 Q Isn't it like the number three in the

13 country, number three or number four? I mean the

14 parent company, Wells Fargo & Company. It's

15 certainly in the top ten, isn't it?

16 A Top ten of what? I mean are you asking me

17 a question? I'm just not sure what you're asking.

18 Q Okay. All right. It's part of the website

19 stuff. I'll talk to you about it later. Let me ask

20 it this way, Mr. Schwartz.

21 Do you have any reason to believe that in

22 any of its mortgage servicing activities, Wells Fargo

23 & Company departs from the customary and usual

24 standards of practice of prudent institutional or

25 commercial mortgage lenders servicing its own



Page 701 mortgage loans?

2 MR. SIMON: Which Wells Fargo entity?

3 MR. RUBIN: It says Wells Fargo & Company.

4 I'm talking about the entity that promulgated this

5 Wells Fargo Exhibit 4.

6 A And I believe I testified that

7 notwithstanding the note at the bottom of the page

8 that says Wells Fargo & Company, that this document

9 was taken from the Wells Fargo Bank Minnesota, N.A.'s

10 policy manual.

11 MR. RUBIN: That's not responsive.

12 Objection. Would you read the question back, please.



15 A I don't know. I don't know what all

16 Wells Fargo & Company does.

17 Q Well, let's take a look then back at

18 Exhibit 6, if you would, the web pages that I printed

19 off from the Wells Fargo site. The second page of

20 the exhibit, its section Roman Numeral II, Serve

21 Wells Fargo's Best Interests, talks about Wells Fargo

22 being committed to compliance with laws, rules,

23 regulations, states, localities, federal government,

24 and it says, quote, as a team member you're expected

25 to support this commitment by, colon, first, being



Page 711 knowledgeable about your job, second, conducting all

2 aspects of Wells Fargo's business in an honest,

3 ethical and legal manner, and in accordance with

4 federal laws, rules and regulations and the

5 applicable laws, rules and regulations of all

6 localities and states where Wells Fargo does

7 business, and third, complying with Wells Fargo's

8 policies and procedures, right?

9 A I believe you read that accurately.

10 Q Is that your understanding of what

11 Wells Fargo employees are supposed to do, comply with

12 all of Wells Fargo's policies and procedures as it

13 says in the code, Wells Fargo & Company and each of

14 its subsidiaries and affiliates?

15 A In reading the bullet that you read,

16 complying with Wells Fargo's policies and procedures,

17 it does not say all.

18 Q Does it say some?

19 A It doesn't say some.

20 Q Does it say the ones you choose to comply

21 with?

22 MR. SIMON: Objection to form. It says

23 what it says.

24 BY MR. RUBIN:

25 Q Exactly. It says Wells Fargo.



Page 721 And Wells Fargo is defined as, quote, means

2 Wells Fargo & Company and each of its subsidiaries

3 and affiliates, doesn't it?

4 A Are you saying that's what the document

5 says? Okay.

6 Q Sure. One thing I can do is read, so yeah,

7 it does. It says that.

8 Now, don't you understand that to mean that

9 everyone who works for Wells Fargo is supposed to

10 comply with policies that are promulgated by the

11 parent company, Wells Fargo & Company?

12 A I suppose that's a reasonable

13 interpretation.

14 Q Right. And have you ever made any effort

15 to ascertain whether Wells Fargo & Company has any

16 policies, practices or procedures that govern the

17 servicing of mortgage loans that any Wells Fargo &

18 Company entity may service?

19 A No. As I've testified before, I have made

20 an effort to find out about Wells Fargo Bank

21 Minnesota's policies --

22 Q Right.

23 A -- relating to such matters.

24 Q And all you were able to locate is this

25 Wells Fargo 4 document, right?



Page 731 MR. SIMON: That's not what he said, Matt.

2 BY MR. RUBIN:

3 Q Well, no. Isn't that correct that all you

4 were able to locate was this exhibit that we've

5 marked as Wells Fargo 4?

6 MR. SIMON: That was responsive to your

7 request is what he said.

8 A Yeah, I believe that's the only document

9 that I was able to locate that relates to that matter

10 that's responsive to your question.

11 Q Okay. Are there other policies or

12 procedures out there that you were able to locate

13 that aren't in writing?

14 MR. SIMON: Matt, there are other policies

15 and procedures that don't relate to your request.

16 Quit badgering the witness.

17 MR. RUBIN: Dealing with the servicing of

18 mortgage loans.

19 A I don't believe that there are any other

20 policies and procedures in Wells Fargo Bank Minnesota

21 that deal with servicing mortgage loans.

22 Q But you have no idea, just to be

23 accurate -- then we can move on to something else --

24 whether there are any other policies promulgated by

25 Wells Fargo & Company that would deal with the



Page 741 servicing of mortgage loans?

2 A I don't know.

3 Q Okay. And just to be perfectly clear, you

4 are not prepared to testify today as to what the

5 customary and usual standards of practice of prudent

6 institutional, commercial, multifamily and


8 own mortgage loans would be, correct?

9 MR. SIMON: Is that the last time you're

10 going to ask this question?

11 MR. RUBIN: Yeah.

12 A Yes. The answer is that is correct. I

13 don't know what that industry standard is.

14 Q All right.

15 A And I don't believe that part of Wells

16 Fargo Bank Minnesota knows what that industry

17 standard is.

18 Q Who does know that? If the trustee of this

19 half a billion dollars in loans has no idea what the

20 standard is, who does?

21 A I believe that that standard --

22 MR. SIMON: Objection, form. You're asking

23 him to speculate on who in the industry would know

24 what the --

25 MR. RUBIN: Hey, would you stop with the



Page 751 narrative objections? Objection, form, objection,

2 responsiveness, objection, privileged, or tell him

3 not to answer. Please, Paul.

4 MR. SIMON: Matt, you said that was the

5 last question you were going to ask him on it. Now

6 you're asking him --

7 MR. RUBIN: This is a different question.

8 MR. SIMON: -- if he knows it. It's not

9 one of your topics.

10 MR. RUBIN: You're conducting this old

11 style, Paul. Please stop it. You know what you're

12 doing is wrong. Would you please restrict yourself

13 to the objections allowed by the Texas rules, please.

14 MR. SIMON: Are you through?

15 MR. RUBIN: I want an answer to that

16 question. He was about to answer it, and you

17 interrupted him. You did what you're not supposed to

18 do. Now, you know you're not supposed to do that.


20 MR. RUBIN: With my statement?

21 MR. SIMON: Yes.

22 MR. RUBIN: Yes.

23 MR. SIMON: This is not one of your topics.

24 MR. RUBIN: You're not going to let him

25 answer it?



Page 761 MR. SIMON: Answer it if you know who in

2 the industry knows.

3 MR. RUBIN: To be fair, Mr. Schwartz, let

4 the reporter read it back. These arguments between

5 lawyers always distract the witness. I apologize for

6 that.

7 THE WITNESS: That's fine.

8 MR. RUBIN: And the predicate to the

9 question was when you said you didn't think anyone

10 within Wells Fargo would know that, my follow-up

11 question was --


13 A I believe that the collection of knowledge

14 of commercial mortgage loan servicers in the CMBS

15 industry know that.

16 Q Is there any sort of objectively

17 determinable or expressable expression, if you will,

18 of what those standards would be?

19 A Not to my knowledge.

20 Q Then in all candor, sir, how is someone

21 supposed to ever evaluate whether the actions or

22 conduct of ORIX as master or special servicer comply

23 with that standard?

24 A I would guess they would have to get an

25 industry -- an expert in that standard to testify.



Page 771 Q Are you familiar with a gentleman named

2 Jack Aini or Aini, A-i-n-i?

3 A Yes.

4 Q Who apparently signed, yes, signed this on

5 behalf of Norwest Bank Minnesota?

6 A What document are you referring to?

7 Q We're still on the pooling and servicing

8 agreement.

9 A Okay.

10 Q And this is actually like the second to the

11 last page. It's got an internal document number of

12 7753.

13 A Yes.

14 Q Help me out with his pronunciation. I

15 don't want to --

16 A Aini.

17 Q I don't want to man-handle that one.

18 What's his position?

19 Well, is he still with Wells Fargo

20 Minnesota?

21 A Yes.

22 Q Position would be what?

23 A Vice president.

24 Q Of any particular division?

25 A It's not -- that's not the way it works in



Page 781 the bank. His title is vice president.

2 Q Okay. Then let me ask is he assigned

3 responsibilities with a particular division or

4 department?

5 A Yes.

6 Q And that would be what?

7 A He works almost exclusively on commercial

8 mortgage-backed securities in the corporate trust

9 division.

10 Q So he would be a colleague of yours on

11 roughly the same report level?

12 A I don't know what you mean by roughly the

13 same report level.

14 Q You're both vice presidents in the same

15 division?

16 A Yes.

17 Q Okay. Does your work overlap with Mr.

18 Aini's?

19 A Can you clarify what you mean by overlap?

20 Q That's a terrible question. I don't really

21 need to know. Let me ask you this.

22 Do you think he as the person who signed

23 this pooling and servicing agreement on behalf of

24 Norwest Bank, now Wells Fargo Minnesota, that he

25 would have any knowledge or understanding of what



Page 791 those customary and usual standards of practice for

2 mortgage loan servicing would be?

3 A I believe he would have no more so of an

4 understanding than myself.

5 Q Do you know if he has ever been involved in

6 actual day-to-day mortgage servicing?

7 A I don't know.

8 Q Why do you think he wouldn't have any

9 greater knowledge than you do?

10 A Because of my understanding of his function

11 within our organization.

12 Q Which we won't belabor this, but generally

13 is what?

14 A Generally he's responsible for negotiating

15 the contracts from the perspective of Wells Fargo

16 Bank Minnesota as trustee and for working through the

17 minutia of closing the deal.

18 Q Okay. Let me ask you a little bit more

19 about this Section 3.01 A, and we're back to page 53

20 of the pooling and servicing agreement.

21 A I see it.

22 Q Okay. Great. We've talked about

23 subheading A 1. Subheading A 2 talks about the

24 manner in which the master or servicer services loans

25 that it owns as I read it, owned by the master



Page 801 servicer or special servicer as the case may be, and

2 then it says whichever standard is higher.

3 Do you have any understanding about what

4 that language means, whichever standard is higher?

5 A The document speaks for itself. I don't

6 have any specific interpretation that I know of

7 beyond that.

8 Q The reason I ask is we've had some

9 discussion about exactly what higher is supposed to

10 mean. Does that mean more favorable to the borrower,

11 more favorable to the lender, more favorable to the

12 trust, or does it have any discrete meaning that you

13 can tell at all?

14 A If you'll give me a moment to read the

15 section --

16 Q Take your time.

17 A -- I'll endeavor to answer your question.

18 Q Certainly. Thank you. I appreciate that.

19 MR. SIMON: Matt, are you near a stopping

20 point?

21 MR. RUBIN: Any time.

22 MR. SIMON: Okay. After he answers this

23 question.

24 MR. RUBIN: Sure.

25 A Oh, I see. The higher seems to be



Page 811 referring to 1 or 2, the higher of 1 or 2.

2 Q And I just don't know what that means. If

3 you don't have any clarification, that's fine. We

4 can just move on to the next thing after the break.

5 A I can't interpret the document.

6 MR. RUBIN: Okay. Let's go ahead and take

7 a break if you'd like, Paul.

8 THE VIDEOGRAPHER: The time is 10:47.

9 We'll go off the video record.


11 THE VIDEOGRAPHER: The time is 10:48. This

12 is the end of tape number 1. We're off the record.




16 THE VIDEOGRAPHER: This is the beginning of

17 tape number 2 in the matter of Wells Fargo, et al.

18 versus Rafizadeh, et al. Our deponent is Barry

19 Schwartz. The time is 11:01 A.M. We're back on the

20 video record.

21 BY MR. RUBIN:

22 Q Mr. Schwartz, continuing with our

23 discussion about this Section 3.01 A, the servicing

24 standard, we've talked about the two different

25 standards applicable, headings 1 or 2, and then it



Page 821 continues. With a view to the maximization of timely

2 recovery of principal and interest on a present basis

3 on the mortgage loans or specially serviced mortgage

4 loans as applicable and the best interests of the

5 trust and certificate holders notwithstanding five

6 specific exceptions there. I'm particularly

7 interested in the language, a view to the

8 maximization of timely recovery of principal and

9 interest on a present value basis.

10 What's your understanding of what that

11 language means?

12 A It speaks for itself. Maximization of

13 timely recovery of principal and interest on a

14 present value basis.

15 Q What I understand that to mean -- and tell

16 me if this is also your understanding -- is that the

17 cardinal principle, if you will, the overriding

18 consideration for the actions of a master or special

19 servicer in its conduct is to maximize the timely

20 recovery of principal and interest. That's their

21 most important obligation.

22 A I can't speak to that one way or another.

23 I'm not a master or special servicer.

24 Q Well, speaking on behalf of the plaintiff,

25 Wells Fargo Bank Minnesota, N.A., the trustee of this



Page 831 half a billion dollars in mortgages, is that what

2 Wells Fargo Bank expects its master and special

3 servicer to do, to take all actions with a primary

4 view toward maximizing the timely return or recovery

5 of principal and interest on a present value basis?

6 A I have to take exception to the fact that

7 you refer to the master or special servicer as

8 somehow belonging to Wells Fargo Bank Minnesota.

9 They serve the trust.

10 Q I didn't mean that. I'm talking about the

11 substance of it.

12 A Well, you referred to Wells Fargo Bank's

13 master or special servicer, so I wanted to clarify

14 that. We don't have a master or special servicer.

15 The trust does.

16 Q Okay. With that clarification, can you

17 answer the question?

18 A Can you please read it back?

19 Q I knew that was coming.

20 A I got myself confused.

21 Q I knew you were going to get into that.

22 A Sorry.

23 Q That's okay.

24 A I don't mean to be taking extra time.

25 Q That's all right. We'll finish on a timely



Page 841 basis I'm sure.


3 A No. We expect the servicer to comply with

4 the provisions that restrict their conduct in the

5 pooling and servicing agreement. I'm in no position

6 to interpret or summarize those provisions.

7 Q Well, I'll object as nonresponsive.

8 Clearly whatever's in the PSA, can we just call it

9 that, PSA for pooling and servicing agreement?

10 A Absolutely.

11 Q Whatever's in the PSA, it binds everyone

12 who signed it and governs their conduct as defined in

13 the agreement?

14 A Yes.

15 Q I mean I think we're clear on that?

16 A Yes.

17 Q But I'm interested in what your

18 understanding of this language is where the servicing

19 standard is qualified, whatever the standard may be,

20 quote, with a view to the maximization of timely

21 recovery of principal and interest on a present value

22 basis on the mortgage loans or specially serviced

23 mortgage loans. I read that to mean that that's

24 supposed to be the guiding principle, if you will,

25 the maximization of the recovery, that that's



Page 851 supposed to be the first consideration, the foremost

2 consideration. Is that right, or is that wrong, or

3 do you have no opinion?

4 A I don't have an opinion. I mean it says

5 with a view to. I can't speak to exactly what's

6 intended by that.

7 Q How would you interpret or assess the

8 actions or conduct of the master or special servicer

9 in light of that provision?

10 A It's not my job to assess the actions of

11 the master servicer.

12 Q Because the trustee just doesn't do that?

13 A That's not the trustee's responsibility.

14 Q So does this language have any meaning at

15 all in your -- in the position of Wells Fargo

16 Minnesota that the master or special servicer are to

17 act with a view to the maximization of timely

18 recovery of principal and interest?


20 A It has the meaning outlined in the

21 document.

22 Q Okay.

23 A You keep asking me to interpret the

24 document.

25 Q No. I'm asking for your understanding of



Page 861 what the trustee on whose behalf the master and

2 special servicer are working for the trust interprets

3 it to mean and understands it to mean, what it is

4 that you all expect. It's a difference.

5 A I'm not sure that I understand the

6 distinction.

7 Q That's fine. Would you agree that the

8 actions and conduct of the master or special servicer

9 are supposed to be governed by the principle that

10 those actions and conduct must be undertaken with a

11 view to the maximization of timely recovery of

12 principal and interest?


14 A It's the same question and the same

15 answer. I don't know. I mean I don't -- I can't

16 interpret the document as it relates to the standards

17 that the servicer is supposed to follow.

18 Q Okay. Are you familiar with a rating

19 service known as Fitch Ratings?

20 A Yes.

21 Q What's your understanding of what Fitch

22 Ratings is and what they do?

23 A They're a nationally recognized statistical

24 rating agency that provides information to the

25 general public about the creditworthiness of



Page 871 individual securities. In addition they provide

2 research reports relating to various topics. I guess

3 that's it.

4 Q In your profession, your years of

5 experience in the industry, have you had occasion to

6 use Fitch Ratings for any purpose?

7 A When you say use, can you clarify that?

8 Q Let me ask it this way.

9 Do you think they're accurate and

10 reliable?


12 A They're one of a few nationally recognized

13 statistical rating agencies, and I believe that they

14 are viewed by the investing public as accurate an

15 reliable.

16 Q And the other ones would be -- in that

17 category or that class would be who that you're --

18 A Moody's and Standard and Poor's.

19 Q Kind of the big three of these rating

20 agencies, would that be a fair shorthand --

21 A That's a reasonable summary.

22 Q Okay. The reason I ask is I've just found

23 in my client's hands a Fitch Ratings report on

24 structured finance from Wells Fargo Bank, N.A. dated

25 July 19, 2002, and I'm going to have to pass this one



Page 881 back and forth to you because I don't have a copy of

2 it, but I will mark it, and then Paul, if you don't

3 mind, we can substitute out a nonhighlighted version

4 for the highlighted one that Mr. Rafizadeh gave to

5 me.

6 MR. SIMON: That's fine. Did you say this

7 was Wells Fargo Minnesota?

8 MR. RUBIN: No. This is Wells Fargo Bank,

9 N.A.



12 BY MR. RUBIN:

13 Q And rather than come around behind you,

14 Mr. Schwartz, I don't want to do that, but it

15 describes for Wells Fargo Bank, N.A. primary

16 servicing, and this is on CMBS transactions, Wells

17 Fargo Bank, N.A.'s snapshot description, if you will,

18 of its CMBS servicing activities. It says Primary

19 Servicing. As of June 30, 2002, WFB was primary

20 servicer for 2,553 CMBS loans totaling 18.22 billion.

21 And I'll show you that, and then we can pass it back

22 and forth. And I apologize for this cumbersome

23 procedure.

24 A Okay. I see that reference in this report.

25 Q Okay. And then could you hand it back to



Page 891 me, please? And it continues with the next bullet

2 point, Master Servicing. As of June 30, 2002, WFB

3 was named master servicer for 36 CMBS transactions

4 totaling 23.68 billion with responsibility for

5 overseeing 30 primary servicers. And that's the

6 second highlighted section on that page.

7 A Okay.

8 Q Based upon your experience with the Fitch

9 Ratings service, would you have any reason to

10 question the accuracy -- material accuracy of those

11 numbers?

12 A No.

13 Q Is that consistent with your knowledge or

14 understanding of the extent to which Wells Fargo

15 Bank, N.A. is involved as a servicer, master or

16 special, on CMBS transactions?

17 A In general scope, yes. In numerical value

18 or number of units or whatever, no. I'm not familiar

19 with how big their servicing portfolio or master

20 servicing portfolio was till you just told me from

21 this report.

22 Q And this is what, a year and a half old, so

23 I'm sure the numbers have changed since then.

24 Now, would you think that in light of the

25 Wells Fargo code of ethics applicable to the parent



Page 901 and all subsidiaries that requires all of

2 Wells Fargo's entities to adhere to the highest

3 possible standards of ethics and of business conduct,

4 that Wells Fargo Bank, N.A. in its CMBS servicing

5 activities would comply with customary and usual


7 commercial, multifamily or manufactured housing

8 mortgage lenders in their servicing?

9 MR. SIMON: Can I get a clarification of

10 that?

11 MR. RUBIN: Sure.

12 MR. SIMON: The entity again that you're

13 asking him about is Wells Fargo Bank, N.A.?

14 MR. RUBIN: That apparently is the one that

15 has the CMBS servicing portfolios, yes, as I read the

16 Fitch report.

17 A You're asking me to opine on how the code

18 of ethics relates to that entity?

19 Q No. In light of the fact that the code of

20 ethics applicable to the Wells Fargo parent and all

21 subsidiaries which we've seen requires adherence to

22 the highest standards of ethics and business conduct,

23 would you think that Wells Fargo Bank, N.A. in its

24 CMBS servicing would comply with customary and usual




Page 911 commercial, multifamily mortgage lenders?

2 A Yes.

3 Q Okay. And to that extent would you agree

4 that the policies, practices and procedures of Wells

5 Fargo Bank, N.A. could at least help inform us as to

6 what the customary and usual standards would be?

7 MR. SIMON: Objection, form. You're asking

8 for his opinion again?

9 MR. RUBIN: He can answer the question.

10 MR. SIMON: Are you asking for his opinion?

11 MR. RUBIN: I'm asking him to answer the

12 question.

13 A To the extent that --

14 MR. SIMON: Hold on a second. I'm entitled

15 to know if you're asking him for an opinion. If

16 you're asking him for an opinion, that's not what the

17 purpose of this deposition is. Here's my point.

18 MR. RUBIN: Paul, he was going to answer

19 the question, and you know what he was going to say.

20 Now let him answer the question.

21 MR. SIMON: No, Matt. Here's my point.

22 MR. RUBIN: Are you instructing him not to

23 answer? I've asked my question.

24 MR. SIMON: Do you want to have this

25 conversation on or off the record?



Page 921 MR. RUBIN: On. I've asked my question.

2 It's perfectly proper within the scope of deposition

3 subjects 8 and 9, particularly 9, which deals

4 specifically with Wells Fargo Bank, N.A. were to be

5 utilized, employed or complied within the

6 administration or servicing of loans included in the

7 trust. That's exactly what I've just asked him, and

8 if you won't let him answer, that's fine. We'll go

9 back down, and we'll come back here again another

10 time.


12 MR. RUBIN: Yes.

13 MR. SIMON: May I make my speech now?

14 MR. RUBIN: Sure.

15 MR. SIMON: You are very precise with your

16 words, Matt, and you have spent a lot of time going

17 over a letter that has a typo -- or not a

18 typographical, but a misprint in the letter. You

19 have spent a long time on what these words mean. You

20 are now asking him questions that say do you think,

21 what is your opinion, and that is not the purpose.

22 If you really want his thoughts or his opinion, that

23 is not the purpose of this deposition. If you're

24 misusing the word think or opinion to mean do you

25 have a factual understanding of this, then he can



Page 931 answer the question. That's what I'm asking you to

2 clarify. A 30 B 6 is not supposed to be an expert

3 deposition, Matt, and you know that.

4 MR. RUBIN: I would agree with that, Paul,

5 but it is supposed --

6 MR. SIMON: Asking him for his opinion is.

7 MR. RUBIN: I'm asking him to testify as

8 the designated representative of the plaintiff

9 entity. Now, I'm not going to characterize it as an

10 opinion, as a fact. It's a question. As the extent

11 to which the Wells Fargo Bank, N.A. CMBS standards

12 would inform this customary and usual standards of

13 practice, I think that's directly within number 9.

14 MR. SIMON: I think that question is. The

15 last question you used the word is it your opinion or

16 do you think?

17 MR. RUBIN: Okay. Why don't you just make

18 your objection if there's some lack of clarity. He

19 was prepared to answer. We could have had an answer

20 ten minutes ago. Now Mr. Schwartz probably doesn't

21 even remember the question. So our respective

22 positions I think are clear. If you would be so kind

23 as to find that question and try again.


25 A Yeah, to the extent that any servicer's



Page 941 policies and procedures would assist with that.

2 Q Okay. Thank you. And the evil word think

3 wasn't even in the question. So be it.

4 MR. SIMON: Objection to the side bar,

5 Matt.

6 MR. RUBIN: I know.

7 MR. SIMON: It was in your previous

8 question that you followed up with.

9 MR. RUBIN: Okay. Okay.

10 BY MR. RUBIN:

11 Q Let me change subjects, Mr. Schwartz. I

12 should have done this before. It's what we usually

13 do at the beginning of depositions. We're going to

14 take a sidetrack here, and you can tell me something

15 about your educational and professional background

16 and qualifications if you would, sir.

17 A Sure.

18 Q Why don't you start from your undergraduate

19 degree and take it forward.

20 A I have a bachelor's degree in accounting

21 from Towson State University now known as Towson

22 University.

23 Q I'm sorry. Us Texans don't know where that

24 is. Where would that be?

25 A That's in Maryland.



Page 951 Q Okay. Thanks.

2 A It's part of the University of Maryland

3 state school system.

4 Q Great. Got it. Thank you. I'll let you

5 do a narrative here. Just kind of walk me through.

6 A Sure. I'm also a CPA in the State of

7 Maryland, not practicing or active, but I have the

8 CPA designation. Do you want me to give you a

9 rundown of my resume and prior job experiences? Is

10 that what you're asking? I want to make sure I'm

11 giving you a responsive answer.

12 Q What I'd like to do, yeah, just help me,

13 help us understand how you got from undergraduate

14 school to your current position. Go ahead and walk

15 through your various positions if it's not a list as

16 long as your arm.

17 A No, no. I think I could probably do that.

18 Is that okay? Am I allowed to do that? Okay. Right

19 out of college I worked for what was then a big eight

20 accounting firm, Deloitte, Haskins & Sells, for two

21 years.

22 Q And I'm sorry. Your degree was awarded in

23 what year?

24 A In 1986.

25 Q Okay. Thanks.



Page 961 A And I started with Deloitte right after

2 graduation. I moved to Ryland in 1988, a subsidiary

3 of the Ryland Homes Company, through a mortgage

4 company that I think they used to have, and have not

5 changed entities directly since. I've been with a

6 combination of merger and consolidation type things

7 all along, so I've worked for the combined entity

8 since that time. In that tenure my positions

9 included responsibility for accounting for individual

10 trusts, doing tax accounting for individual trusts,

11 all of these trusts having issued mortgage-backed

12 securities, ultimately became fully responsible for

13 all aspects of the tax administration and reporting

14 functions for the entity, and I may not get the order

15 exactly right, but I was responsible for the cash

16 management department, as well as residential

17 mortgage-backed securities bond administration

18 function and the commercial mortgage-backed

19 securities bond administration and trust

20 administration functions, to my current position of

21 basically full responsibility for coordination of the

22 operations relative to commercial mortgage-backed

23 securities.

24 Q Now, you say that you're responsible for

25 the coordination of these operations.



Page 971 To what extent is the trustee -- and I

2 presume this is in a trustee capacity we're talking

3 about, or is that not correct?

4 A It's in a role as trustee, yes, all the

5 commercial. Well, we have various other roles on

6 different deals, but in this deal that's in question

7 we're named as trustee.

8 Q All right. Have you ever been involved in

9 any aspect of mortgage servicing?

10 A No.

11 Q Have you ever been involved in any aspect

12 of mortgage or loan underwriting?

13 A No.

14 Q The actual lending process?

15 A No.

16 Q To that extent do you have any personal

17 knowledge of how these types of mortgage loans are

18 supposed to be administered?

19 A That question is broad. Can you narrow it

20 down for me?

21 Q Okay. In interactions between the lender

22 or the servicer in this instance and the borrower, I

23 take it you've never been involved in any such direct

24 interaction?




Page 981 Q Have you ever been involved in trying to

2 administer or work out a loan where there has -- some

3 problem has arisen between the lender and the

4 borrowers?

5 A No.

6 Q Do you have any knowledge at all about

7 workout policies, practices, procedures?

8 A General. Nothing specific.

9 Q Does Wells Fargo Minnesota have any kind of

10 position at all vis-a-vis this particular trust about

11 whether, and if so, when, ORIX as the servicer is to

12 make an effort to work out any problem with a loan

13 prior to initiating acceleration and foreclosure?

14 A The question was long. I lost the

15 beginning of it.

16 Q I'm sorry. Let me try it again.

17 A Could you just ask it again?

18 Q Fair enough. I won't do that to the court

19 reporter. If it's too long to remember, it's not

20 going to be worth reading back anyway.

21 We're talking generally about workouts, and

22 my question was does Wells Fargo Minnesota have any

23 sort of position or expectation about what ORIX as

24 servicer should do to try and work out a problem, a

25 situation that has arisen between a borrower and



Page 991 lender on any particular mortgage loan?

2 A No, except for the scope of the pooling and

3 servicing agreement. Not to the extent beyond the

4 pooling and servicing agreement setting the standard

5 for ORIX's behavior.

6 Q And that relates us back to Section 3.01,

7 the servicing standard?

8 A I believe so.

9 Q Okay. Do you know what communications

10 Wells Fargo Minnesota has received from ORIX about

11 this particular loan? And by that, I mean the

12 Arlington Apartments loan that's involved in this

13 lawsuit.

14 A Yeah, I believe so.

15 Q Tell me what you've seen. Or I'm sorry.

16 Tell me what Wells Fargo Minnesota has received. Let

17 me put it that way.

18 A Start with the standard servicing reporting

19 that's part of the commercial mortgage-backed

20 securities industry normal reporting that occurs.

21 And I can't enumerate exactly each piece of the

22 report, but there's a large number, a few -- I don't

23 know quite how to get to it -- maybe six or seven

24 different reports that on a monthly basis a servicer

25 is responsible for creating and passing through the



Page 1001 trustee for the use of the trustee's filing it and

2 for making it available to the investors. Those

3 reports -- please let me finish.

4 Q Sure.

5 A Those reports contain information about

6 every loan in the pool. They're not specific to the

7 loan in question in this matter.

8 Q Are there specific line item entries for

9 each visible constituent loan?

10 A Yes, I believe so.

11 Q Okay. And are these reporting -- periodic

12 reporting documents delivered in hard copy, or is it

13 just on line, or how do you get it?

14 A I honestly don't know for this exact

15 transaction how they're given to us by ORIX. They

16 can be in hard copy or in electronic format.

17 Electronic format can be transmitted either through

18 an attachment to an e-mail or by sending us a CD.

19 Q In terms of what's actually in the

20 Wells Fargo Minnesota file that was received from

21 ORIX, I mean do you know physically what is there,

22 what's been sent?

23 A I can tell you that I had a staff member

24 when you asked -- you'll recall you asked me about

25 preparation for the deposition. I had a staff member



Page 1011 look through the trust file --

2 Q Right.

3 A -- and pull out any documents that he

4 thought were specifically related to the Arlington

5 loan.

6 Q And what did you find?

7 A I found a few different documents that all

8 of which came to us from ORIX or necessarily a subset

9 of everything that they had including -- I hope I can

10 remember all of it. Forgive me if I miss something.

11 Q Certainly.

12 A A letter telling us that the loan was being

13 placed into special servicing.

14 Q Yes, sir.

15 A Something telling us that they had

16 determined that any future advances on the property

17 would be nonrecoverable, a transmittal of an

18 appraisal.

19 Q Yes, sir.

20 A I'm just trying to recollect what was in

21 those. That's generally it. And I did not look at

22 each individual regular reporting that was for the

23 whole pool of loans that this loan was only one line

24 item on because I have a general understanding of

25 what's in those documents. They comprise part of the



Page 1021 trust file.

2 Q Let's see. Of the 106 loans that comprise

3 this particular pool, the certificate Series 1999 C

4 1, does that sound right, 106 loans?

5 A I honestly don't know. I'm responsible for

6 approximately 250 similar transactions. This is only

7 one of them. And each one can contain hundreds of

8 loans.

9 Q I wouldn't expect you to have any command

10 of specific knowledge of that volume of material. I

11 just want to find out if -- let's see -- it says so

12 in the pooling and servicing agreement. Well, let me

13 show you.

14 MR. SIMON: Matt, do you have the MLPA?

15 That might have it.

16 THE WITNESS: The PSA typically has an

17 exhibit that lists the individual assets that are

18 being transferred to the trust.

19 MR. RUBIN: Yeah, I'm sure it's there

20 somewhere. Tell what you. I'll mark the prospectus

21 anyway because I'm going to have some questions about

22 that. We'll mark that as Wells Fargo 10.

23 (Exhibit WF-10 was marked for


25 transcript.)



Page 1031 BY MR. RUBIN:

2 Q And this is -- yeah, this is actually the

3 October 29, '99 supplement to the overall October 15,

4 '99 prospectus. And I'm specifically only looking at

5 the first page where it says the trust fund will

6 consist of a pool of 106 conventional fixed rate

7 mortgage loans. See that up in the upper right-hand

8 corner under The Trust Fund?

9 A Yes, I see that.

10 Q Okay. Does that sound about right as far

11 as you know?

12 A Yeah, sounds reasonable.

13 Q Of that round number 100 loans, do you have

14 any idea how many are in special servicing as opposed

15 to master servicing?

16 A No, not at any one time.

17 Q Is there any way to find that out?

18 A There is.

19 Q Would that be something that's included on

20 these periodic reports that ORIX would make to the

21 trustee?

22 A Yes.

23 Q And how often do these periodic reports get

24 made?

25 A Monthly and quarterly depending upon the



Page 1041 type of reporting it is.

2 Q If a document request had been sent asking

3 Wells Fargo Minnesota to produce its entire file or

4 all communications from ORIX that have been received,

5 would these monthly reports -- should they have been

6 included within the production?

7 A Yeah, that's information we received from

8 ORIX.

9 Q Okay. What about -- and let me go ahead

10 and refer you to one of these exhibits in the book

11 that's there in front of you. I believe it's number

12 17.

13 A Okay.

14 Q Is this the letter you said that you had --

15 excuse me -- Wells Fargo Minnesota had received

16 informing the trustee that this loan had been placed

17 in special servicing, or is this something else?

18 A This is something else.

19 Q Have you seen this one? This is the May

20 29, 2001 asset status report. I believe that's what

21 that's called.

22 A No, I don't believe I've seen this exact

23 document.

24 Q All right. Then why don't you put that

25 aside for right now. I'll ask you something about



Page 1051 that later. But you saw a different letter from ORIX

2 informing that there had been a servicing -- what do

3 they call it? Help me out here. There's a term for

4 it where they change servicing from master to special.

5 MR. SIMON: Transfer?

6 A Servicing to transfer?

7 Q Yeah. You saw a servicing transfer letter?

8 A Yeah, something along those lines.

9 Q Okay. And what about when the decision to

10 initiate acceleration and foreclosure was made, was

11 there any letter that was sent from ORIX about those

12 issues?

13 A Not to my knowledge.

14 Q Isn't there supposed to be one?

15 A I don't know. I'm not intimately familiar

16 with all aspects of the 200 plus page PSA.

17 Q Shame on you. You really should.

18 A That's what I have staff for.

19 Q Look for me, if you will, at page 88 of the

20 PSA.

21 A Okay. Let's find that. Is that the

22 document at tab 2 here?

23 Q That's correct, sir.

24 A Okay. Page 88. Okay.

25 Q I'm interested in the Section 3.18 B --



Page 1061 A Uh-huh.

2 Q -- which says in the event that any

3 mortgage loan becomes a defaulted mortgage loan and

4 the special servicer has determined in good faith

5 that such defaulted mortgage loan will become subject

6 to foreclosure proceedings, the special servicer

7 shall promptly so notify in writing the trustee and

8 the master servicer.

9 Did you see any such written notice from

10 ORIX about this Arlington Apartments property

11 becoming subject to foreclosure proceedings?

12 A Not personally, no.

13 Q Do you think it should be in the file if

14 it's called for by the PSA?

15 A I can tell you that if ORIX sent it to us,

16 it should be in the file, but I can also tell you

17 that we have no way of knowing when it would be

18 required. In other words, we wouldn't know that

19 they've taken that action until they've told us that

20 they've taken that action.

21 Q But surely at some point the trustee is

22 supposed to be informed of such action being taken,

23 isn't it?

24 A It appears that that is what this document,

25 the PSA, says.



Page 1071 Q Okay. And you expect ORIX to comply with

2 its obligations under the PSA?

3 A Yes.

4 Q Let me bounce back to an exhibit we

5 haven't identified, Mr. Schwartz. We skipped over

6 it. It's the deposition notice, Exhibit 8.

7 A Okay. I see it on the table in front of

8 me.

9 Q Now, although that does say that it's a

10 deposition to be taken in December in my office, do

11 you understand that you are here to testify on behalf

12 of Wells Fargo Bank Minnesota, N.A. on all of these

13 subjects except numbers 7, 12 and 20 that were

14 limited by the court in response to some motions that

15 the parties had filed?

16 A That sounds right, although I don't have my

17 notes with me from my conversations with my attorney

18 about exactly which ones were excluded by the court.

19 Q Okay. And I'm sure if I transgress those

20 boundaries, Mr. Simon will let me know forthwith.



23 transcript.)

24 BY MR. RUBIN:

25 Q Let me also show you Wells Fargo Exhibit



Page 1081 11, an Affidavit of Brian Smith that was submitted to

2 the court in connection with those hearings about the

3 Wells Fargo corporate representative deposition.

4 Do you need this, Paul?

5 MR. SIMON: Yeah.

6 BY MR. RUBIN:

7 Q Have you ever seen Mr. Smith's affidavit

8 before?

9 A Yes.

10 Q What was the occasion on which you saw it?

11 A It was in the file that I reviewed in

12 preparation for this deposition.

13 Q Okay. Had you met with him or talked to

14 him about the contents of the affidavit before it was

15 submitted to the court?

16 A No.

17 Q He says the trustee has no personal

18 knowledge of any subject identified in defendant's

19 deposition notice. First, the trustee has no

20 knowledge about some subjects, e.g., 2, 3 and 5,

21 because the question's implied assumption is

22 incorrect. For instance, the trustee did not

23 communicate with ORIX concerning any defendant, the

24 loan made the basis of this lawsuit, or the property

25 used to secure the loan, unquote. That's paragraph 5



Page 1091 of Mr. Smith's affidavit.

2 Now, that's simply not accurate, is it?


4 BY MR. RUBIN:

5 Q The trustee did have communications with

6 ORIX about each one of those issues, did it not?


8 A Let me read it. ORIX did provide us with

9 certain documents related to those matters.

10 Q Yes.

11 A I don't know if you define that as

12 communications.

13 Q Actually it would within the meaning of the

14 deposition notice, so --

15 But there's no question that there was at

16 least written communication between ORIX and the

17 trust, the trustee, about the defendants, the loan or

18 the property?

19 A ORIX did provide written documents to us.

20 Q Okay.

21 A Clearly not the other way.

22 Q I'll object to the nonresponsive portion.

23 Mr. Smith's affidavit also claims that the

24 trustee has no knowledge of Wells Fargo Bank

25 Minnesota, N.A.'s involvement in commercial real



Page 1101 estate lending because it does not engage, and it has

2 not engaged, in commercial real estate lending.

3 That's not accurate either, is it?

4 A No.

5 Q And he says similar subjects are 7, 10, 11,

6 13, 14, 15, 16, 17 and 18, which I guess you can look

7 at. 7 has been removed from consideration, but 8,

8 the servicing standard, 9, the extent to which --

9 MR. SIMON: 9 is not one of them.

10 MR. RUBIN: I'm sorry?

11 MR. SIMON: 9 isn't one of his list.

12 MR. RUBIN: You're right. I stand

13 corrected.

14 BY MR. RUBIN:

15 Q 10, internal reviews within Wells Fargo,

16 11, the nature and extent of the trustee's

17 involvement, 13 is interest income, 14, fee

18 collection practices, 15, the pooling and servicing

19 agreement, 16, upside participation from resales, 17,

20 foreclosure triggers and 18, use of MAI approved

21 appraisers.

22 The trustee, Wells Fargo Bank Minnesota,

23 N.A., certainly had knowledge of some of those

24 subjects, didn't it?




Page 1111 A We did have knowledge of some of those

2 subjects.

3 Q Okay. Paragraph 6 of Mr. Smith's affidavit

4 continues that the trustee has no special or peculiar

5 knowledge about other subjects and refers to 6 and 8

6 because the trustee's knowledge if any is secondhand,

7 for example, by reading the document identified

8 within the subject. For instance, the trustee's only

9 knowledge about the policies, practices, procedures

10 or standards that were to govern ORIX's conduct as

11 master servicer or special servicer necessarily comes

12 from reading the documents such as the pooling and

13 servicing agreement or maybe the loan documents and

14 is no broader than what could be gleaned by anyone

15 who read those documents.

16 Now, the trustee has an understanding, does

17 it not, of what -- I don't mean the trustee.

18 Wells Fargo Bank Minnesota has an

19 understanding, does it not, of what standards were to

20 govern ORIX's conduct?

21 A Yes.


23 BY MR. RUBIN:

24 Q All right. 9, 12. Okay.

25 Do you know why Mr. Smith was allowed to



Page 1121 submit an affidavit that, at least on its face,

2 appears to be somewhat inaccurate?


4 A What do you mean by the word allowed?

5 Q Let me rephrase it if you're not

6 comfortable. Why he did it?

7 A You're asking me why he filed an affidavit

8 that we now realize was inaccurate?

9 Q Yes, sir.


11 BY MR. RUBIN:

12 Q If you know. If you don't know, it's

13 okay.

14 A I don't know.

15 Q All right. Fair enough. Let's go ahead

16 and go through this list of subjects that we see on

17 Wells Fargo Exhibit 8. Some of them I think we've

18 probably exhausted pretty well. Number 1 is document

19 production by Wells Fargo in response to defendant's

20 request for production.

21 Have you reviewed the entire document

22 production by Wells Fargo in the case?

23 A I only know that I reviewed the documents

24 that I discussed with my attorney. I can't speak to

25 whether or not that was a complete response that was



Page 1131 made on behalf of Wells Fargo.

2 Q Okay. So you really can't say exactly what

3 was produced and probably haven't reviewed every

4 single numbered document at the bottom --

5 MR. SIMON: Objection.

6 BY MR. RUBIN:

7 Q -- that was given to us --


9 BY MR. RUBIN:

10 Q -- is that correct?


12 A Can you clarify the question?

13 Q Sure. The question is have you reviewed,

14 and can you testify to be more precise, about the

15 specific documents produced by Wells Fargo in

16 response to the request for production of documents?

17 And by that, I mean everything from page 001 to

18 whatever it is, page 1134.

19 A No.

20 Q Okay. Number 2. Communications between

21 ORIX and the trustee concerning the Arlington

22 Apartments loan. You've told us about the periodic

23 reports.

24 A Uh-huh.

25 Q Are there any other communications between



Page 1141 ORIX and the trustee concerning the Arlington

2 Apartments loan?

3 A My review of the file resulted in the

4 documents that I described before that were all from

5 ORIX to the trustee concerning the loan.

6 Q All right. Has anyone ever picked up the

7 phone and talked to these guys about a call from --

8 and by these guys I mean ORIX.

9 Has there been any kind of verbal

10 discussion about either the loan, the mortgage or any

11 nonprivileged discussion about this lawsuit as far as

12 you know?

13 A To my knowledge, no.

14 Q And just so we'll be aware, is there any

15 kind of policy or procedure in place at Wells Fargo

16 Minnesota by which you all would record or make notes

17 of conversations, make memos to the file or something

18 like that, if such a conversation had occurred?

19 A No, unless it was a substantive

20 conversation.

21 Q All right. And I take it you didn't find

22 any such notes or consequence of any such verbal

23 communications?


25 Q Number 4. Policies, practices, procedures



Page 1151 and standards applicable to Wells Fargo's

2 administration or conduct in connection with the

3 trust or the Arlington Apartments loan. Now, we

4 haven't really talked about Wells Fargo's role in how

5 this CMBS pool gets administered.

6 Are there any written policies or practices

7 or procedures governing what Wells Fargo Minnesota is

8 supposed to do?

9 A Relative to the trust or relative to the

10 loan? It was a two-part subject.

11 Q It's a dysjunctive sentence, so I guess

12 it's both, trust or the loan.

13 A Yes to the trust. No to the loan.

14 Q And beyond the PSA, what is their dealing

15 with the responsibilities or standards governing

16 Wells Fargo vis-a-vis the trust?

17 A That's a broad question. We have many

18 corporate trust policies that relate to being a

19 trustee for a trust.

20 Q Okay. Do you know if any of those have

21 been produced?


23 A You're asking about my personal knowledge?

24 Q Your knowledge as the designated

25 representative to talk about these 20 odd subjects.



Page 1161 A I don't know.

2 Q And just so we're clear, do you understand

3 that you are here not as Mr. Schwartz, VP, but

4 rather, as the designated representative to speak

5 officially on behalf of the named plaintiff entity,


7 A Yes.

8 Q Okay. I thought so, but I wanted to be

9 sure. All right. Let's see. Number 5. The nature

10 and extent of Wells Fargo Bank Minnesota, N.A.'s

11 involvement in commercial real estate lending.

12 Can you talk about that to any significant

13 extent?

14 A To some extent. I endeavored to determine

15 what it was in preparation for this deposition so

16 that I could adequately represent the knowledge of

17 the organization.

18 Q Okay. And tell us what is the approximate

19 face value of Wells Fargo Bank Minnesota, N.A.'s

20 commercial real estate loans any time in the last two

21 years?

22 A I don't know that.

23 Q How many such loans are there?

24 A I don't know that.

25 Q Are there any policies, practices or



Page 1171 procedures that govern or apply to Wells Fargo Bank

2 Minnesota's involvement in commercial real estate

3 lending?

4 A Yes.

5 Q More than just that one page or one

6 document that you gave us?

7 A Well, that document references something

8 more narrow than commercial real estate lending.

9 Q Right. By that document, we're talking

10 about Wells Fargo 4.

11 A Yes, I understood that.

12 Q I thought so, but the record --

13 A I understand.

14 Q -- we have to play this record game. All

15 right. So in terms of any other documents produced

16 concerning the nature and extent of Wells Fargo's

17 involvement in commercial real estate lending,

18 Wells Fargo 4 is all we have, right?

19 A I don't know because I've not reviewed all

20 of the documents that have been produced in response

21 to discovery requests.

22 Q Fair enough.

23 A I know that we did provide documents to

24 ORIX and counsel, and counsel determined what was

25 appropriate to produce.



Page 1181 Q All right. Well, under number 5 it would

2 seem to me that included within the nature and extent

3 of Wells Fargo Minnesota's involvement in commercial

4 real estate lending, we go back to the servicing

5 standard of the PSA, the standards that prudent

6 institutional, commercial, et cetera, lenders employ

7 in servicing their own mortgage loans.

8 Can you add any clarification at all about

9 those standards or practices or policies applicable

10 to Wells Fargo Bank Minnesota, N.A.'s involvement in

11 commercial real estate lending?

12 A I can tell you that those policies are

13 meant to govern assets of the bank. A loan is an

14 asset of the bank, and the policy is broader than

15 commercial mortgage lending specifically. And I know

16 of no other guidance relating to that matter or that

17 topic I guess.

18 Q What is Wells Fargo Bank Minnesota, N.A.'s

19 policy regarding workouts of loans on which

20 difficulties or disputes have arisen?

21 A My understanding of the policy is that the

22 loan officer and/or banker that are responsible for

23 the relationship with the commercial customer will

24 endeavor to determine when a loan is in a problem

25 situation such as what you're referring to. If it's



Page 1191 something that can't immediately be worked out

2 without risk of loss to Wells Fargo as the owner of

3 that asset, it will be forwarded to a workout group

4 or workout committee that has more expertise in

5 handling those situations.

6 Q And as far as you know, what is supposed to

7 happen in the workout committee? I mean is there

8 anything -- well, let me just ask the general

9 question. Then we'll have specifics.

10 A As far as I know, what's supposed to happen

11 in the workout committee is they're supposed to --

12 you know, they're supposed to determine what the best

13 way to maximize the return to Wells Fargo of the

14 particular asset is within the guidelines of the loan

15 documents and the legality.

16 Q Would Wells Fargo Minnesota as trustee

17 expect ORIX to comply with the same type of approach

18 or to utilize the same type of approach in dealing

19 with any borrowers that might have a troubled loan in

20 this pool?


22 A I can only tell you what we would do for

23 our own loans, and I can tell you that the guidance

24 for the way the servicer is supposed to act in this

25 particular pool is in the pooling and servicing



Page 1201 agreement.

2 Q Okay. But you acknowledge that that's how

3 Wells Fargo Minnesota, N.A. would handle such a loan

4 on its own account that it was the owner of?

5 A Yes, that's generally what my testimony

6 was.

7 Q Right. Okay. And do you think that that

8 particular approach that you've testified to is

9 consistent with the customary and usual standards of

10 practice of a prudent institutional or commercial

11 mortgage lender servicing its own mortgage loan?

12 A I don't know.

13 Q Why not?

14 A Because I don't have intimate understanding

15 of that standard to be able to use my -- to use that

16 judgment.

17 Q But if you will, look at numbers 8 and 9 of

18 your -- I'm sorry -- of the corporate representative

19 deposition notice. That appears to me to be included

20 within those two categories of what the corporate

21 representative was supposed to testify to.

22 A Yes, and I already --


24 A I already have testified --

25 Q Okay.



Page 1211 A -- to the extent that Section 3.01 I

2 believe does govern the standards of care of the

3 servicer.

4 Q But you can't say whether the standards or

5 the practices and policies followed by Wells Fargo

6 Bank Minnesota, N.A. for its own loans would be

7 within the standard -- servicing standard set forth

8 in Section 3.01?

9 MR. SIMON: Objection, form. Matt.

10 MR. RUBIN: No. This is a different

11 question, Paul.

12 MR. SIMON: You're still asking him what

13 the standards are, which he's told you repeatedly he

14 doesn't know what the industry standard is. And you

15 said a long time ago you were going to move on.

16 MR. RUBIN: That was before I got this next

17 bit of information about how they do it.

18 MR. SIMON: Didn't you know about this

19 before the deposition?

20 MR. RUBIN: What their standard was? No,

21 because I didn't get any documents that were

22 particularly helpful, and I've been told for eight

23 months that there was no such entity. In any

24 event --

25 MR. SIMON: In any event, he has told you



Page 1221 repeatedly he doesn't know what the industry standard

2 is, and he's told you what he thought about Wells

3 Fargo Minnesota's policy.

4 BY MR. RUBIN:

5 Q Let's talk more specifically about default

6 acceleration and cure of issues in commercial real

7 estate loans.

8 What is Wells Fargo Minnesota's policy

9 about accelerating and initiating foreclosure upon

10 loans that are not in default in payment of principal

11 or interest?

12 A That would be handled on a case-by-case

13 basis depending upon all the factors relevant to that

14 particular asset of the bank, and the workout

15 committee would determine those factors and

16 appropriately work within legal constraints and the

17 constraints of the loan documents to determine what

18 was in the best interest of Wells Fargo as the owner

19 of that asset.

20 Q As the designated representative of Wells

21 Fargo Minnesota to testify about commercial real

22 estate lending practices, are you aware of any

23 instance in which a loan that was current on payment

24 of principal and interest secured by commercial real

25 estate was nevertheless accelerated and had



Page 1231 foreclosure proceedings initiated?

2 A I'd have no way of knowing that.

3 Q Why not?

4 A Because I don't have knowledge of

5 everything that's been done to administer every

6 single asset of the bank.

7 Q Could you have found out if you tried?


9 A I don't know. I mean I just don't know

10 what I would have found out.

11 Q Did you make any effort to find out whether

12 there were any such acceleration and foreclosure

13 decisions by Wells Fargo Bank Minnesota, N.A. in

14 preparing for your testimony today?

15 MR. SIMON: You're going to tell me, Matt,

16 where this is one of the topics that you're talking

17 about?

18 MR. RUBIN: Sure. I think it's all

19 subsumed, Paul, within the nature and extent of its

20 involvement and also -- that's number 5, and also it

21 could be part of 17, foreclosure triggers.

22 MR. SIMON: I don't think so. 17 refers to

23 the prospectus, Matt. It doesn't refer to loans that

24 Wells Fargo Bank Minnesota holds for itself. 5

25 refers to a volume or quantity or size of the



Page 1241 business that they do and not policies that affect

2 particular loans.

3 MR. RUBIN: Okay.

4 MR. SIMON: You told the judge, Matt --

5 MR. RUBIN: Paul.

6 MR. SIMON: -- and this is going to be on

7 the record. Stop it. You told the judge that this

8 deposition was going to be limited to questions

9 pertaining to this loan, and you're going into what

10 does Wells Fargo Bank Minnesota do on things that

11 have nothing to do with this lawsuit.

12 MR. RUBIN: No, no. And I will disagree

13 with that because I believe that I have consistently

14 maintained ever since I was told the lie back in

15 April of 2003 that there is a separate entity, the

16 trustee, and that's why I couldn't get a single

17 document from Wells Fargo Minnesota because there was

18 no such entity. Ever since then, I have maintained

19 that anything done by Wells Fargo Bank Minnesota in

20 handling its commercial loans is directly relevant to

21 the servicing standard. That's why I'm asking Mr.

22 Schwartz that question right now. If your

23 understanding was that I made some representation

24 that would only be dealing with this loan, I never

25 would have said that because I've consistently



Page 1251 maintained that I have been getting the wool pulled

2 over my eyes deliberately by a refusal to -- by a

3 phony, a false and inaccurate claim that there is a

4 distinction between the trust and Wells Fargo Bank,

5 N.A. as the entity.

6 MR. SIMON: And we've clarified that it's a

7 distinction without a difference, and my objection

8 stands, Matt.

9 MR. RUBIN: Okay.

10 MR. SIMON: What Wells Fargo does on its

11 individual loans is not one of the topics that you've

12 identified for him to testify, and so your

13 insinuation that he hasn't done his homework by not

14 looking into what loans were accelerated or

15 foreclosure proceedings were begun where they were

16 current on P and I has nothing to do with this

17 deposition, at least insofar as you've been able to

18 tell me so far.

19 MR. RUBIN: I disagree with that.

20 MR. SIMON: Well, point to a topic, and

21 I'll let him testify about it, Matt.

22 MR. RUBIN: It could be part of number 4.

23 It could be part of number 5. It could be part of

24 number 6.

25 MR. SIMON: How Wells Fargo forecloses



Page 1261 other loans is part of how ORIX was supposed to

2 service this loan?

3 MR. RUBIN: It all deals with policies,

4 practices and procedures and the extent to which

5 Section 3.01 of the pooling and servicing agreement

6 incorporates, essentially by reference, reasonable

7 commercial standards. Now, either Wells Fargo

8 Minnesota employs reasonable commercial standards or

9 it doesn't. If it does, then I'm entitled to get

10 into the frequency, the circumstances in which it, in

11 compliance with the standard and code of ethics of

12 Wells Fargo & Company, has conducted itself in the

13 same or similar fashion in the past. It all goes

14 directly to what is the standard of commercial

15 reasonableness and commercial standards unless

16 they're going to say they don't observe commercial

17 standards, which they're not going to say.

18 MR. SIMON: Matt.

19 MR. RUBIN: So it's all part of the same

20 issue, Paul. I'm entitled to get into the specifics

21 that make up the whole.

22 MR. SIMON: I understand that, Matt.

23 MR. RUBIN: Good.

24 MR. SIMON: But what you're not entitled to

25 do is just go on a fishing expedition. And even what



Page 1271 you're saying is it might be part of this, it might

2 be part of that. I don't see where you've asked him

3 to identify what loans were accelerated when they

4 were current on principal and interest. You well

5 know that there are issues other than current

6 principal and interest --

7 MR. RUBIN: Wait a minute.

8 MR. SIMON: -- that can cause a loan to

9 accelerate.

10 MR. RUBIN: Now, listen. We're not going

11 to do this on the record anymore. If you have an

12 objection, Matt --

13 MR. SIMON: I asked you if you wanted to go

14 off. You said you wanted to do this on the record.

15 MR. RUBIN: If you have an objection to

16 make in accordance with the Texas rules, please do

17 so. We both know what those objections are;

18 objection, form, objection, responsiveness,

19 objection, privilege, or you may instruct the witness

20 not to answer under certain circumstances. I want

21 this to stop, these speaking objections, these old

22 style objections that are designed to coach the

23 witness as much as anything else. Now let's just

24 stop it. Okay?

25 MR. SIMON: I've asked you to identify a



Page 1281 topic, and even you can't. All at best you can say

2 is it might fall into any one of these broad

3 categories. And Judge Halbach with regard -- with

4 regard to number 11, Judge Halbach struck any

5 constituent loan, and he said you're going to talk

6 about this loan. All of these other topics with one

7 exception contains or pertains to the Arlington

8 Apartments loans.

9 MR. RUBIN: No. All of those questions --

10 and 11 I agree with you because this is not -- could

11 not possibly be under number 11. I'll concur with

12 that. Any prior conduct, administration, practices,

13 policies, procedures of Wells Fargo Bank Minnesota in

14 administering commercial real estate loans is

15 directly related to the servicing standard under 3.01

16 in my view.

17 MR. SIMON: I agree with that.

18 MR. RUBIN: And I am entitled to explore,

19 now that we've gotten the general discussion

20 complete, I'm entitled to explore more specific

21 instances to see whether in circumstances similar to

22 those which we believe were present in this case

23 Wells Fargo has a practice, a policy or procedure, a

24 similar method of handling it that should have been

25 incorporated within 3.01. That's all I'm trying to



Page 1291 do.

2 MR. SIMON: Well, you could have made your

3 questions clearer because even you can't point to one

4 that you think this clearly falls within.

5 MR. RUBIN: No, no. I'm telling you that I

6 think it is all included.

7 MR. SIMON: I'm done, Matt. Go with your

8 question.

9 MR. RUBIN: Oh, great.

10 MR. SIMON: He can answer it if he knows

11 it, but I'd like to move along.

12 MR. RUBIN: Well, I'm glad we got that

13 done. Can you even find the question? I'm glad I've

14 got a good court reporter here.

15 THE REPORTER: One moment, please.

16 MR. RUBIN: Thank you.


18 A No.

19 Q Thank you. All right. I think we talked

20 about number 8 in the list of subjects of examination

21 pretty extensively, and that's the servicing

22 standard. Let me just ask you a general question,

23 Mr. Schwartz.

24 Is there anything that you would add to

25 your prior testimony that would help us understand



Page 1301 what was supposed to be the servicing standard, the

2 actual day-to-day administrative servicing approach

3 that was to be taken by ORIX in the servicing of this

4 loan or of this pool?

5 A No, I have nothing to add.

6 Q I thought that would be the answer.

7 Number 9. We didn't really talk

8 specifically about this, we kind of danced around it,

9 but this is the extent if any to which the policies,

10 procedures or standards for commercial lending

11 practices applicable to any Wells Fargo parent or

12 subsidiary company, including, without limitation,

13 Wells Fargo & Company and Wells Fargo Bank, N.A.,

14 were to be utilized, employed or complied with in the

15 administration of servicing of loans or servicing of

16 loans included in the trust.

17 And that loops me back I guess to the

18 questions I had begun to ask earlier, and that's

19 whether you think that these policies, practices or

20 procedures of either Wells Fargo Bank, as we've seen

21 that does CMBS loans, or the other Wells Fargo

22 companies, were intended to inform the servicing

23 standard. Do you understand my question?

24 A No. Sorry.

25 Q I was afraid of that. Let me just strike



Page 1311 that.

2 Would Wells Fargo Bank Minnesota have

3 expected ORIX to comply with the same policies or

4 procedures or standards for commercial lending and

5 servicing that Wells Fargo Bank itself uses in its

6 administration of its own loan portfolio?

7 A No.

8 Q Why not?

9 A Because they're subject to the standards of

10 the pooling and servicing agreement, which are

11 necessarily different than those standards that are

12 used by the bank as a owner of assets as a lender

13 directly. Third party servicing is very different

14 from --

15 MR. SIMON: Let him finish his answer.

16 A -- from servicing for your own portfolio.

17 We have existing relationships with customers that

18 are commercial customers, and we do what we think is

19 right relative to those relationships and the lending

20 that we do with those. It has nothing to do with

21 lending that is done on a third party basis for a

22 pool of third party investors.

23 Q But with respect, sir, isn't that exactly

24 what Section 3.01 requires, that the loans be

25 administered or serviced in accordance by giving due



Page 1321 consideration to the customary and usual standards of

2 practice of prudent institutional, commercial, et

3 cetera, mortgage lenders servicing their own mortgage

4 loans? Now, that's exactly what it says, isn't it?

5 A Uh-huh.

6 Q And that's a yes, right?

7 A That's exactly what it says, yes.

8 Q Okay. We can't do uh-huhs.

9 A Sorry.

10 Q That's okay. It's human.

11 So as I read it, the standards applicable

12 to lenders servicing their own mortgage loans are

13 supposed to be employed in evaluating the servicing

14 standard applicable to this particular third party

15 servicing agreement. Isn't that what it says?

16 A Notwithstanding your argument, there's no

17 responsibility that Wells Fargo has of interpreting

18 that standard in our role as trustee.

19 Q Objection, nonresponsive. I'm not asking

20 about whether Wells Fargo did anything to interpret

21 it. I'm asking about what -- again we're back to

22 where we were before -- what comprises this

23 standard. And here it's lenders servicing their own

24 mortgage loans. Let me ask it this way.

25 Is it your testimony that as far as the



Page 1331 trustee is concerned, it would have been perfectly

2 acceptable for ORIX to engage in conduct that never

3 would have been deemed acceptable if committed or

4 undertaken by a Wells Fargo Bank, N.A. officer in

5 working out in dealing with a mortgage loan?


7 A I can't answer as to acceptable or not

8 acceptable. I'm unclear on what you're actually

9 question. What's the question?

10 Q Let me ask it this way. I'll come back to

11 that one in a second.

12 Is there any way under this servicing

13 standard as far as you know to evaluate whether the

14 actions and conduct of the master or special servicer

15 comply with the servicing standard?

16 A I don't know.

17 Q Okay. Would Wells Fargo Bank Minnesota

18 expect at a minimum that ORIX would comply with the

19 same CMBS servicing standards that Wells Fargo Bank,

20 N.A. employs in its CMBS servicing activities?


22 A I don't know what standards Wells Fargo

23 Bank, N.A. uses in their servicing activities, nor

24 can I speak to how that relates to ORIX's servicing

25 activities. The standards are laid out in the



Page 1341 pooling and servicing agreement.

2 Q Well, sir, I mean you say they're laid out

3 in the pooling and servicing agreement, and I see

4 where that section is identified, but I'll be darned

5 if I can get a handle on what it is that this

6 language means in operation.


8 MR. RUBIN: That's not a question yet.

9 MR. SIMON: I'm objecting to the side bar,

10 Matt.

11 BY MR. RUBIN:

12 Q Okay. And I'm just trying to find out if

13 there is any clarification or guidance you can give

14 us as to what comprises the customary and usual


16 commercial mortgage lenders servicing their own

17 mortgage loans.


19 A Other than the sense that it is a general

20 industry standard followed by all servicers

21 performing this kind of function, no.

22 Q You're not changing your prior answer about

23 the extent to which Wells Fargo Bank, N.A.'s policies

24 or procedures might inform that customary standard,

25 are you?



Page 1351 A No.

2 Q Okay.

3 A No.

4 Q Fine. Let's go on to the next one. I

5 think number 10 is easy. Internal reviews,

6 evaluations, assessments or communications within

7 Wells Fargo concerning the Arlington Apartments loan

8 or the actions or conduct of ORIX.

9 Are there any? Have there been any?

10 A None. No.

11 Q Number 11. Nature and extent of the

12 trustee's involvement in administration of trust or

13 decision-making on this constituent mortgage loan?

14 A None.

15 Q Do you have any understanding -- and this

16 is taken from both the prospectus and the PSA -- any

17 understanding about how fees are supposed to be

18 assessed to a borrower?

19 A I guess, first of all, I have to note that

20 the prospectus is not a document that Wells Fargo

21 Bank Minnesota is a party to.

22 Q Now, why do you say that, sir?

23 A Because it's a document that was prepared

24 by the underwriter that was selling these

25 securities. We didn't -- it's not a contract that we



Page 1361 signed up to.

2 Q I would agree with that.

3 A So I can't speak to what it says. I mean

4 if you point to me a section, I can read it.

5 Q Sure. Excuse me. I'm sorry.

6 A But as it relates to -- I believe your

7 question related to fees that could be charged to the

8 borrower.

9 Q Yeah, that's right.

10 A Those are outlined in the loan documents,

11 not in either of the two documents that you, to my

12 understanding, that you listed.

13 Q All right. Do you have any understanding

14 about whether ORIX is supposed to comply with the

15 terms of the prospectus in its administration or

16 servicing of the loan, of any constituent loan?

17 A Yes, I have an understanding. And they're

18 supposed to comply with the terms of the pooling and

19 servicing agreement. I don't believe that the master

20 servicer or special servicer is a party to the

21 prospectus either. It's not a contractual document

22 that determines how they're supposed to act on behalf

23 of the trust or the investors. The pooling and

24 servicing agreement is the sole place where that's

25 determined.



Page 1371 Q All right. So would it be accurate to

2 characterize your understanding and position as

3 basically the prospectus is issued by the issuer and

4 the depositor of the securities, and they're the only

5 ones who are responsible for the content?

6 A That's absolutely correct. Well, other

7 than the fact that you did not include the

8 underwriter.

9 Q I stand corrected of course.

10 A Using general terms you're correct, but

11 specific terms of art, underwriter would be included.

12 Q I appreciate that clarification, and I

13 would agree with you.

14 THE WITNESS: Can I ask that we take a

15 break?

16 MR. RUBIN: Of course. Don't forget to

17 unhook yourself.

18 THE WITNESS: Okay. Thanks.

19 MR. RUBIN: Sure.





24 We're back on the video record.

25 BY MR. RUBIN:



Page 1381 Q Mr. Schwartz, continuing with our review of

2 the deposition notice, I think we're past number 12.

3 I'm going to skip a few of them. Going directly to

4 number 19, the default and workout standards and

5 fees.

6 The first question dealing with fees, do

7 you have any present understanding of the fee

8 structure to be paid to ORIX as, first, the master

9 servicer, and second, as special servicer?

10 A I have a general understanding.

11 Q I'm not sure where it is in the PSA, but I

12 can direct you to a couple of pages in the

13 prospectus, if you would turn there with me to, yeah,

14 Wells Fargo 10. And I believe this is the

15 supplement. At pages S 73 and 74 there's a

16 discussion of the fee structure.

17 A And apparently a rather lengthy one.

18 Q Yes. Well, the fees are important to

19 everyone I'm sure. And I won't ask you to have your

20 eyes glaze over by reading that whole thing, but

21 rather, just look with me, if you will, at the

22 specific numbers that are plugged in there.

23 In the first paragraph under Servicing and

24 Other Compensation and Payment of Expenses at S 73 it

25 says the primary compensation to be paid to the



Page 1391 master servicer in respect of its servicing

2 activities will be the master servicing fee, and then

3 about halfway down that paragraph you see the

4 sentence about weighted average?

5 A Yes.

6 Q It says and the weighted average master

7 servicing fee rate as of the cutoff date will be

8 0.06199 percent. So what, just over six one-

9 hundredths of a percent. And then the special

10 servicing fee is described at the beginning at the

11 bottom of page S 73. The principal compensation of

12 the special servicer will be special servicing fee,

13 workout fee and liquidation fee. And we see at the

14 top of page S 74, quote, the special servicing fee

15 will accrue at a rate, the special servicing fee rate

16 equal to 0.25 percent per annum, and then it

17 continues by talking about how it's computed and

18 paid.

19 Looks to me like the special servicer earns

20 about, well, more than four times what the master

21 servicer earns as its fee.

22 Is that consistent with your understanding?

23 A Do you want to check your math?

24 Q Well, .06199 to .25 percent. A little bit

25 more than four times?



Page 1401 A Okay. That sounds reasonable. Right.

2 Q In the view of the trustee, does that

3 create any incentive for the master servicer to send

4 a loan to special servicing to quadruple its fee?

5 MR. SIMON: Objection, form. That's a

6 prohibited topic, Matt.

7 MR. RUBIN: Huh?

8 MR. SIMON: It's a prohibited topic. It's

9 part of question 20. Does it create an incentive

10 goes directly to whether there was a conflict of

11 interest for the special servicer and the master

12 servicer.

13 MR. RUBIN: You won't let him answer?

14 MR. SIMON: The judge said he couldn't

15 answer it. I mean you're asking him to compare

16 default fees or special servicing fees and master

17 servicing fees and asking if there's an incentive for

18 it. It's clearly hinting towards whether there's a

19 conflict of interest.

20 MR. RUBIN: It doesn't matter. The

21 conflicts of interest are disclosed in the

22 prospectus, and they say there are going to be some,

23 so I'm not concerned about conflicts of interest.

24 I'm talking about administration of loans.

25 Specifically this deals with whether there may be an



Page 1411 incentive if the trustee has any position. If they

2 don't, they don't. But it deals with administration

3 and good faith issues more than conflicts of

4 interest.

5 MR. SIMON: By the way, do you want to look

6 at the PSA for that? I found the section that deals

7 with it. It's on page 76.

8 MR. RUBIN: Does that have the .06?

9 MR. SIMON: It defines it in terms of a

10 spoken formula, but it doesn't define it in terms of

11 numbers.

12 MR. RUBIN: Right.

13 THE WITNESS: It's probably defined in the

14 definitions section.

15 MR. RUBIN: It's way in the back with the

16 table. This is actually a more convenient reference

17 I think.

18 BY MR. RUBIN:

19 Q And assuming these numbers are right, Mr.

20 Schwartz -- I think we can assume they're right --

21 I'll just ask you if -- and this can be a yes or

22 no -- if it's no, it's no -- from the trustee's

23 perspective the prospect of a special servicer

24 earning four times as much in fee income on a

25 specially serviced loan as opposed to a master



Page 1421 service loan creates -- does it create any problems?

2 A Not from the perspective of performing the

3 duties that we're hired to perform, no.

4 Q All right. From the trustee's perspective,

5 does that create the possibility that the special

6 servicer will have an incentive or motivation to

7 transfer a loan from master to special servicing in

8 order to quadruple its fees?


10 A I wouldn't want to speak about the

11 possibility and the incentives of the various parties

12 that are not my entity.

13 Q Would you agree that whatever the

14 incentives or the intentions are, that when a loan is

15 transferred from master servicing to special

16 servicing, the special servicer earns considerably

17 higher compensation than it otherwise would have as

18 master servicer?

19 A Yeah, I think we proved that with the math

20 here.

21 Q And then there are also these other fees, a

22 workout fee and a liquidation fee, that may or may

23 not come into play depending on what happens, as

24 described in the prospectus, right?

25 A If that's what this prospectus says, yeah.



Page 1431 I saw that it listed those fees.

2 Q Okay. Are you aware of whether there are

3 any -- or whether ORIX has ever engaged in any sort

4 of postforeclosure financing or participation

5 activities whereby it could earn additional

6 compensation on a foreclosed property?

7 MR. SIMON: Has ORIX ever done that? Is

8 that what your question is?

9 MR. RUBIN: As far as he knows, yeah. This

10 is number 16.

11 A I don't know if ORIX has ever done that.

12 Q This is specifically, this category number

13 16, upside participation from subsequent resales of

14 foreclosed properties financed by servicer.

15 Do you understand what that means?

16 A I think I know what you're getting at.

17 Q Tell me what you understand, and we'll see

18 if we're on the same page.

19 A What I think you're talking about is to the

20 extent the value of any real estate that's realized

21 in lieu of the payment of the loan exceeds the value

22 of the debt, that there's -- that's the upside that

23 you're referring to.

24 Q I'm glad we talked about that because that

25 is -- that's not exactly what I meant.



Page 1441 Are you talking about the market value and

2 bidding in at below market value in that

3 circumstance? Maybe we are talking about the same

4 thing.

5 A I'm sorry. What I was referring to was the

6 ultimate net proceeds that could be realized upon the

7 disposition of the real estate.

8 Q Okay. And how from a trustee's perspective

9 could that benefit a servicer?

10 A From the trustee's perspective could that

11 benefit a servicer? I don't know.

12 Q Okay. Then what were you talking about

13 when you were describing your understanding of what

14 this subject was? I mean do you see a circumstance

15 in which there could be a benefit from this upside

16 participation?

17 A Yes.

18 Q Okay.

19 A But you asked me about the servicer

20 enjoying that benefit.

21 Q Right.

22 A And I don't know who would enjoy that

23 benefit.

24 Q Would that be something that's buried

25 somewhere here in the PSA or in the prospectus do you



Page 1451 think?

2 A I'm not sure. The pooling and servicing

3 agreement should guide what the master servicer

4 should be doing or the special servicer should be

5 doing in terms of what they do with any cash they

6 realize upon the liquidation of real estate. I'm

7 confident that that would be a term that would not

8 have been left out or ignored by the counsel that

9 drafted these documents.

10 Q They're thorough. No question of that.

11 Have you ever experienced or seen a

12 situation where in one of these pool transactions a

13 loan is specially serviced, it goes into foreclosure,

14 and then the special servicer, through another

15 affiliate or division or entity, provides financing

16 to a buyer or obtains an equity participation in the

17 resale of the property after foreclosure?

18 A No.

19 Q Are you aware of any such arrangements ever

20 occurring?

21 A Isn't that what you just asked me?

22 Q I asked you if you've seen any or

23 participated in any.

24 A Okay. No. The answer to both is no.

25 Q Okay. There's a provision in the PSA that



Page 1461 permits the servicer to purchase defaulted mortgage

2 loans. I'm wondering if the trustee has received any

3 notice from ORIX as master or special servicer that

4 it intends to buy or to acquire the note or the

5 Arlington Apartments property.

6 A I'm not aware of any such communication.

7 Q If there were any such communication, that

8 would be part of the file too, would it not?

9 A It should be.

10 Q Let's shift gears again and go back to

11 talking about servicing and workouts and loan

12 administration. I'm particularly interested in one

13 of those documents that's in front of you in the

14 exhibit binder.

15 A Okay.

16 Q It is, if memory serves --

17 MR. SIMON: What's the number?

18 MR. RUBIN: I'm trying to get the correct

19 number, Paul. I think it's 11, but let me

20 double-check. Okay. Hold on. No. Close. Number

21 12 is the one I'm interested in.

22 BY MR. RUBIN:

23 Q Now, Exhibit ORIX 12 is something that was

24 part of ORIX's document production.

25 Have you ever seen this before?



Page 1471 A No. I'm confident I've not.

2 Q I didn't think you would have. Let me ask

3 you just to take a look at the first page of it. The

4 second and third pages with all -- and fourth with

5 all the detailed financial calculations I'm not going

6 to ask you about, but the first summary and comment

7 pages. I thought you might want to read the whole

8 thing.

9 A Do you want me to read the whole right side

10 of this page? I was just kind of waiting for a

11 question.

12 Q I'm sorry. We weren't communicating. Why

13 don't you go ahead and just read through that thing

14 on the ORIX modeling assumptions.

15 A Okay.

16 Q I do have some specific questions for you

17 further down the page.

18 A Okay. You'll just have to give me a few

19 minutes. This is detailed information.

20 MR. RUBIN: Yeah. Do you want to go off

21 the record while he reads it? There's no reason to

22 let him sit there.

23 MR. SIMON: That's fine.

24 MR. RUBIN: Let's go ahead and break off

25 the record while he reads.



Page 1481 THE VIDEOGRAPHER: The time is 12:43.




5 We're back on the video record.

6 BY MR. RUBIN:

7 Q Okay, Mr. Schwartz. Excuse me. I've taken

8 a moment off the record so you can read this January

9 16, 2001 final. It's an ORIX underwriting summary.

10 And I have some specific questions, not about the

11 detailed underwriting issues because that's not your

12 area of expertise, I know that, or your area of

13 testimony, but rather, this second to the last and

14 last section dealing with the projection of the

15 property's development or lack of development in the

16 future. And the ORIX report says with the poor

17 DSCR -- that's in all capital letters -- currently

18 estimated at .76 X, the property will need to have a

19 considerable financial commitment made to make it

20 able to service its debt. It is anticipated this

21 will not occur, and it will continue to be

22 insufficient property cash flow to service the debt

23 in the years 2001 forward, and thus, it appears the

24 borrower will have little equity motivation to remain

25 in the deal, and a foreclosure assumption is



Page 1491 presumed.

2 Let me ask you about that. We had talked

3 earlier about troubled loans, if you will, or problem

4 loans and workout situations.

5 Based on what you've read here, would this

6 fit the description of a troubled or problem loan

7 potentially?

8 A I don't have expert knowledge to know that.

9 Q All right. Then let's just talk about the

10 workout aspect of it because workouts -- default on

11 workout standards and fees is part of category number

12 19 I believe.

13 Where ORIX is projecting in January of 2001

14 that the property will have to have a considerable

15 financial commitment made, but it's anticipated that

16 commitment will not occur, do you think ORIX should

17 have asked the borrower if it was prepared to make

18 that kind of commitment?


20 A I'm not in a position to think what ORIX

21 should have done or should not have done in servicing

22 the loan.

23 Q Well, in terms of workout standards or

24 ORIX's conduct as servicer, would or would not the

25 trustee have expected ORIX to make some effort to



Page 1501 find out whether the borrower intended to continue

2 paying the loan or to make the necessary infusion or

3 financial commitment before projecting a foreclosure?

4 A You're asking me to give you specific

5 understanding of what ORIX should have done in their

6 servicing, and the only thing that I know relative to

7 the standards they need to service to is the sections

8 in the PSA that talk about it. I don't have any

9 detailed knowledge, nor does Wells Fargo Bank

10 Minnesota, N.A. as trustee have any detailed

11 knowledge of what those servicing standards should

12 be. And this would be a subset of that.

13 Q All right. Well, in compliance with the

14 usual and customary standards of reasonably prudent

15 commercial lenders in servicing their own mortgage

16 loans, do you think that at a minimum before

17 initiating acceleration and foreclosure proceedings,

18 a lender ought to find out from the borrower whether

19 they intend to make the financial commitment

20 necessary to the property?


22 A You're asking me to conjecture at how

23 somebody ought to go about servicing a loan. I've

24 already told you that I don't know about a serviced

25 loan, I'm not an expert on servicing loans, and



Page 1511 Wells Fargo has no position on how to service a loan.

2 Q What about presuming foreclosures? Is this

3 the way that Wells Fargo Minnesota handles this kind

4 of situation for its own mortgage loans?


6 MR. RUBIN: I'm sorry, Paul. Go ahead.

7 MR. SIMON: I thought you were done.

8 Finish your question. Then I'll object.

9 BY MR. RUBIN:

10 Q Okay. Is this the way that Wells Fargo

11 Bank Minnesota deals with borrowers on commercial

12 real estate loans it handles for its own account?


14 A I don't know the details of how that's

15 done. It's negotiated on a case-by-case basis.

16 There's no one standard of how to go about doing

17 that. I would have to suppose or assume how the loan

18 officer or the workout committee would do that.

19 Q And there's nothing giving us any guidance

20 as to whether they should even make an effort to

21 contact the borrower before initiating a foreclosure

22 or an acceleration?


24 A Are you asking is there anything to give us

25 that kind of detailed guidance?



Page 1521 Q I don't think I used the word detailed. I

2 said any guidance.

3 A I don't know of any guidance that Wells

4 Fargo Bank Minnesota uses in administering loans for

5 its own account other than that which we had talked

6 about before as the policy.

7 Q Do you know if Wells Fargo projects default

8 and acceleration and foreclosure on commercial loans

9 like this months before the projected default date?

10 MR. SIMON: Can I just get you to clarify?

11 We've been loose here with the term Wells Fargo. Are

12 we going back to Wells Fargo Minnesota, or are you

13 talking about --

14 MR. RUBIN: I'm talking about Minnesota.

15 MR. SIMON: Okay.

16 A Yeah. I don't remember the exact question

17 whether it's affirmative or negative.

18 Q Take a guess. What the heck. Let me try

19 it again.

20 Do you know whether Wells Fargo Minnesota

21 projects default and foreclosure on performing

22 loans -- by performing I mean current in principal

23 and interest -- six months to a year in advance?

24 A No, I don't know with what level of detail

25 and specificity how the workout group or bankers work



Page 1531 with individual distressed assets.

2 Q All right. Wouldn't you think that it is a

3 minimum standard of customary and prudent lending

4 practice to have contact with the borrower to find

5 out what they intend to do with a particular

6 property?


8 A I'm in no position to know what's customary

9 and standard in terms of how or when the master

10 servicer or servicer would communicate with the

11 borrower.

12 Q And why is that, that you are not in a

13 position to testify to that?

14 A Because as I've said before, Wells Fargo

15 Bank Minnesota only makes these kinds of loans to

16 accommodate commercial customers that we already

17 have. We don't service for third parties. There's

18 not a standard that exists on exactly how to do each

19 piece.

20 Q And you have no idea what the present face

21 value of the commercial loan portfolio is for Wells

22 Fargo Bank Minnesota --

23 A No.

24 Q -- right?

25 A I don't know.



Page 1541 MR. SIMON: Let him finish his question.

2 A Sorry. I didn't let you finish your

3 question.

4 Q That's okay.

5 A It had been asked before.

6 Q I just wanted to make sure.

7 There was something in the PSA and the

8 prospectus called, I believe, a controlling

9 certificate holder -- I'm sorry -- controlling class

10 representative.

11 Does that have any meaning to you --

12 A Yes.

13 Q -- for a particular pool?

14 A In a general sense. I don't know what it

15 means specifically for this pool.

16 Q Do you know if there was a controlling

17 class representative for any of the certificate

18 classes for this pool?

19 A I don't know.

20 Q Where would we find something like that,

21 that information?

22 A To the extent that one had been named, it

23 would be in our trust files.

24 Q If you would turn back with me in the

25 exhibit binder before you to exhibit ORIX 17.



Page 1551 A Okay.

2 Q This is one you said you hadn't seen. It

3 was the May 29, 2001 documents from -- excuse me --

4 Mark Contreras of ORIX, an asset status report.

5 A Uh-huh.

6 Q And I notice on page 2 under distribution,

7 it shows a copy to Wells Fargo Norwest Bank

8 Minnesota. That's not the right name now, is it,

9 Wells Fargo Norwest Bank Minnesota, N.A.? That's

10 somewhat confusing I think.

11 A Yes, that's not an entity that I'm familiar

12 with.

13 Q Okay. Do you know Marlene Olsen?

14 A I do not.

15 Q No idea what her connection would have been

16 with this particular, this pool, or why she would

17 have been getting a copy on behalf of the bank?

18 A I really don't.

19 Q Do you know what if anything was done with

20 this asset status report that was sent some time in

21 May of 2001 to the trustee, master servicer, rating

22 agencies -- excuse me -- and it says directing

23 certificate holder of controlling class?

24 A I don't know what any of these parties

25 would have done with that.



Page 1561 Q Was there any sort of internal review or

2 assessment done at Wells Fargo when this particular

3 asset status report came out after it was transferred

4 to special servicing?

5 A It's highly unlikely that that would have

6 occurred because we don't review the details of these

7 asset status reports. They're given to us either for

8 filing to keep a comprehensive trust file or to

9 forward to other parties that may want to look at the

10 detail of it.

11 Q Okay. And I may have asked you this. If I

12 did, I apologize, but do you have any feel or

13 estimation of about how many of the loans in this

14 pool may have been transferred from master or regular

15 servicing to special servicing?

16 A I don't know.

17 Q I take it you have no opinion, assessment,

18 evaluation, or anything to add, about the substance

19 of what's in this ORIX Exhibit 17?

20 A No, I have nothing to add.

21 Q I think we're finished with that, Mr.

22 Schwartz --

23 A Okay.

24 Q -- unless there's something --

25 A I'm just trying to --



Page 1571 Q -- that you find particularly fascinating

2 in there.

3 A I'm trying to determine what the notice

4 address was for Wells Fargo and why it was sent to

5 that other address, which isn't typically our notice

6 address. That's the only reason I'm looking.

7 Q I see.

8 A Sorry for the interruption.

9 Q That's fine.

10 MR. RUBIN: Why don't we go ahead and break

11 and see if that's lunch.

12 THE WITNESS: Yeah. Let's go off the

13 record.






19 BY MR. RUBIN:

20 Q Mr. Schwartz, let me ask you to take a look

21 back at the old PSA again, ORIX 2. And this time I'm

22 interested in something that's at the bottom of page

23 71.

24 A Okay.

25 Q And this is Section 3.09 that's entitled,



Page 1581 Realization Upon Defaulted Mortgage Loans Required

2 Appraisals. And it's a very long paragraph, but I'm

3 interested particularly in the section dealing with

4 when under the PSA the special servicer is supposed

5 to initiate foreclosure proceedings or is permitted

6 to. And it states the special servicer subject to

7 subsections B through D of this Section 3.09 of

8 course may at any time consistent with the servicing

9 standard foreclose upon or otherwise comparably

10 convert, parens, which may include an REO

11 acquisition, closed parens, the ownership of property

12 securing such mortgage loans as come into and

13 continue in default as to which no satisfactory

14 arrangements can be made for collection of delinquent

15 payments and which are not released from the trust

16 fund pursuant to any other provision hereof. And

17 then it continues with language dealing with casualty

18 damage and the bidding process, advances and such

19 things, but I'm specifically interested in the

20 contingency under Section 3.09 A that says that the

21 special servicer can foreclose upon properties that

22 come into and continue in default as to which no

23 satisfactory arrangements can be made for collection

24 of delinquent payments.

25 Now, are you aware of any other contingency



Page 1591 in the PSA pursuant to which the special servicer is

2 permitted to initiate foreclosure proceedings?

3 A No, I'm not familiar with every aspect of

4 the PSA.

5 Q If the only contingency that is stated in

6 the PSA and the only one identified as an event

7 following which the special servicer may initiate

8 foreclosure, if this is all that is stated, would you

9 expect this to be the only circumstance in which

10 foreclosure is supposed to be initiated?


12 A I can't expect all the ways that it might

13 happen and the ways that a servicer might exercise

14 their general duties to protect the interest of the

15 ownership of the loan.

16 Q Well, I'll object to that as

17 nonresponsive.

18 Is there any other section of the PSA

19 that -- as far as you know, that addresses whether or

20 not or when the special servicer may initiate

21 foreclosure or otherwise acquire the property?

22 A No, not to my knowledge.


24 BY MR. RUBIN:

25 Q And if the only contingency listed in



Page 1601 Section 3.09 is payment default for which no

2 satisfactory arrangement can be made, well, then

3 that's what the servicer is limited to, isn't it --


5 BY MR. RUBIN:

6 Q -- as you understand?

7 A I can't speak to what the servicer is

8 limited to. My understanding is generally they have

9 broad powers to exercise judgment in performing their

10 duties subject to that standard that we've talked

11 about so much in this deposition.

12 Q Sure. And it does say consistent with the

13 servicing standard, but I'll object to the non

14 responsive portion.

15 Would you agree with me that if the only

16 circumstance in the PSA that expressly permits the

17 special servicer to foreclose is payment default for

18 which no satisfactory arrangements can be made for

19 collection of delinquent payments, then the special

20 servicer is bound by that limitation?


22 A I don't know what they'd be bound by or

23 not. I can't agree with -- even if I were to

24 stipulate to the assumption of if this was the only

25 section that you stated, I don't know how to



Page 1611 interpret that section as a servicer.

2 Q Why not?

3 A Because I'm not a servicer, and my

4 organization doesn't service these loans in these

5 capacities.

6 Q And again you can't testify as to the

7 standard that should have been employed or applied to

8 ORIX in its conduct?

9 A I can't offer any additional information

10 than what we've discussed already.

11 Q The decision to proceed to foreclose

12 against a property that's involved in one of these

13 pools is not a decision taken lightly, is it?


15 A I don't know how subjectively ORIX or any

16 other servicer would take that decision.

17 Q Do you know about how many of the loans

18 comprising this pool have been put into foreclosure

19 of the 106 or so loans?


21 A No, I don't know.

22 Q Any sense at all? 1, 10, 50?


24 A I don't know.

25 Q Would you expect the PSA to define the



Page 1621 circumstances in which the special servicer is

2 permitted to initiate foreclosure or otherwise to

3 acquire the property?


5 A In the general sense of promulgating

6 standards for the servicer, yes.

7 Q Or specific provisions, right, if there are

8 specific provisions?

9 A Subject --


11 BY MR. RUBIN:

12 Q Go ahead. Subject --

13 A Subject to the servicing standard.

14 Q Sure. Okay.

15 A My understanding is the servicing standard

16 is not intended to be a limiting or any other thing

17 to be a limiting factor in what the servicer can or

18 cannot do. It's intended to give them broad powers

19 to protect the interest of the investors in the

20 trust.

21 Q All right. Let's talk about protecting the

22 interest of the investors in the trust. I want you

23 to assume certain facts for me, and I'm going to ask

24 you a couple of questions about them. Assume that in

25 March of 2002 the Arlington Apartments loan was paid



Page 1631 current for principal and interest, that there had

2 been no default in payment of principal and interest

3 since the inception of the loan, which was in July of

4 1999, so almost two years of unblemished payment

5 history, that the property was then seized by the

6 special servicer pursuant to Louisiana process, that

7 since March of 2002 -- I'm sorry -- it was two and a

8 half years -- March of 2002 the property has been in

9 the possession of the keeper appointed by the

10 Louisiana court at the request of the special

11 servicer, that since that time collections have

12 dropped, the condition of the property has

13 deteriorated, physical condition.

14 A Just for clarification, since what time?

15 Q Since the seizure in March of 2002. And if

16 I said 2001, I was wrong. It's 2002.

17 A Okay.

18 Q Rent collections have dropped. The

19 condition of the property has deteriorated. There

20 have been either none or virtually no payments of

21 principal and interest on the note, and the value of

22 the property has declined because of diminished

23 occupancy and increased deterioration, wear and

24 tear.

25 Assuming that all of those facts are



Page 1641 correct, can you say that ORIX's actions in seizing

2 the property in March of 2002 with those outcomes

3 would have been done consistent with a view to

4 maximizing the timely recovery of principal and

5 interest on a present value basis?

6 MR. SIMON: Objection, form. Matt, I don't

7 think this is an appropriate area for you to be

8 asking him for an expert opinion to take a bunch of

9 incomplete hypotheticals and assume an answer.

10 You've been doing this all day. It's not an

11 appropriate 30 B 6.

12 MR. RUBIN: Are you going to tell him not

13 to answer? Let's just do it the right way. Either

14 tell him not to answer or let him answer. I have

15 nothing else to say.

16 MR. SIMON: Taper your answers down. This

17 is ridiculous.

18 MR. RUBIN: Are you going to let him answer

19 or not answer?

20 MR. SIMON: I'm going to let him answer

21 this question, Matt. I'm not going to keep him going

22 down this road.

23 MR. RUBIN: Okay. Let him answer then.

24 MR. SIMON: If you can.

25 A You've given me a number of assumptions.



Page 1651 Can you state the actual question? I wrote down the

2 assumptions because I had a feeling a long list was

3 coming. Can you give me the question again?

4 Q Absolutely. I'll even give you a preview

5 of it. I'm trying to get the position of the trustee

6 as to whether what ORIX has done, and I'm asking you

7 to assume all those things have happened since March

8 of 2002, have occurred, in the face of a loan that

9 was performing completely, monthly payments of

10 principal and interest were being made and passed

11 through to all the certificate holders in accordance

12 with the appropriate provisions of the pool.

13 If in fact there was such a seizure in

14 March of 2002 when there had been no payment default,

15 if since then the property has deteriorated, the

16 collections have dropped --

17 A I got the assumptions.

18 Q All those assumptions.

19 Assuming all that's true, from the

20 trustee's perspective was that seizure and kicking my

21 clients out, off the property, was that consistent

22 with a view towards maximizing the timely recovery of

23 principal and interest on a present value basis on

24 this particular loan?

25 A I have no reason to believe that ORIX



Page 1661 didn't take that view when they took that action. I

2 can't play Monday morning quarterback to know what's

3 happened since then or to second guess ORIX's

4 decisions. Those were their decisions. It was their

5 purview, and the trustee doesn't have any opinion at

6 all about whether those were good or bad decisions or

7 whether they were done in accordance with the

8 servicing standard or not.

9 Q Would you agree that the paramount interest

10 of the trustee is in obtaining payment of the

11 mortgage loans so that the -- on a timely basis of

12 principal and interest -- so that the proceeds of

13 those loans can be distributed to the certificate

14 holders in accordance with the terms of the

15 prospectus?

16 A I believe that you've described the

17 perspective that an investor would have, but the

18 trustee is limited to certain ministerial duties that

19 are outlined in the PSA.

20 Q All right. Does the trustee have any

21 interest at all in ensuring the timely payment of

22 principal and interest on the constituent mortgage

23 loans so that the proceeds can be passed through to

24 the various investors who bought into the securitized

25 pool?



Page 1671 A In a general sense, yes.

2 Q And would you agree that that is the

3 paramount obligation that either the master and

4 special servicer have -- well, just leave it at that,

5 the master and special servicer would have getting

6 the loans paid so that the proceeds, the payments can

7 be passed through in accordance with the prospectus?


9 A I think that the perspective of those

10 entities is outlined in 3.01 where it defines the

11 servicing standard. You're asking me again to

12 summarize or give you an opinion about that servicing

13 standard. I'm not in a position to. It's not my

14 organization's responsibility under the documents to

15 have that perspective or opinion.

16 Q So we just revert to the language of 3.01

17 that talks about a view towards maximizing the

18 recovery?

19 A Yes.

20 Q Okay. Good enough. And we're just about

21 finished. Believe it or not, I think I'm finished.

22 Let me just ask you one final identification

23 question, give you one last exhibit.





Page 1681 transcript.)

2 BY MR. RUBIN:

3 Q Are you familiar with an organization

4 called the Commercial Real Estate Secondary Market

5 and Securitization Association?

6 A Yes.

7 Q Let me show you a publication that we found

8 that that entity had prepared. It's called CMBS

9 Basic Overview an Industry Contribution from CSSA.

10 That's Wells Fargo Exhibit 12.

11 Have you ever by chance seen that overview

12 or summary of the CMBS process?

13 A Clarify. No. The answer to your question

14 is no, I don't believe I've seen this document.

15 Q Okay. Based upon your experience in the

16 industry and the CMBS segment of the industry, would

17 that association, shall we say, know what they're

18 talking about in preparing an overview of the CMBS

19 process?


21 A You're asking me to tell you whether I

22 would believe what they're telling me? I'm not quite

23 sure.

24 Q If you think that that is an -- if that

25 association has sufficient knowledge, experience and



Page 1691 in depth, if you will, in the CMBS field to write an

2 overview of the CMBS process.


4 A The organization has since morphed into a

5 different organization known as the CMSA, and the

6 organization is made up of various industry

7 participants that perform various aspects related to

8 commercial mortgage-backed securities. There are

9 certainly people in the membership that have that

10 knowledge. The organization in and of itself isn't

11 an entity in a sense other than it's a membership

12 organization of those people in this line of

13 business.

14 Q What is the CSSA? Do you know what that

15 means?

16 A It's a predecessor organization to the CMS

17 -- the CMSA I believe.

18 Q Do you know what CSSA stands for? Because

19 I couldn't find it in there. I was just curious.

20 A I will use my best recollection, but I

21 can't promise you it's exactly right.

22 Q You can cross your fingers on this.

23 A Commercial Securitization Association --

24 Commercial -- I don't remember exactly. I honestly

25 don't. It's been years since they changed names to



Page 1701 the CMSA, which is the Commercial Mortgage Securities

2 Association. Effectively the same entity. They just

3 thought the name was more reflective of what they

4 did.

5 Q As an industry trade association then

6 dealing with these particular types of securities,

7 would you think that they have at least a general

8 sense of what the CMBS process entails?

9 A I would say that the members do. The

10 organization of itself does not have employees with

11 that kind of wherewithal.

12 Q Do you know anything at all about how

13 either CSSA or CMSA prepares publicly available

14 information like this overview I've handed you as

15 Exhibit 12?

16 A Yes, I have a general understanding of how

17 that's done.

18 Q Okay. And briefly tell me what that is so

19 we can all get out of here.

20 A Yeah. I know we all have things to do.

21 It's -- the process is to have constituents members

22 write sections or whole documents and have other

23 members do sort of a peer review kind of concept to

24 ensure that they're reasonably accurate and

25 representative of factual statements.



Page 1711 Q All right. And that process, assuming that

2 what I've handed you is an authentic and accurate

3 copy of a CSSA publication, that process would have

4 been followed in preparing this CMBS Overview as far

5 as you know?

6 A As far as I --

7 Q Okay.

8 A Likely, yes.

9 Q That's fine.

10 A You know, given that I don't really know

11 this document.

12 Q And I won't ask you to go through it unless

13 you're just dying to do some more reading today, but

14 I doubt that's likely to occur.

15 MR. RUBIN: So I think that that will just

16 about do it for me, Mr. Schwartz. I appreciate your

17 time and your courtesy.

18 THE VIDEOGRAPHER: The time is 1:39. This

19 is the end of the video deposition. Off the record.

20 Two tapes were used today.

21 (Discussion off video record, continuing on

22 written record only.)

23 THE REPORTER: For the written record, Mr.

24 Schwartz, will you be reading and signing or waiving?

25 THE WITNESS: I'll read and sign the



Page 1721 transcript of the written record.

2 THE REPORTER: And Mr. Simon, where will we

3 send the read and sign?

4 MR. SIMON: If you want, you can send it

5 directly to Barry. Barry, do you mind receiving it

6 directly? It will save time.

7 THE WITNESS: That's fine. This is the

8 address, 9062 Old Annapolis Road.

9 THE REPORTER: And Mr. Simon, will you be

10 ordering a copy of the testimony today?

11 MR. SIMON: Yes.

12 THE REPORTER: And a copy of the exhibits

13 also?

14 MR. SIMON: Sure. Regular deposition and

15 an ascii disk is fine.

16 (Signature having not been waived, the

17 deposition of Barry S. Schwartz was concluded at 1:41

18 P.M.)

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Page 1731 CHANGES AND SIGNATURE

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Page 1741 I, Barry S. Schwartz, have read the

2 foregoing deposition and hereby affix my signature

3 that same is true and correct, except as noted above.

4

5

6 _________________________

7

8

9 STATE OF _____________________)

10 COUNTY OF ____________________)

11

12 BEFORE ME, ______________________, on this day

13 personally appeared ___________________, known to me

14 or proved to me under oath or through

15 ____________________ (description of identity card or

16 other document) to be the person whose name is

17 subscribed to the foregoing instrument and

18 acknowledge to me that they executed the same for the

19 purposes and consideration therein expressed.

20 Given under my hand and seal of office this

21 _______ day of ____________________, 2004.

22

23 __________________________

24 Notary Public in and for

25 the State of _____________



Page 1751 Wells Fargo Bank Minnesota, N.A., et al. v.

2 Mondona Rafizadeh, et al.

3 I, Sharon D. Livingston, a Registered

4 Professional Reporter and Notary Public in and for

5 the State of Maryland, hereby certify to the

6 following:

7 That the witness, Barry S. Schwartz, was duly

8 sworn by the officer and that the transcript of the

9 oral deposition is a true record of the testimony

10 given by the witness;

11 That the deposition transcript was submitted on

12 ______________ to the witness or to the attorney for

13 the witness for examination, signature and return to

14 me by _________________, 2004;

15 That the amount of time used by each party at

16 the deposition is as follows:

17 Matt E. Rubin: Four hours, thirty minutes.

18 That pursuant to information given to the

19 deposition officer at the time said testimony was

20 taken, the following include all parties of

21 record:

22 Paul Simon, Esquire, on behalf of plaintiffs

23 and counterdefendants

24 Matt E. Rubin, Esquire, on behalf of defendants

25 and counterplaintiffs



Page 1761 I further certify that I am neither counsel for,

2 related to, nor employed by any of the parties or

3 attorneys in the action in which this proceeding was

4 taken, and further, that I am not financially or

5 otherwise interested in the outcome of the action.

6 Further certification requirements pursuant to

7 Rule 203 of the TRCP will be certified to after they

8 have occurred.

9 Certified to by me this 12th day of January

10 2004.

11

12 __________________________________

13 Sharon D. Livingston

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15

16

17 My commission expires:

18 July 1, 2005

19

20

21 ____________________________

22 Notary Public in and for the

23 State of Maryland

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Documents

Barry Schwartz