in re: bankatlantic bancorp, inc. securities litigation 07...

Case 0:07-cv-61542-UU Document 704 Entered on FLSD Docket 05/16/2011 of 8

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

CASE NO. 07-61542-CIV-UNGARO

IN RE BANKATLANTIC BANCORP, INC. SECURITIES LITIGATION

DECLARATION OF SERENA HALLOWELL SUBMITTED IN OPPOSITION TO

DEFENDANTS’ MOTION FOR SANCTIONS

I, Serena Hallowell, respectfully submit this declaration in Opposition to Defendants’

Motion for Sanctions in the above-captioned action and hereby declare as follows:

1. I am an attorney admitted to practice in New York and pro hac vice in this case,

and am an associate of Labaton Sucharow LLP (“Labaton”), Lead Counsel and Co-Class

Counsel for Class Representatives, State-Boston Retirement System (“State-Boston”) and Erie

County Employees Retirement System (collectively, “Plaintiffs”). I have personal knowledge of

all facts set forth in this declaration and can testify competently thereto if called upon to do so as

a witness.

2. The Court appointed State-Boston as Lead Plaintiff and Labaton as Lead Counsel

on February 5, 2008 (DE 45). The Court’s order directed Lead Counsel to file an amended and

consolidated class action complaint.

I was one of the attorneys involved in the preparation of the Consolidated

Amended Complaint (“CAC”) filed on April 22, 2008 and the First Amended Consolidated

Complaint (“FACC”) filed on January 12, 2009.


4. In preparation for filing the CAC, Lead Counsel for the Class, with the assistance

of Barroway, Topaz, Kessler, Meltzer & Check, LLP (“Barroway”), who was later appointed as

Co-Class Counsel, conducted an investigation, as detailed more fully in the affidavit of one of

Labaton’s investigators, Amy Greenbaum.

During the course of that investigation, Ms. Greenbaum provided me and other

supervising attorneys at Labaton with detailed memoranda of her witness interviews and one

witness interview transcript. Counsel at Labaton, including Paul Scarlato, Michael Stocker, and

me, and counsel at Barroway, reviewed these memoranda and witness transcript prior to the

filing of the CAC . Thereafter, Plaintiffs’ counsel, including me, provided Ms. Greenbaum with

additional questions for follow-up interviews. Based, in part, on these memoranda and the

transcript and any follow-up interviews and the memoranda generated as a result, the CAC was

prepared with inclusion of seven confidential witnesses.

6. Of the confidential witnesses included in the CAC, Ms. Greenbaum informed me

and other supervising attorneys at Labaton that at least two of the witnesses had articulated to her

that they were fearful of retribution by BankAtlantic, given the litigious nature of certain

BankAtlantic executives. This concern on the part of the confidential witnesses was also

memorialized in the witness transcript reviewed by me and provided to other supervising

attorneys. In addition, on April 21, 2008, one of the confidential witnesses signed an affidavit

which I have reviewed that described her specific concerns of being sued by certain Defendants

in retaliation for providing information to Plaintiffs’ counsel.

7. In filing the CAC, Plaintiffs’ counsel attempted both to protect the identities of

these confidential witnesses, and to plead enough detail to convey the basis of the confidential

witness allegations.

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8. Although information as to the titles and specific dates of employment at the

Bank were included within the existing investigative memoranda and the witness interview

transcript for the seven confidential witnesses, the CAC did not include the witnesses’ specific

titles or dates of employment.

9. Instead, a decision was made to withhold that specific information and include a

footnote in the body of the CAC that stated: “In an effort to protect the identities of

knowledgeable witnesses who have come forward on a confidential basis, Plaintiffs have not

pleaded all available information concerning job titles, locations, and starting and ending dates of

employment when providing such information would be tantamount to revealing the witnesses’

identity. Plaintiffs will provide such information to the Court in camera if the Court so requests.”

Thus, Plaintiffs’ counsel advised the Court that there was detailed identifying information for the

confidential witnesses as of the time the CAC was filed.

10. By Order dated December 11, 2008 (“First MTD Order”), this Court granted

Defendants’ motion to dismiss the CAC with leave to replead. The First MTD Order identified

the lack of specific identifying information for the confidential witnesses as a substantial

deficiency.

11. Following the Court’s First MTD Order, I along with other supervising attorneys,

directed the investigators to re-interview the confidential witnesses in the CAC with inquiries

designed to elicit further information about, among other things, their employment duties, the

relevant time period for the statements made, and the basis for their knowledge and information

as to the individual defendants’ involvement in the conduct at issue in the CAC. This information

was intended to supplement information previously obtained during the investigative interviews

with the confidential witnesses prior to the filing of the CAC.


12. After reviewing the deficiencies cited in the First MTD Order, I provided Ms.

Greenbaum additional questions to ask the confidential witnesses in the CAC. Many of my

follow up questions were focused on FACC Confidential Witness #2, Barbara Halprin

(“Halprin”). Specifically, I asked Ms. Greenbaum to make additional inquiries focused on

obtaining a better understanding of the basis of Halprin’s knowledge for all of her statements,

confirming that her statements applied to the class period specifically, and to obtain greater detail

about exception reports, the major loan committee and the Individual Defendants’ participation

therein. Other supervising counsel also provided follow up questions for the investigators.

13. After the First MTD Order was issued, to bolster the information Plaintiffs’

counsel already had, Ms. Greenbaum conducted follow up telephone interviews with Halprin on

December 17, 2008 and January 8, 2009. Because Halprin was an important witness for the

purposes of amending the complaint, I was present for at least parts of both Halprin interviews.

Ms. Greenbaum provided attorneys Paul Scarlato, Jonathan Gardner and me her memoranda for

these calls.

14. Thereafter, Ms. Greenbaum provided attorneys, Paul Scarlato, Jonathan Gardner

and me, a transcript of an investigative call made on the same day of FACC Confidential

Witness #3, Donna Loverin.

15. The investigative interviews conducted after the filing of the First MTD Order,

along with the investigative interviews conducted previously, served as the basis for revising the

CAC to correct the deficiencies the Court had identified in the First MTD Order.

16. Prior to filing the FACC, the decision was made by Plaintiffs’ counsel to not

include CAC Confidential Witness #5, Susan Imbrigiotta, in the FACC even though Plaintiffs’

counsel believed that she had information relevant to the matters at issue in this case, as the

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investigative memorandum confirmed that she was not employed at BankAtlantic during the

Class Period.

17. Based on a review of the dates of employment included in the investigative

memorandum for FACC confidential witness #6, Mark Meek (“Meek”), Plaintiffs’ counsel

believed that Meek was working at BankAtlantic during part of the Class Period. Therefore, the

decision was made by Plaintiffs’ counsel to keep the allegations provided by Meek in the FACC,

with references in two paragraphs - ¶¶59, 81.

18. The FACC was filed on January 12, 2009. I believed that the FACC accurately

reflected the statements previously made by the Confidential Witnesses to the investigators. A

redlined copy of the FACC detailing the changes that had been made from the CAC was also

filed with the Court. Among the additions to the FACC were details regarding the confidential

witness titles and dates of employment, as taken from the original investigative memoranda and

witness transcript generated prior to the filing of the CAC. The majority of the other changes

made from the CAC to the FACC, with respect to confidential witness statements, centered

around additional information gathered from Halprin (CW#2) during her interviews on

December 17, 2008 and January 8, 2009.

19. All of the Confidential Witness information in the complaints was generated

through Plaintiffs’ counsel’s investigation as detailed above.

20. Attached as Exhibit A to this declaration is a chart with true and correct excerpts

of certain deposition testimony of the confidential witnesses, and testimony given by CW1,

Johnny Irizarry, to the Securities and Exchange Commission, in connection with its investigation

into BankAtlantic.


I declare, under penalty of perjury under the laws of the United States of America, that

the foregoing is true and correct to the best of my knowledge.

Executed this 16th day of May, 2011, in New York, New York.

/s/Serena Hallowell_ Serena Hallowell

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CERTIFICATE OF SERVICE

I HEREBY CERTIFY that on May 16, 2011, I electronically filed the foregoing

document with the Clerk of the Court using CM/ECF. I also certify that the foregoing document

is being served this day on all counsel of record or pro se parties identified on the attached

Service List in the manner specified, either via transmission of Notices of Electronic Filing

generated by CM/ECF or in some other authorized manner for those counsel or parties who are

not authorized to receive electronically Notices of Electronic Filing.

/s/ Ronald D. Shindler RONALD D. SHINDLER


SERVICE LIST

Adam M. Schachter Eugene E. Stearns Gordon M. Mead, Jr. Stearns Weaver Miller Weissler Alhadeff & Sitterson, P.A. 150 W. Flagler Street, Suite 2200 Miami, FL 33130 Telephone: (305)789-3400 Facsimile: (305) 789-3395 [email protected] [email protected] [email protected]

Case 0:07-cv-61542-UU Document 704-1 Entered on FLSD Docket 05/16/2011 Page 1 of 47

Exhibit A

Case 0:07-cv-61542-UU Document 704-1 Entered on FLSD Docket 05/16/2011 Pa ge 2 of 47

Johnny Irizarry (CW#1) FACC Para. Allegation from FACC Quoted Excerpts from Confidential Witness Depositions

58 Specifically, from personal experience gained during the Class Period, A. Q: Was there anything at BankAtlantic that led you to believe that the CW1 described a lending environment where the Bank’s Credit loan officers received commissions based on the loans that they Department reported directly to the lending department. CW1 stated were underwriting? that this type of reporting structure is atypical in banking because the A: Yes. Credit Department is supposed to provide checks and balances to Q: What? mitigate risk. According to CW1, this structure was problematic A: Comments among themselves. because, by reporting to the lending department, the Credit Q: And you heard these comments? Department reported to the lenders who received commissions based A: Yes. Like, I need to complete my quota for the month. I only lent on loan approvals, and whose compensation was dependant on ten million, and it's twenty-five. Please help me, you know, meeting loan quotas. expedite the loan because I need to meet my quota.

Q: And if they met their quota, what would happen? A: Generally loan officers are compensated based on the business

they bring in. Depo. 111:12-112:1.

B. Q: The Major Loan Committee members only got the analysis that the lending officers put into that packet. Is that accurate?

A: They -- the Major Loan Committee would receive a package in which, I'd say, 75 percent of the package would be the financial analysis of the project, and 25 percent would be the borrower's -- the guarantor's analysis.

Q: And the financial analysis of the package came from the lending officers?

A: Yes. Q: The lending officers were the ones who received commissions

based on the amount of the loans that they underwrote in a given period?

A: I'm not sure -- I'm not sure that I'd use the word "commission" but compensation would be -- I don't think any bank gives a specific commission for a loan rather than the performance is -- their payment is based on -- part of compensation is based on how they perform. Depo. 114:9-115:6.

SEC Deposition:



C. Q: And how do you know that the loan officers' compensation was derived based on the business that they brought in to the bank?

A: Because many times they would be discussing their goals at credit committee and how, you know, how many clients they had, how many loans they had brought, like a scorecard. Informally, between them: you know. For example, Marcia Synder telling X loan officer you have only brought $10 million loans and you should have brought 15: what's going on, that information.

Q: As far as compensation being tied to the production being brought in by the officer, how do you know that?

A: Because of their -- because of their -- when they became pushy, trying to get their analysis, everybody wanted to get their analysis done first so they can, they would mention it; that they need to complete this because the month was going to close and the incentives that they were going to get, they needed to have it by X, by, you know, the scorecard be completed by X date in a very colloquial manner and that's something verbal. Depo. 17:2-21.

58 In fact, during the Class Period, the Credit Department ultimately SEC Deposition: reported to Marcia Snyder (“Snyder”), Executive Vice President of A. Q: And how do you know that the loan officers' compensation was Lending. CW1 recalled that Snyder’s compensation was based on derived based on the business that they brought in to the bank? meeting loan quotas. A: Because many times they would be discussing their goals at credit

committee and how, you know, how many clients they had, how many loans they had brought, like a scorecard. Informally, between them: you know. For example, Marcia Synder telling X loan officer you have only brought $10 million loans and you should have brought 15: what's going on, that information.

Q: As far as compensation being tied to the production being brought in by the officer, how do you know that?

A: Because of their -- because of their -- when they became pushy, trying to get their analysis, everybody wanted to get their analysis done first so they can, they would mention it; that they need to complete this because the month was going to close and the incentives that they were going to get, they needed to have it by X,



by, you know, the scorecard be completed by X date in a very colloquial manner and that's something verbal. Depo. 17:2-21.

59 (not cited by Defendants’ CW1 also stated that in the case of CRE loans, the lenders themselves A. Q: Paragraph 59 of the complaint states: CW1also stated that in the chart) underwrote their own loans during the Class Period. This undermined case of commercial real estate loans, CRE loans, the lenders

risk controls, as the very people who received commissions based on themselves underwrote their own loans during the Class Period. the amount of loans they underwrote were also in charge of the And I’ll represent to you that the Class Period is from the period underwriting and due diligence on those CRE loans. November 9, 2005 to October 25, 2007. Do you think that that is

an accurate statement? A: Yes. Q: The paragraph goes on to state: This undermined risk controls, as

the very people who received commissions based on the amount of loans they underwrote were also in charge of the underwriting and due diligence on those CRE loans, commercial real estate loans. According to CW1, CRE loans were treated differently from the bank’s other loans that were properly underwritten by the Credit Department, not the lenders. Do you believe that those statements are an accurate reflection of your statements -

A: Yes. Depo. 110:1-22.

B. Q: So after the lending officers underwrote the commercial real estate loans, you testified that they put their analysis in a package for the Major Loan Committee members?

A: Correct. Depo. 114:3-8.

SEC Deposition: C. Q: Can you describe for us sort of your day-to-day duties as

Commercial Credit Manager? A: Yes, like I mentioned before, I was basically responsible for the

underwriting of the tax returns, the analysis of the guarantors of facilities.

Q: Was this for all types of loans or any particular category of loans? A: Basically commercial loans we did underwrite, but commercial

real estate loans we did not underwrite.



Q: What do you mean by that? Did someone else underwrite those loans?

A: Yes: the commercial real estate loans were underwritten by the loan officers. Depo. 15:7-15.

59 (not cited by Defendants’ According to CW1, CRE loans were treated differently from the A. Q: According to CW1, CRE loans were treated differently from the chart) Bank’s other loans that were properly underwritten by the Credit bank’s other loans that were properly underwritten by the Credit

Department, not the lenders. Department, not the lenders. Do you believe that those statements are an accurate reflection of your statements --

A: Yes. Depo. 110:1-22.

B. Q: Were commercial real estate loans treated differently from the bank's other loans?

A: Yes. Q: How were they treated differently? A: With the other loans with commercial loans the Credit Department

would do the whole credit analysis of the loan. Q: And with commercial real estate loans how was the credit analysis

treated? A: The loan officers would prepare the credit analysis of the

borrower, and we would prepare the credit analysis of the guarantors. Depo 112:3-15.

62 (not cited by Defendants’ CW1 and CW2 were aware of these facts from their direct A. Q: Who was on the Major Loan Committee? chart) participation in the Major Loan Committee meetings and with respect A: The CEO of the bank, the executive vice president, the CFO, a

to CW2, from seeing, generating and distributing specific reports to all couple of other loan officers, if I'm not mistaken. And I would sit members of the Major Loan Committee during the Class Period. in as secretary of the committee just basically taking minutes.

Depo. 53:9-14.

B. Q: Exhibit 5 is an e-mail with Bates Number BBX HUBBARD 027 01100016. Take a look at the e-mail, Mr. Irizarry. Do you see at the bottom of the e-mail it indicates that this is an e-mail from you to Henry Barnes dated July 6, 2006?

A: Yes.



Q: And the subject is high loan to value ratio loans report? A: Yes. Q: You write to Mr. Barnes: Henry, could you please send me the

latest high loan to value ratio loans report that was prepared? The latest one that I have is dated December 31, 2005, and I must present the updated version in Major Loan Committee each time a high LTV loan is approved.

Q: Does this refresh your recollection that there were high loan to value ratio loan reports generated at BankAtlantic?

A: Yes. Q: And does it refresh your recollection that you presented these

reports at Major Loan Committee? A: Yes. Depo. 152:19-153:16.

65 Based on their personal observation as employees of the Bank A. Q: I am going to represent to you that BLB means builder land involved in the credit, servicing and closing aspects of CRE loans, banking. LAD means land acquisition and development, and CW1 and CW2 stated that many of the loans in the BLB, LAD and LADC means land acquisition development and construction. Is it LADC portfolios made during the Class Period were not properly your understanding that development -- acquisition and documented and other conditions of closing were not satisfied. development and acquisition development and construction loans

were part of the commercial real estate portfolio? A: Yes. Q: At BankAtlantic? A: Yes. Depo. 116:22-117:9.

B. Q: Let’s go back for a second. Did you witness commercial real estate loans that closed where there were policy conditions that had not been met?

A: Yes. Q: Did you observe loans in the commercial real estate portfolio that

closed despite not having all of the documentation that may have been required per policy?

A: Occasionally, yes. Depo. 118:24-119:9.

SEC Deposition:



C. A: ...keep track of the exception report, which was the largest exception report I've ever seen in my life. Depo. 19:21-23.

66 (not cited by Defendants’ Internal BankAtlantic procedures also required members of the Credit A. Q: Aside from the engagement of appraisers in terms of credit chart) Department, such as CW1, to provide opinions on the creditworthiness analysis being conducted for CRE loans, did the Credit

and technical aspects of CRE loans, as well as underwriting aspects of Department engage in any sort of analysis outside of the analysis the loans. of personal tax returns of guarantors? However, CW1 stated that, based on first hand observations as a A: No. commercial credit officer, the only function the Credit Department Q: CW1 -- this paragraph goes on to state: CW1 explained that actually performed during the Class Period in connection with CRE guarantors are a secondary source of repayment, and consideration lending was the analysis of personal tax returns of the guarantors. of this factor alone was not proper due diligence. CW1 explained that guarantors are a secondary source of repayment, Q: Would you agree with that statement? and consideration of this factor alone was not proper due diligence. A: Yes.

Q: Do you believe that you could have made this statement in sum or substance to the investigator who previously spoke with you?

A: Yes. Q: Can you explain the statement? A: Basically, like I said before, the loan officers would prepare the

financial analysis of the loan, and then they would gather our input as far as the analysis of the guarantors, and that would be presented to the Credit Committee, and, yes, guarantors are deemed a secondary source of repayment. Depo. 120:3-121:6.

B. Q: What should the Credit Department be examining in order to conduct proper due diligence?

A: In order to have the proper checks and balances I believe, and I have seen it in every other bank that I ever worked with, the financial analysis should be in the hands of the Credit Department not in the hands of the loan officers.

Q: Why? A: Because of the principle of checks and balances. Basically, like I

mentioned before, they are the interested party to get the loan approved. So you want -- you want to have a Credit Department is going to be looking at the aspects that the loan officer might or



might not focus on purposely or not. Q: You said they are the interested party. Who did you mean by that? A: The loan officers. Depo. 121:22-122:17.

C. Q: So if the loan officer already had done the underwriting for commercial real estate loans, what exactly did the Credit Department review in connection with commercial real estate loans?

A: We prepared the borrowers – the guarantor's financial analysis. Q: So you looked at tax returns? A: Yes. Q: You looked at personal financial statements? A: Yes. Q: And was it your job to make sure that everything in those

statements was accurate? A: In the personal financial statements and tax returns, yes. Depo.

133:2-134:13.

SEC Deposition: D. Q: And what type of duties did you have as Commercial Credit

Manager? A: I was the secretary of the loan credit committee and major credit

committee and I basically underwrote or reviewed the underwritings of the personal tax returns for the guarantor of facilities. Depo. 14:6-11.

67 Specifically, during the Class Period, CW1 witnessed occasions A. Q: Did you observe during the Major Loan Committee meetings that where Major Loan Committee members approved loans based on Marcia Snyder was frequently a proponent of lending based on the character lending, while rejecting attempts to discuss credit concerns familiarity of the borrower? and the technical aspects of loans during meetings. A: Yes. Among other -- among other committee members, yes.

Depo. 125:2-8.

B. Q: So your testimony is that Marcia Snyder was not the only proponent of lending based on familiarity with the borrower,



correct? A: Correct. Depo. 125:17-21.

67 (not cited by Defendants’ According to CW1, from a credit perspective the problem with A. Q: The paragraph goes on to say: According to CW1, from a credit chart) “character lending” was that without proper due diligence, the Bank perspective the problem with "character lending" was that without

could not tell if a borrower was overextended. proper due diligence, the bank could not tell if a borrower was over-extended. Do you agree with that statement?

A: Yes. Depo. 124:7-14.

68 Indeed, CW1 stated that Snyder would often get in quarrels with Linda A. Q: In Paragraph 68, if you go to the second sentence it states: Indeed Kilgo, (“Kilgo”) who also worked in the Credit Department during the confidential -- excuse me -- Indeed, CW1 stated that Snyder would Class Period, because Snyder would direct Kilgo to make loan often get in quarrels with Linda Kilgo, who also worked in the disbursements before appraisals were complete, which violated Credit Department during the Class Period, because Snyder would Company policy. direct Kilgo to make loan disbursements before appraisals were

complete, which violated company policy. Did you ever witness loan disbursements being made before appraisals were complete?

A: When a policy exception was approved, yes. Q: So it was a policy to not make a loan disbursement before

appraisals were complete? A: Yes. Depo. 126:24-127:15.

73 CW1 and CW2 both stated that the Credit Department was Note: Irizarry also confirmed in his deposition testimony that everything “powerless” to reign in the Company’s reckless CRE lending during he testified to during his SEC deposition was truthful to the best of his the Class Period. knowledge. Depo. 131:16-21. During his SEC deposition Mr. Irizarry

further testified under oath to the following:

SEC Deposition: A. Q: Based on what you’ve testified, was the bank conservative in its

underwriting practices for the commercial real estate loans? A: The bank was reckless. Q: Reckless? A: Reckless. Reckless disregard for policy and sound banking practices

as any exception report you could see from that bank would tell you.



Q: Did BankAtlantic’s commercial real estate loans have more exceptions than similar loans you’ve seen at other banks?

A: At least 10 to 15 times more. Depo. 44:4-16

73 (not cited by Defendants’ According to CW1, Snyder, as Executive Vice President of Lending, A. Q: Based on your observations as secretary of the Major Loan chart) overrode attempts to bring a risk perspective to Committee meetings. Committee while you were at BankAtlantic, did you observe Marcia

Snyder ever trying to override attempts to bring a credit perspective to the Major Loan Committee meeting?

A: ... yes. She is a very pushy executive, and sometimes the input that she would get from the risk manager would be -- would not be the determining factor in making a decision. Depo. 128:16-129:4

B. Q: While you were secretary of the Major Loan Committee, did you see anyone trying to bring a credit perspective to the committee?

A: Yes. Q: Who? A: The chief risk officer and the chief credit officer. Q: That's Jack Mindling and Jay McClung? A: Yes. Q: You thought that they tried to bring a credit perspective to the

committee? A: Yes. They tried. Q: And how were those attempts received? A: At the end of the day it was more of a business decision than a

credit based decision in my opinion in the sense that they would approve a loan, and whoever had a vote would just not let -- that vote would not invalidate or decline – be sufficient to the decline the loan.

Q: Do you recall a member of the Major Loan Committee by the name of Perry Alexander?

A: Yes. Q: Did Perry Alexander try to bring a credit perspective to the Major

Loan Committee? A: Yes. But he was a loan officer also.



Q: But you recalled that he tried to bring up issues -- credit issues with respect to particular loans?

A: Yes. Q: And how was his attempts to bring a credit perspective to the

committee met? A: Generally it would be -- it would be up to Marcia Snyder and Alan

Levan to approve a loan basically whether or not -- I mean, if the objection was not strong enough -- it was part of the discussion of course, but if the objection was not strong enough, then the loan would be approved, but they were not very welcome.

Q: People raising concerns about credit issues was not welcome at the Major Loan Committee? Is that what you observed?

A: Many times, yes. Specifically with this loan officer. Depo. 160:25- 163:3

SEC Deposition: C. Q: Regarding the major loan committee, were there any members that

had more influence than others on the committee as far as approval of loans?

A: Yes, Marcia had a very, I would say, she was basically the one handling, you know, the one with the most, even more power than the chairman many times.

Q: When you say that Marcia had more power than even the chairman at times, did she push, docs that mean she pushed for loans to get approved or what exactly do you mean by that?

A: She was a very pushy person, very dominant. Very arrogant and she would get whatever she wanted, it was the common, and I saw it myself, whatever she wanted to get approved, to get done, she would. As a result I ended up being fired for no reason, just because she could not, we did not get along. I only saw her at committees and I always only expressed my professional views. And they were never welcome by the way, because that was not part of my job description, to opine on the credit worthiness of the bond, but the --

Q: Did you make attempts to do that even though it wasn't part of your

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job description? A: Many times, yeah. Q: During committee meetings or outside of meetings? A: During committee meetings. Q: And how were those attempts met by the members? A: They were never welcome. I was the credit manager and they were

looking at me, who are you to be giving an opinion, I mean, you're, practically the loan officers would almost go as far as, in the game itself, the committee, the other members were more like, yeah we hear you but, you know, this guy, we know him or something. But the loan officer would show discontent when I would say why, you know why should we approve this loan if that service coverage ratio, for example, that's another exception that was constantly being met. Depo. 35:11-36:21

D. Q: And how did the committee address Alexander's concerns when he brought those concerns to the committee?

A: For the most part derisive. They would sometimes listen in, but he would always end up or almost always end up being, you know, opposed.

Q: By whom, by everyone else in the committee? A: By the other members, but more specifically from that lady, Marcia

Snyder. Depo. 40:8-24

73 CW1 also said that loan officers under Snyder “got away with murder” SEC Deposition: and explained that Snyder directed loans to be funded before the loan A. Q: Regarding the major loan committee, were there any members that documents were put together and appraisals were received. had more influence than others on the committee as far as approval

of loans? A: Yes, Marcia had a very, I would say, she was basically the one

handling, you know, the one with the most, even more power than the chairman many times.

Q: When you say that Marcia had more power than even the chairman at times, did she push, docs that mean she pushed for loans to get approved or what exactly do you mean by that?

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A: She was a very pushy person, very dominant. Very arrogant and she would get whatever she wanted, it was the common, and I saw it myself, whatever she wanted to get approved, to get done, she would. As a result I ended up being fired for no reason, just because she could not, we did not get along. I only saw her at committees and I always only expressed my professional views. And they were never welcome by the way, because that was not part of my job description, to opine on the credit worthiness of the bond, but the -- Depo. 35:11-36:5.

73 (not cited by Defendants’ CW1 said there was no respect for credit and “it was a joke” that there SEC Deposition: chart) were that many exceptions at closing. A. A: ...keep track of the exception report, which was the largest

exception report I've ever seen in my life. 19:21-23.

B. Q: Jeff Mindling? A: Yes, Jeff Mindling, but he was, he would do whatever Marcia said.

He was just scared. It was very, it was another joke, unfortunately. Depo. 33:4-7.

C. Q: Did BankAtlantic’s commercial real estate loans have more exceptions than similar loans you’ve seen at other banks? A: At least 10 to 15 times more. Depo. 44:13-16.

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75 (not cited by Defendants’ According to CW1, whose job it was to opine on the credit worthiness A. Q: And, in fact, earlier today you testified that you thought that land chart) of loans, these loans were highly speculative because they were based loans were highly speculative, correct?

on the belief that the land will appreciate, and construction loans are A: Correct. risky, because of the many facets and problems which can occur Q: And you're familiar with land acquisition development and during the construction process. construction loans?

A: Yes. Depo. 131:3-11.

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Barbara Halprin (CW#2) FACC Para. Allegation from FACC Quoted Excerpts from Confidential Witness Depositions

60 (not cited by Defendants’ Confidential Witness #2 (“CW2”) was a managerial level employee in A. Q: So you went to work at BankAtlantic in 1993, and you stayed chart) the Bank’s loan servicing and closing department, who has specific until when?

and detailed knowledge about the Bank’s CRE lending practices, A: Until 2007. including its underwriting, compliance and closing procedures during Q: And that would be roughly 14 years? the Class Period. A: Correct. Depo. 14:19-23.

B. Q: During those 14 years, let's see, I will ask you about what your tasks were. So if you would generally give me a narrative answer of what you started doing and what you ended doing?

A: I was hired in as the supervisor of consumer accounting and support consumer lending. They were just going through a reorganization of their consumer department so that started in that area. And, um, subsequently I was promoted throughout the operations area and managed. My tenure there was management of consumer loan operations, and then I was promoted to senior vice president. And they combined all of the loan operations basically, and then I supported the servicing and the servicing piece of all loans with the bank. Depo. 14:24-15:12

C. Q: Were you ever involved in the activities of the bank with respect to the underwriting of loans before they were ultimately approved?

A: There was occasion where my opinion was asked as far as the loan that was being originated and from being able to manage that and handle it from the back end. Depo. 30:3-9.

D. Q: Did you have involvement with closing proceedures? A: I did. Q: And what was your involvement with closing proceedures? A: For -- closing and servicing needs to work closely with each other

in the commercial loan because of the fact that we have to board that loan to the servicing system and be familiar with it. So, thus, the proceedures all flow together, and there is dependencies upon

14



everybody performing their requirements in that job. Depo. 64:16-65:1.

60 (not cited by Defendants’ CW2 was employed by the Bank prior to and during the majority of A. Q: So you went to work at BankAtlantic in 1993, and you stayed chart) the Class Period. According to CW2, the Bank had in place and was until when?

required to follow very detailed, written lending policies and A: Until 2007. underwriting procedures approved by the OTS in connection with Q: And that would be roughly 14 years? every CRE loan the Bank made. A: Correct. Depo. 14:19-23.

B. Q: All right. Now, did you explain that to the investigator? A: What -- I have to answer with the details of what -- when we do

something in the loan servicing environment we have to follow policy. The voting members that you need to obtain are the specific signatures that are written on the bottom of a credit facility summary. If you have a copy of the credit facility summary, you can see exactly what I am speaking to. It has their names on it. You have to have a validated signature there, and it's not to go forward without the number of people signing it, and they also too on the same document have to if they abstain they abstain. It has to be on the document. And you have to go to get those signatures on it, and that was -- and that is stated in policy. Depo. 122:14-123:4

60 (not cited by Defendants’ CW2 was personally aware of these lending policies and procedures as A. Q: Of course you should know something about that because you chart) a direct result of CW2’s duties as an individual who was tasked with were filing reports under Sarbanes Oxley, right, which we've

monitoring the Bank’s compliance during the Class Period. talked about here today? A: I was a highly recognized and contributor to addressing the issues

to put controls in place for Sarbanes Oxley compliance. Depo. 207:21-208:2

61 (not cited by Defendants’ According to CW2, the Bank’s Major Loan Committee, which met in A. Q: So I want to read you from Paragraph 61 of the complaint: chart) the boardroom of the Bank’s corporate headquarters, was responsible According to CW2 -- that has been identified as you -- the bank's

for approving CRE loans in excess of $5 million in the BLB, LAD and major loan committee, which met in the board room of the bank's LADC portfolios. corporate headquarters, was responsible for approving CRE loans

15



in excess of five million, and that BLB, LAD, and LADC portfolios, during the class period committee had six voting members including Levan, Abdo, and Levan. Do you see that?

A: Yes. Q: Is that what you said? A: Yes. Depo. 120:8-15

61 (not cited by Defendants’ During the Class Period, the Committee had six voting members, A. Q: So I want to read you from Paragraph 61 of the complaint: chart) including defendants A. Levan, Abdo and J. Levan. According to CW1 According to CW2 -- that has been identified as you -- the bank's

and CW2, A. Levan and Abdo were voting members of the Major major loan committee, which met in the board room of the bank's Loan Committee during the Class Period. A. Levan and Abdo also corporate headquarters, was responsible for approving CRE loans served as Chairman and Vice Chairman of the Committee, in excess of five million, and that BLB, LAD, and LADC respectively, during part of the Class Period. According to CW2, J. portfolios, during the class period committee had six voting Levan similarly was a voting member of the Major Loan Committee members including Levan, Abdo, and Levan. Do you see that? for the majority of the Class Period, starting when he became President A: Yes. of BankAtlantic. Q: Is that what you said?

A: Yes. Q: Who were the six members during the class period? A: It would have been, um, Marcia, Jay, um, Alan, Jack, um, and

Jarett. And, um, on the transactions of greater than the five million Perry himself was not a voting member that I was aware of. Depo. 120:8-24.

62 (not cited by Defendants’ CW1 and CW2 were aware of these facts from their direct A. Q: Did you go to major loan committee meetings? chart) participation in the Major Loan Committee meetings and with respect A: I did occasionally. Depo. 15:21-22.

to CW2, from seeing, generating and distributing specific reports to all members of the Major Loan Committee during the Class Period. B. Q: Did you go to any major loan committee meetings in 2006?

A: In 2006, yes, I did. Depo. 16:7-9. 62 (not cited by Defendants’ Thus, these CWs attended and participated in numerous high level A. Q: Did you go to major loan committee meetings? chart) meetings with A. Levan, J. Levan and Abdo and have specific A: I did occasionally. Depo. 15:21-22.

knowledge of the proceedings therein. B. Q: Did you go to any major loan committee meetings in 2006?

A: In 2006, yes, I did. Depo. 16:7-9.

16



63 (not cited by Defendants’ According to CW2, it was a regular practice for problematic loans to A. A: ...-- I had to review minutes and all in accordance to our job chart) be included on the agenda at Major Loan Committee meetings for operationally. Depo. 15:25-16:2.

discussion and approval during the Class Period. Major Loan Committee members regularly discussed problem loans during the B. Q: Did you review major loan committee minutes as part of your Class Period in the Committee meetings, at which CW2 was often duties? present. CW2 added that discussion of these problem loans during the A: Yes. Class Period, which were all identified in Exception Reports, also Q: You also sat in on some major loan committee meetings? made it into the Committee meeting minutes, which CW2 was also A: I did. Depo. 250:1-6. able to review in furtherance of CW2’s compliance-oriented job duties.

63 (not cited by Defendants’ CW1 and CW2 added that these minutes were maintained by a A. Q: And then the lending officer takes that loan package to the major chart) member of the Credit Department, and according to CW2, they were loan committee for presentation?

electronically available to certain employees at BankAtlantic, A: The manager of the credit department is the secretary in a sense of including CW2. the loan committee, and they maintain the -- they present the --

they prepare the agenda to work with the board committee members, and the loan officer is there to, in fact, do the presentation, answer questions of the board members in regards to the presentation that is being put in front of them. Depo. 252:15- 23.

65 (not cited by Defendants’ Based on their personal observation as employees of the Bank A. Q: And he [Robert Radon] is the one who would go through the loan chart) involved in the credit, servicing and closing aspects of CRE loans, files and indicate whether there were deficiencies?

CW1 and CW2 stated that many of the loans in the BLB, LAD and A: He would go through the loan files. He would also -- a part of that LADC portfolios made during the Class Period were not properly too was that the documentation and closing area would document documented and other conditions of closing were not satisfied. an exception that the closing and funding occurred without being

met, and that would go over for being placed on the exception report. Depo. 33:9-15

65 (not cited by Defendants’ According to CW2, it was common practice during the Class Period A. Q: Ms. Halprin, did you tell people in the Labaton firm, Ms. chart) for the Major Loan Committee (including defendants A. Levan, Abdo Greenbaum or others that it was common practice during the class

and J. Levan) to override the Credit Department and direct that the period for the major loan committee including Defendants Alan loans be funded anyway despite obvious and known underwriting Levan, Abdo, and Jarett Levan to override the credit department deficiencies. and direct that loans be funded anyway despite obvious and

known underwriting deficiencies?

17



A: Yes. Depo. 82:14-21.

B. Q: When did you observe Alan Levan directing the credit department to be overridden so that loans would be funded despite obvious and known underwriting deficiencies?

A: The issuance of the minutes and of -- I had to review the minutes as part of our position in order to see the approval and any of the details regarding that approval, and also then with conversations between Jeff Midling, and Jay McClung, and with Alan over the phone, though, not in person. Depo. 82:22-83:6.

69 (not cited by Defendants’ According to CW2, these Class Period underwriting deficiencies were A. Q: And he [Robert Radon] is the one who would go through the loan chart) clearly documented in internal reports maintained by the Bank titled files and indicate whether there were deficiencies?

“Exception Reports.” Exception Reports were generated any time a A: He would go through the loan files. He would also -- a part of that loan contained an underwriting deficiency or any time a lending policy too was that the documentation and closing area would document was overridden. When these Exception Reports were generated, they an exception that the closing and funding occurred without being included a list of all current exceptions. met, and that would go over for being placed on the exception

report. Depo. 33:9-15.

69 (not cited by Defendants’ As a result of CW2’s duties with respect to the closing and servicing of A. Q: Were you involved in the preparation of exception reports? chart) loans, CW2 saw all Exception Reports during relevant portions of the A: Yes, I was.

Class Period. Q: Would you tell me what phase or what part of exception reports you were involved in?

A: The keeper of the reports, and the responsible for the circulation. I was the manager of loan servicing, and that responsibility is to track the exceptions, to document them, and to submit them to the different management levels, the different committee levels, and, also, then to the people that are responsible to cure the exception. Depo. 28:24-29:10.

69 (not cited by Defendants’ According to CW2, Exception Reports were disseminated to the A. Q: How are exception reports disseminated? Is it done chart) Individual Defendants during the Class Period, including at Major electronically?

Loan Committee meetings attended by CW2. Based on this personal A: Electronically, and on periods of time done by paper. Depo. 94:7- knowledge during the Class Period, CW2 stated that Exception 10.

18



Reports detailed missing documentation and any other underwriting criteria not satisfied, such as missing legal documents related to the B. Q: Did you personally give exception reports to the board of collateral backing the loan and title insurance; a failure to obtain directors? advanced deposits; and a failure to get the appropriate appraisal A: They are on the distribution list of those exceptions. documents. CW2 clarified that each Exception Report contained all Q: And what makes you say that they are on the distribution list? past exceptions not resolved, as well as any new exceptions for that A: Because we were -- my area was the keeper of the distribution month’s loans. list, and plus, too, it has to be ratified by the board of directors.

Q: What has to be ratified? A: The exception report that it has been reviewed because it's a

requirement to present it to the examiners. Q: So it's your testimony that you were responsible for getting the

exception reports to the board of directors? That was your job? A: It was the job of loans servicing and loan operations to ensure that

that it was circulated. I was also on the distribution of it and responsible for that function. Depo. 96:16-97:11.

C. A: I'm saying that the fact that the corporate secretary is responsible for board meetings, and the gathering of all the documents that are going to go forward. They're coordinating that. So this was a [exception] report that was required to be delivered for their review. Depo. 98:1-5.

70 (not cited by Defendants’ According to CW2’s review of these Exception Reports during the A. A: There are two in the sense that it's combined. The nature of the chart) Class Period, one tab on the Exception Report tracked “trailing business requires trailing documents to also be tracked for a

documents.” These were documents that were expected after the period of time. There is the pending report. And once certain closing of a loan. They would appear as “pending” on the report until items, all defined in 7 policy and procedures, pass that period of they were 90 days past due. At that point they would appear on the time not being received, then it moves to an exception report. Exception Report as delinquent and missing. CW2 elaborated that Depo. 29:11-18. another tab tracked “day 1 exceptions”. These were exceptions where the loan was granted by the Major Loan Committee members, despite B. Q: Well, you would have noted it on the exception report if it was not certain Company conditions not being satisfied as required by the in the account, wouldn't you? Company’s internal checklist in approving a CRE loan. These A: No, no. That would have been the responsibility of the closing exceptions were required to be fulfilled “no later then 5 days” after the department, who it would be their responsibility to close the loan. loan closed. When Day 5 would come and the exception was not They would then notate the exception in that case that would have

19



fulfilled, the exception would then appear on the Exception Report, been approved and noted. So what we would have done it turned which was disseminated to the Individual Defendants. As an example out that they changed it to a five day, and after five days it would of how pervasive these underwriting deficiencies were, during the need to go on the exception report. We were just reporting it. We Class Period, the Bank’s own Class Period SEC filings confirm that were not -- we cannot cure it. We could not do anything. Depo. for the period ending September 30, 2007, there were only 74 LAD, 34:21-35:6. LADC, and BLB loans on the Bank’s books. Of this amount, CW2 recalled that approximately 50%-60% of these loans appeared on the C. Q: So going to the exception reports these are reports that are Exception Report at any given time. generated that showed there was missing loan documentation and

other exceptions of underwriting criteria that was not satisfied prior to the loan closing?

A: Yes. It had needed to be satisfied on some and by the nature of the others needed be received within the 90-day time period. Depo. 253:22-254:4.

71 (not cited by Defendants’ CW2 also stated that loans would remain on the Exception Report until A. Q: How are exception reports disseminated? Is it done chart) the deficiencies were resolved. During the Class Period, Exception electronically?

Reports were circulated via email and paper on an excel spreadsheet A: Electronically, and on periods of time done by paper. Depo. 94:7- on a monthly basis to all Bank executives including each of the 10. Individual Defendants, as well as the members of the Major Loan Committee and the Board of Directors. The Major Loan Committee B. Q: Did you personally give exception reports to the board of was responsible for follow-up on all exceptions noted in these reports. directors? CW2 elaborated that it was common for the Major Loan Committee to A: They are on the distribution list of those exceptions. not follow-up on the exceptions altogether until BankAtlantic was Q: And what makes you say that they are on the distribution list? written up by the OTS in connection with these exceptions. A: Because we were -- my area was the keeper of the distribution Nonetheless, no real changes ever came as a result of the OTS’s list, and plus, too, it has to be ratified by the board of directors. involvement during the Class Period. Q: What has to be ratified?

A: The exception report that it has been reviewed because it's a requirement to present it to the examiners.

Q: So it's your testimony that you were responsible for getting the exception reports to the board of directors? That was your job?

A: It was the job of loans servicing and loan operations to ensure that that it was circulated. I was also on the distribution of it and responsible for that function. Depo. 96:16-97:11.

20



72 (not cited by Defendants’ According to CW2, based on personal knowledge stemming from A. Q: Were you involved in the preparation of exception reports? chart) CW2’s own duties and inclusion on the distribution lists in connection A: Yes, I was.

with Exception Reports during the Class Period, the Exception Reports Q: Would you tell me what phase or what part of exception reports were so important that they were provided to the Company’s Board of you were involved in? Directors. Accordingly, CW2 stated that Defendant Toalson and White A: The keeper of the reports, and the responsible for the circulation. I would have reviewed the Exception Reports as participants in the was the manager of loan servicing, and that responsibility is to Board of Directors meetings. In addition, the Exception Reports were track the exceptions, to document them, and to submit them to the incorporated into the Board’s meeting minutes. As for A. Levan, J. different management levels, the different committee levels, and, Levan and Abdo, CW2 elaborated that they were on the monthly also, then to the people that are responsible to cure the exception. distribution list for the Exception Reports, that CW2 was a party to Depo. 28:24-29:10. discussions regarding certain exceptions on these reports [such as those involving Steeplechase] during the Major Loan Committee B. Q: How are exception reports disseminated? Is it done meetings with these Individual Defendants and that they were all electronically? members of the Board of Directors, where these reports were discussed A: Electronically, and on periods of time done by paper. Depo. 94:7- and made part of the Minutes. 10.

C. A: I'm saying that the fact that the corporate secretary is responsible for board meetings, and the gathering of all the documents that are going to go forward. They're coordinating that. So this was a [exception] report that was required to be delivered for their review. Depo. 98:1-5.

D. Q: And you say the exception reports were incorporated into the board's meeting minutes. Where do we find the meeting minutes in which the exception reports were incorporated?

A: In the meeting minutes for the board. Depo. 112:4-8.

74 (not cited by Defendants’ According to CW2, Snyder’s improper loan approval practices were A. Q: Now, is it your testimony that Marcia Snyder's improper loan chart) well known to A. Levan, J. Levan and Abdo during the Class Period. approval practices were well known to Alan Levan?

In fact, according to CW2 who had knowledge by virtue of CW2s A: Yes. position as a loan servicing manager, at times during the Class Period, Q: Is that your testimony? Snyder was supervised first by A. Levan, and later by J. Levan. A: Yes. Specifically, Snyder reported directly to A. Levan and then to J. Levan Q: How is it -- what is your personal knowledge where you observed

21



when he was named President of the Company in early in 2007. CW2 Alan Levan's agreeing with Snyder's improper loan approval added that Snyder was “in cahoots” with the Levans and Abdo, when it practices? came to Snyder coercing the sign-off of incomplete loans. CW2 A: Personally on a number of occasions. Marcia was very vocal, and confirmed that Snyder was just one of the players in the loan on a number of occasions Alan was present, and, actually, then, environment at BankAtlantic, she was not a “lone ranger employee.” you know, would be appalled at the way that she treated, and the Additionally, the Individual Defendants knew about Snyder’s way that she spoke, and the way she tried to bully things through. improper loan approvals by reason of their receipt of Exception Depo. 114:1-14. Reports and participation on the Major Loan Committee.

B. Q: How about Jarett Levan? Did you observe him personally signing off and agreeing to Marcia Snyder's bullying to get bad loans through the process?

A: Not what the result was per every occasion, but I witnessed on numerous times Jarett being bullied by Marcia. Depo. 114:25- 115:6.

C. Q: Well, who else besides Marcia Snyder was involved in the bullying to put bad loans on the books or loans with exceptions?

A: She was in -- with my position and who I had to interact with, she was the bullying across the board. Depo. 135:13-19.

76 (not cited by Defendants’ CW2 also stated that the Company made every effort to avoid A. Q: Did you tell the lawyers or the paralegal or investigator at Labaton chart) reserving for problem loans by “moving things around,” including that the people at BankAtlantic would use tactics such as

such tactics as: (1) transferring the loans to Bank subsidiaries because transferring loans to some of the bank's subsidiaries to avoid reserves adversely impacted the Bank’s revenue (as was done in the impacting the bank's overall revenue? Steeplechase loan); and (2) intentionally mischaracterizing CRE loans A: Yes. and placing them in less risky categories than they should have been in Q: And how many loans were transferred to the bank subsidiaries to justify lower reserves so as not to adversely impact the Bank’s avoid impacting the bank's overall revenue? revenue. CW2 witnessed this during the Class Period as part of CW2s A: Steeplechase was, and there would be – there were a number of duties, which included examining loan loss reserve-related compliance others over the years. Depo. 171:6-15. issues.

B. Q: Are you aware of any bank employees who intentionally mischaracterized loans into less risky categories?

A: Yes. Q: Who did that?

22



A: The -- several of the regional. Len Harvell, and Marcia, you know, Jeff. It's subject to interpretation and to have how they move it and to what the end collateral is.

Q: Well, was it your testimony that Len Harvell was putting loans into categories? That's your testimony?

A: The loan officer in conjunction with the credit analyst does. They are the ones that do give the definition of what the underlying collateral is on the credit approval.

Q: Did Jeff Mindling intentionally put loans in less risky categories? A: I believe that he did. Q: Did you talk to him about that? A: I did. Q: You told him he should not do that? A: I did. Q: And when did you have those conversations? A: In the same 2006 time frame. The period between June of 2006

throughout the end of 2006, early 2007. Depo. 183:25-185:1.

C. Q: And how would you know what the reserves were? A: Because it's published on reports, on county reports the loan loss

reserve. Q: How did you know what process was undertaken to established

those reserves? A: Because I would work with the controller, Dave Freedman, to

understand the process. He needed me to explain the portfolio. Q: When you expressed an opinion during period that the reserves

were not adequate, you left that out of your Sarbanes Oxley filings?

A: No, I did not. It's included in my Sarbanes. Q: You think so? A: Yes. Depo. 138:25-139:13.

82 (not cited by Defendants’ According to CW2, and based on personal observation at Major Loan A. Q: And you say the exception reports were incorporated into the Committee meetings and a review of Committee meeting minutes, the board's meeting minutes. Where do we find the meeting minutes

23



chart) Steeplechase loan was a discussion item at these meetings, which were in which the exception reports were incorporated? attended by A. Levan, Abdo and J. Levan. Following discussion at A: In the meeting minutes for the board. Depo. 112:4-8. these meetings, this loan was approved by BankAtlantic’s Major Loan Committee, consisting of A. Levan, J. Levan, and Abdo, and Bank executives Marcia Synder, Executive Vice President of Commercial Lending, Jeff Mindling, Senior Vice President and Chief Credit Officer and Jay McClung, Executive Vice President and Chief Risk Officer. According to CW2, and based on CW2’s observation as a participant at the Major Loan Committee meetings, although Snyder was influential at Committee meetings (and at BankAtlantic in general), the ultimate word on larger loans, such as Steeplechase, rested with the Levans and Abdo.

83 (not cited by Defendants’ According to CW2, an important condition of the Steeplechase loan A. Q: I will read to you Paragraph 83, which is what triggered my chart) approval was that the borrower purportedly had $2 million in “pre-sold question to you just now in the amended complaint. According to

lots.” Pursuant to internal Bank policy, and as a material condition of you, Ms. Halprin, an important condition of the Steeplechase loan the loan’s approval and closing, the $2 million was required to be approval was that the borrower purportedly had 2 million in pre- placed in escrow at the Bank prior to closing. That material condition sold lots. Pursuant to internal bank policy it's a material condition never happened, but the Bank funded the loan anyway. of the bank's approval and closing the 2 million was required to

be placed in escrow at the bank prior to closing. And this is in bold. That material condition never happened, but the bank funded the loan anyway. Do you see that?

A: Yes. Q: You say: It says because the material condition was never satisfied

an exception report was generated on the very first day the loan was funded. The exception report specifically noted that the two million in escrow moneys were never received and the loan was not nonrecourse. This deficiency in the Steeplechase loan remained in the exception reports for approximately one year in the class period according to you and who saw those exception reports. Now, you know that is not a true statement, don't you, Ms. Halprin? There was never an exception report that said $2 million has to be in BankAtlantic?

A: No. That is a true statement. Depo. 161:24-163:5.

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84 (not cited by Defendants’ Because that material condition was never satisfied, an Exception A. Q: So when you went back and looked at Steeplechase later, did you chart) Report was generated on the very first day the loan was funded. The look at the files and determine that your department had been

Exception Report specifically noted that the $2 million in escrow reporting this as an exception during the first month after the loan monies were never received and the loan was non-recourse. This was closed? deficiency in the Steeplechase loan remained in the Exception Reports A: I went back and I looked, and it had been reported as an exception for approximately one year into the Class Period, according to CW2, for -- for a long period of time, um, yes. who saw those Exception Reports. Q: Did you bring that to anyone's attention at the time that it was

being reported every month that this was an exception? A: I did. Q: Whose attention did you bring it to? A: It would have been Marcia Snyder, Jeff Mindling. It was a

continuous discussion of the size and the dollars involved with the exception report and the concern that I had about them not being cured, and also too, I have had conversation and it brought up by the OTS examiners on several occasions. Depo. 35:24- 36:17.

B. Q: Your testimony is you had numerous conversations with all three of those people [Mindling, Snyder, McClung] regarding the fact that Steeplechase had an exception that there 8 was supposed to be cash deposit in BankAtlantic that was not, in fact, verified?

A: It was not until probably in September, October of 2006 when it got down to the specific deposits. The numerous conversations were regarding not only just Steeplechase but quite a few other loans and the dollar exposure that was not getting cleared up, that was not getting resolved during that time frame. Depo. 38:15-26.

C. Q: And where can I find that? You have the exhibits in front of you. Point out to me where in your Sarbanes Oxley filing you disclosed what is now part of in this complaint?

A: There is -- as I pointed out, there was an entire write-up on the back going into detail regarding Steeplechase, and, um, also mentioning Nature Walk, and potentially other loans that were out there on the exception report for a great length of time. Depo.

25



67:11-19.

D. Q: You say: It says because the material condition was never satisfied an exception report was generated on the very first day the loan was funded. The exception report specifically noted that the two million in escrow moneys were never received and the loan was not nonrecourse. This deficiency in the Steeplechase loan remained in the exception reports for approximately one year in the class period according to you and who saw those exception reports. Now, you know that is not a true statement, don't you, Ms. Halprin? There was never an exception report that said $2 million has to be in BankAtlantic?


85 (not cited by Defendants’ CW2 confirmed that Abdo, A. Levan and J. Levan were fully aware of A. Q: Your testimony is you had numerous conversations with all three chart) this condition not being satisfied. CW2 knows this because the loan of those people [Mindling, Snyder, McClung] regarding the fact

was discussed in the Committee meetings, this unfulfilled material that Steeplechase had an exception that there 8 was supposed to condition appeared immediately on the Company’s Exception Report be cash deposit in BankAtlantic that was not, in fact, verified? and because it remained on each subsequent Exception Report for one A: It was not until probably in September, October of 2006 when it year’s time - including during the Class Period. As detailed above, got down to the specific deposits. The numerous conversations these Exception Reports were seen by “all” (including the Individual were regarding not only just Steeplechase but quite a few other Defendants) via email transmission on a monthly basis and problem loans and the dollar exposure that was not getting cleared up, that loans on these reports were discussed at both the Major Loan was not getting resolved during that time frame. Depo. 38:15-26. Committee meetings and the Board of Directors meetings.

B. Q: How are exception reports disseminated? Is it done electronically? A: Electronically, and on periods of time done by paper. Depo. 94:7-

10.

C. Q: You say: It says because the material condition was never satisfied an exception report was generated on the very first day the loan was funded. The exception report specifically noted that the two million in escrow moneys were never received and the loan was not nonrecourse. This deficiency in the Steeplechase loan remained in the exception reports for approximately one year

26



in the class period according to you and who saw those exception reports. Now, you know that is not a true statement, don't you, Ms. Halprin? There was never an exception report that said $2 million has to be in BankAtlantic?


86(not cited by Defendants’ Following the initial funding of the Steeplechase Loan, CW2 recalls A. Q: Do you know whether Jack Abdo knew whether or not the $2 chart) that in late 2005, that the Major Loan Committee approved a “future million was an exception to this loan?

advance” on the Steeplechase loan, for another $1-2 million. A: It would have been part of the analysis of the presentation in February of 2006 for the future advance. Depo. 164:4-7.

CW2 recalls that this would have needed Major Loan Committee approval prior to being made. B. Q: As you mentioned before, sometimes loans would go back to the

major loan committee for future advance additional funds, and these exceptions would still be present on the original loan; is that accurate?

A: Yes. Depo. 262:9-13.

C. Q: Under request it says that this is a request for the increase of loan amount by $710,000?

A: Yes. Q: And again the collateral description is the same collateral

description. If you go to the second page it appears that this future advance was approved?

A: Yes. Q: It was approved on 1/31/2006? A: Yes. Depo. 273:22-274:5.

92 (not cited by Defendants’ According to CW2, shortly after the publicity in the Sarasota Herald- A. Q: Did you have any knowledge of Marcia Snyder walking the chart) Tribune regarding Steeplechase, Snyder and other Bank executives Steeplechase property?

“walked” the property in or around March or April of 2006, and A: Yes. concluded it was not suitable for development. According to CW2, Q: What is the basis of your knowledge? Snyder concluded the money that had been funded “was gone.” A: Directly from Marcia.

Q: What did she say to you? A: That they were on the -- that they had gone up to the property on

the Pan Handle and for about the third or fourth time, and, um, it

27



was the principal guarantor, principal borrower had no experience, at what they were developing, and they had moved to a different direction, and subsequently that was failing also too.

Q: When did she tell you this? A: This would have been right around in the 2006 time frame. Q: Well, be more specific. When in 2006 or maybe 2007 you had

these conversations? A: No. It was in 2006. Depo. 166:10-167:2.

95 (not cited by Defendants’ CW2 identified NatureWalk as another example of a loan that A. Q: What other loans did you have these conversations about? chart) appeared on the Exception Reports from the time that it was originated A: I can't recall all of them. The exception report was quite large.

at the end of 2005/beginning of 2006. CW2 advised that the Major Walk comes to mind. Obviously Steeplechase, and there NatureWalk loan was in the range of $5-7 million. In this instance, was from a dollar perspective and from a timing perspective there CW2 explained that the Company’s internal underwriting policies was at least a page of significant exceptions. Depo. 39:1-7. were overridden because the missing loan documentation was “extensive” and because the loan was given to a developer to build B. Q: And where can I find that? You have the exhibits in front of you. residential homes, who had “no experience” in residential home Point out to me where in your Sarbanes Oxley filing you building. This loan was made after being reviewed by the Major Loan disclosed what is now part of in this complaint? Committee, including A. Levan, J. Levan and Abdo. CW2 cited A: There is -- as I pointed out, there was an entire write-up on the “NatureWalk” as another example of “character lending” because it back going into detail regarding Steeplechase, and, um, also was given to the developer based on personal relationships rather than mentioning Nature Walk, and potentially other loans that were its potential to develop and build on the land. CW2 recalled that the out there on the exception report for a great length of time. Depo. Levans and Abdo were well aware of the problems with approving this 67:11-19. loan but they agreed to it anyway.

C. Q: Did you have any other loans that you claim were overstated in value during that period?

A: Yes. Q: Which ones? A: It would have been Nature Walk. And Nature Walk is the only

one that I remember the name to. There are several. Depo. 177:12- 18.

D. Q: And do you know if Nature Walk was ever on any of the exception reports?

28



A: Yes. Q: Is it your understanding that the Nature Walk loan was granted

to a borrower with no experience in building residential property? A: Yes. Q: Was this another example of character lending where someone

knew the borrower or customer so that the loan was made despite a of lack of experience in the relevant area?

A: Yes. And that is included in the write-up. Q: What write-up are you referring to? A: The write-up package that you presented. There is a similar

package that would be attached to Nature Walk. Q: And if you recall, did Nature Walk also have various

documentation problems, problems with the construction loan agreement or construction plans?

A: Yes. Depo. 288:1-20.

103 (not cited by Defendants’ CW2 likewise personally observed that during the Class Period these A. Q: Was there, to your knowledge, any effort by the bank to conceal chart) LADC loans were “on everyone’s radar” and “constantly being re- losses with respect to its LADC portfolio during '06?

evaluated” by management, including A. Levan, Abdo and J. Levan . A: Yes. Q: And notwithstanding that you signed Sarbanes Oxley reports

saying you were unaware of any such things? A: Again, I refer to the back to the checklist. I did indicate that there

were reasons to review what was transpiring in the portfolio. Q: Other than what you filed in Sarbanes Oxley reports, are you

aware of anything else you said to management at any time about concealing problems with LADC loans during '06?

A: Yes. Q: Tell me about that. A: With Jeff Mindling, Jay McClung, and Henry Barnes who is loan

review, we had a number of conversations about concern of the deterioration of the loan portfolio with the underlying collateral. Depo. 137:21-138:16.

104 (not cited by Defendants’ CW2 also personally observed that BankAtlantic’s BLB Loans were A. Q: Now, are you aware of any business reasons why making loans chart) “risky” during the Class Period because land was offered as collateral for land would be considered by BankAtlantic at the time to be

29



for the loan which was not far along in the development process, so the more conservative than making loans on condos or office Bank was lending money against the undeveloped land exclusively. buildings?

A: Land was riskier than -- undeveloped land was in policy and solely stated that it was a higher risk, a much higher risk loan and it was graded accordingly. Depo. 88:4-10.

B. Q: Are there any reasons why a bank might consider loaning money on land would be a more conservative investment then loaning money to build a condominium?

A: No. Q: So the fact that when the land might have intrinsic value that you

don't have to have receivers, that you don't have to have consultants and managers to operate it during the period of foreclosure, and security guards and so on, that did not enter into your thought process?

A: It -- if you're talking about the collateral, the underlying collateral is very much a consideration into the transactions. So BankAtlantic did not do a -- lend on bare land. Their loan on the land was to develop the infrastructure and to, in fact, develop it into whatever was going to be the completed project. And quite a few times they were just loaning on the infrastructure. So there is an investment, and there is a risk that, if in fact, residential housing is going to be the end collateral that that creates a far greater risk if something happens to residential. You have an investment in the acquisition and development of that raw land. 88:17-89:18.

104 (not cited by Defendants’ According to CW2, these BLB loans were generally granted prior to A. Q: Are there any reasons why a bank might consider loaning money chart) infrastructure (roads, sewers, utilities, etc.) and as such there were still on land would be a more conservative investment then loaning

many stages of development before the Company could receive its money to build a condominium? “whole payback”, which was “risky.” A: No.

Q: So the fact that when the land might have intrinsic value that you don't have to have receivers, that you don't have to have consultants and managers to operate it during the period of foreclosure, and security guards and so on, that did not enter into

30



your thought process? A: It -- if you're talking about the collateral, the underlying collateral

is very much a consideration into the transactions. So BankAtlantic did not do a -- lend on bare land. Their loan on the land was to develop the infrastructure and to, in fact, develop it into whatever was going to be the completed project. And quite a few times they were just loaning on the infrastructure. So there is an investment, and there is a risk that, if in fact, residential housing is going to be the end collateral that that creates a far greater risk if something happens to residential. You have an investment in the acquisition and development of that raw land. 88:17-89:18.

105 (not cited by Defendants’ Specifically, CW2 recalled that, even though there were certain “safety A. Q: Ms. Halprin, did you tell people in the Labaton firm, Ms. chart) nets” in place, such as loan review, follow-up documentation, Greenbaum or others that it was common practice during the class

exception reporting, business trailing documents, and other period for the major loan committee including Defendants Alan documentation required for CRE loans, as well as a requirement that Levan, Abdo, and Jarett Levan to override the credit department these documents be followed-up on regularly, “on quite a number of and direct that loans be funded anyway despite obvious and occasions, those [documents] were blatantly disregarded.” In other known underwriting deficiencies? words, CW2 stated that during the Class Period many of the loans in A: Yes. Depo. 82:14-21. the BLB, LAD and LADC portfolios were funded despite not being properly documented (a clear underwriting deficiency). B. Q: Loan documents that were missing where certain underwriting

criteria wasn't satisfied, some post-closing requirements not being met, were they all logged into a spreadsheet and monitored for follow-up?

A: Yes. Q: This was all done in your department? A: Yes. The was the quality control piece of my department. Depo.

248:1-8. 105 (not cited by Defendants’ For example, CW2 personally witnessed loans being funding during A. Q: So what is missing on the corporate exception report for chart) the Class Period despite missing legal documentation related to the Steeplechase is, quote, binder, close quote?

collateral backing the loan and title insurance. A: Which is all of the pertinent documents and everything regarding the loan for us to even review. Depo. 216:15-18.

B. Q: Ms. Halprin, did you tell people in the Labaton firm, Ms.

31



Greenbaum or others that it was common practice during the class period for the major loan committee including Defendants Alan Levan, Abdo, and Jarett Levan to override the credit department and direct that loans be funded anyway despite obvious and known underwriting deficiencies?

A: Yes. Depo. 82:14-21.

C. Q: Loan documents that were missing where certain underwriting criteria wasn't satisfied, some post-closing requirements not being met, were they all logged into a spreadsheet and monitored for follow-up?

A: Yes. Q: This was all done in your department? A: Yes. The was the quality control piece of my department. Depo.

248:1-8. 105 (not cited by Defendants’ CW2 added that missing appraisal certifications were also a common A. Q: So, for example, if there was a missing appraisal documentation chart) problem for approved loans during the Class Period. Specifically, or failure to get satisfaction of due diligence items, those are

CW2 stated from personal knowledge that during the Class Period, any things that would be referenced on an exception report? loan over $5 million required an appraisal review and that many of A: Yes. Depo. 254:9-13. these appraisal reviews reflected lower values of the property than the initial appraisal.

105 (not cited by Defendants’ CW2 added that these loans would then appear on the Exception A. Q: And he [Robert Radon] is the one who would go through the loan chart) Report and the appraisal discrepancy would never be rectified. In files and indicate whether there were deficiencies?

addition, many of the other conditions for closing on those loans were A: He would go through the loan files. He would also -- a part of that likewise not satisfied during the Class Period. CW2 and the Individual too was that the documentation and closing area would document Defendants had first-hand knowledge of these loans regularly being an exception that the closing and funding occurred without being funded despite numerous underwriting deficiencies because all met, and that would go over for being placed on the exception received and discussed the Exception Reports during the Class Period, report. Depo. 33:9-15. and because CW2 was charged with compliance and loan closing duties at BankAtlantic in connection with these loans. B. Q: Ms. Halprin, did you tell people in the Labaton firm, Ms.

Greenbaum or others that it was common practice during the class period for the major loan committee including Defendants Alan Levan, Abdo, and Jarett Levan to override the credit department and direct that loans be funded anyway despite obvious and

32



known underwriting deficiencies? A: Yes. Depo. 82:14-21.

C. Q: When did you observe Alan Levan directing the credit department to be overridden so that loans would be funded despite obvious and known underwriting deficiencies?

A: The issuance of the minutes and of -- I had to review the minutes as part of our position in order to see the approval and any of the details regarding that approval, and also then with conversations between Jeff Mindling, and Jay McClung, and with Alan over the phone, though, not in person. Depo. 82:22-83:6.

D. Q: Did you personally give exception reports to the board of directors?

A: They are on the distribution list of those exceptions. Q: And what makes you say that they are on the distribution list? A: Because we were -- my area was the keeper of the distribution

list, and plus, too, it has to be ratified by the board of directors. Q: What has to be ratified? A: The exception report that it has been reviewed because it's a

requirement to present it to the examiners. Q: So it's your testimony that you were responsible for getting the

exception reports to the board of directors? That was your job? A: It was the job of loans servicing and loan operations to ensure that

that it was circulated. I was also on the distribution of it and responsible for that function. Depo. 96:16-97:11.

E. Q: And you say the exception reports were incorporated into the board's meeting minutes. Where do we find the meeting minutes in which the exception reports were incorporated?

A: In the meeting minutes for the board. Depo. 112:4-8.

105 (not cited by Defendants’ In this capacity, CW2 also observed that throughout the Class Period, chart) the OTS routinely investigated and wrote-up BankAtlantic for these A. Q: Did you ever meet with the OTS examiners?

33



kind of deficiencies. A: Yes, I did. Q: And who did you meet with from the OTS? A: Typically depending upon who the examiner in charge was, but it

was typically Brent -- Brent. I'm sorry. I'm drawing a blank on his last name. And Ozzy.

Q: Now, did you ever review an examination report? A: I did based upon the lending review piece of it, yes. Because, you

know, we would address and give input. I would have responsibility for working very closely with them on it.

Q: Did you or did you not review an asset OTS examination report? A: I did. Depo. 36:18-37:6.

B. Q: And how often did you review parts of OTS examination reports? A: Every time there was an examination. Q: That would be in '05, '06, '07. Do you recall any in that period? A: Yes. There were several. Q: Several examination reports during the '05, '06, '07 period? A: Yes. Depo.. 37:13-21.

C. Q: And you worked with the OTS when they came in at times? A: Yes. Q: You saw OTS reports? A: Yes. Q: This was during the period of 2005, 2006, and 2007? A: Yes, it was. Depo. 251:1-8.

D. Q: So the OTS would write up the bank for these exceptions? A: Yes. Q: Did you ever see the OTS reports regarding their write-ups

relating to exception reports? A: Yes. Q: Did you see them in 2005, 2006, and 2007? A: Yes. Depo. 262:22-263:4.

34



119 (not cited by Defendants’ CW2 confirmed that the Company made every effort during the Class A. Q: And how would you know what the reserves were? chart) Period to avoid properly reserving for problematic commercial real A: Because it's published on reports, on county reports the loan loss

estate loans. reserve. Q: How did you know what process was undertaken to established

those reserves? A: Because I would work with the controller, Dave Freedman, to

understand the process. He needed me to explain the portfolio. Q: When you expressed an opinion during period that the reserves

were not adequate, you left that out of your Sarbanes Oxley filings?

A: No, I did not. It's included in my Sarbanes. Q: You think so? A: Yes. Depo. 138:25-139:13.

B. Q: Did you tell the lawyers or the paralegal or investigator at Labaton that the people at BankAtlantic would use tactics such as transferring loans to some of the bank's subsidiaries to avoid impacting the bank's overall revenue?

A: Yes. Q: And how many loans were transferred to the bank subsidiaries

avoid impacting the bank's overall revenue? A: Steeplechase was, and there would be – there were a number of

others over the years. Depo. 171:6-15.

C. Q: Are you aware of any bank employees who intentionally mischaracterized loans into less risky categories?

A: Yes. Q: Who did that? A: The -- several of the regional. Len Harvell, and Marcia, you

know, Jeff. It's subject to interpretation and to have how they move it and to what the end collateral is.


A: The loan officer in conjunction with the credit analyst does. They

35



are the ones that do give the definition of what the underlying collateral is on the credit approval.



119 (not cited by Defendants’ CW2 explained that during parts of the Class Period the Defendants A. Q: And how would you know what the reserves were? chart) would use tactics such as transferring the loans to some of the Bank’s A: Because it's published on reports, on county reports the loan loss

subsidiaries to avoid impacting the Bank’s overall revenue (i.e.: what reserve. was done with the Steeplechase loan) and/or intentionally Q: How did you know what process was undertaken to established mischaracterizing the loans and placing them in less risky categories those reserves? than they should have been in, to justify lower reserves being taken for A: Because I would work with the controller, Dave Freedman, to these loans. understand the process. He needed me to explain the portfolio.

Q: When you expressed an opinion during period that the reserves were not adequate, you left that out of your Sarbanes Oxley filings?

A: No, I did not. It's included in my Sarbanes. Q: You think so? A: Yes. Depo. 138:25-139:13

B. Q: Did you tell the lawyers or the paralegal or investigator at Labaton that the people at BankAtlantic would use tactics such as transferring loans to some of the bank's subsidiaries to avoid impacting the bank's overall revenue?

A: Yes. Q: And how many loans were transferred to the bank subsidiaries

avoid impacting the bank's overall revenue? A: Steeplechase was, and there would be – there were a number of

36



others over the years. Depo. 171:6-15.

C. Q: Are you aware of any bank employees who intentionally mischaracterized loans into less risky categories?

A: Yes. Q: Who did that? A: The -- several of the regional. Len Harvell, and Marcia, you

know, Jeff. It's subject to interpretation and to have how they move it and to what the end collateral is.


A: The loan officer in conjunction with the credit analyst does. They are the ones that do give the definition of what the underlying collateral is on the credit approval.



120 (not cited by Defendants’ According to CW2, BankAtlantic’s computation for loan loss reserves A. Q: Ms. Halprin, have you ever been in your banking career involved chart) was based, in part, on the classification of the loans. In other words, in creating reserves for problem assets?

loans in riskier categories required a higher reserve allowance than A: I have been involved in through the majority of my career in loans in less risky categories. According to CW2, Bank employees working with accounting to properly identify the loans, and to intentionally mischaracterized loans into less risky categories, categorize them for reserve calculations for risk management, for particularly categorizing loans that should have been in the LAD concentration, for financial comments, and statements, and I'm portfolio into other categories to justify smaller reserves and thus, very closely involved in that. Depo. 76:14-22. protecting the bottom line. To further explain, CW2 stated that in 2006, during the Class Period, there was an initiative at the Bank to B. Q: Are you aware of any bank employees who intentionally “reallocate, move and redefine” many of the CRE loans. By mischaracterized loans into less risky categories?

37



reclassifying a loan that properly belonged in one category into a lower A: Yes. risk category, the Company could avoid taking all of the reserves that Q: Who did that? otherwise would have been required. In CW2’s words, these actions A: The -- several of the regional. Len Harvell, and Marcia, you became a mechanism to “reserve less” and “tinker with the reserves.” know, Jeff. It's subject to interpretation and to have how they By simply manipulating the loan codes, CW2 observed BankAtlantic move it and to what the end collateral is. taking these codes and renaming them during the Class Period. CW2 Q: Well, was it your testimony that Len Harvell was putting loans referred to this as “stretching” the collateral codes. CW2 stated that A. into categories? That's your testimony? Levan was aware of this practice during the Class Period as CW2 A: The loan officer in conjunction with the credit analyst does. They witnessed A. Levan and Jeff Mindling on certain telephone calls are the ones that do give the definition of what the underlying discussing the same. From observation, CW2 believed that this collateral is on the credit approval. practice became more rampant at the Company from 2006 to early Q: Did Jeff Mindling intentionally put loans in less risky categories? 2007, at which time CW2 observed that the collateral codes were A: I believe that he did. being changed on “an everyday basis.” Q: Did you talk to him about that?

A: I did. Q: You told him he should not do that? A: I did. Q: And when did you have those conversations? A: In the same 2006 time frame. The period between June of 2006


C. Q: Who was involved in coming up with collateral codes to put risky loans into less risky categories as you have claimed?

A: It was with Jeff Mindling, Jay McClung, and ultimately to respond to Alan Levan.

Q: Did you ever discuss with Alan Levan this process of creating these categories to hide losses?

A: It would not have been discussed in that. It was part of the discussion of the reassignment of the loan.

Q: Are you aware that in order to be able to take reserves for categories of loans you have to first put them into specific loan categories?

A: Yes. Q: And are you aware that in the accounting rules that loans in each

category have to be like-type?

38



A: Yes. Q: And would you agree that in beginning of '06 BankAtlantic had

grouped virtually all of its land development loans of whatever category into a single category?

A: No, they were not. Q: You do not believe that the loans were all grouped into a single

land development category? A: No. Q: Would you agree that additional categories were created in '06

and '07? A: Again, it's a five -- it's a five-tier definition process. The end

collateral codes were then expanded and broken up out further, but the top categories were defining and further versing down.

Q: How many meetings did you have with Mr. Levan where you discussed loan categories?

A: I was in a -- assisted Jeff Mindling exclusively on this, and Jeff was on the phone with, um, Alan on speaker phone on two occasions.

Q: Well, incidentally, you would agree with me, would you not, that the bank needed to put its loans once losses began to occur into categories where you could justify that they were like-type loans? Wouldn't you agree with that?

A: Like-type in the sense that they needed to go back and review the actual end collateral. Depo. 188:23-190:15.

121 (not cited by Defendants’ CW2 elaborated that during the Class Period, defendants White and A. Q: Well, did Jay McClung establish the reserves? chart) Toalson had active roles in deciding how to reserve for different loans. A: I -- together we established the reserves. I

In fact, according to CW2, they along with Jay McClung, who had to calculate the reserves to present them to him so he could reported to A. Levan and J. Levan are the individuals who determined come up and meet with the bank's accountants. the Company’s loan loss reserves. CW2 referred to White and Toalson Q: So Jay McClung -- according to your testimony, as the “owners of reserves” at the Bank. CW2 further confirmed that as Jay McClung established the reserves? That's your testimony? “owners of reserves” at the Bank, White and Toalson would have been A: Jay McClung was responsible for reserves. Depo 104:6-13. aware of the switching of collateral codes.

B. Q: So by saying he is responsible for them, he was

39



the one responsible for taking and the applying the accounting principles as to how much the reserve ought to be?

A: No. Jay McClung was responsible the same that I am to ensure that you're the knowledgeable person regarding the underlying collateral to that property, which does affect the reserve calculation. So Jay was dependent upon me to give him all the components of the portfolio. I did have to actually calculate the reserve. Then Jay met with the accountants, obviously, and do the end reserve. You know, they do the final reporting because it has to go to the top of the bank.. Depo. 104:14 – 105:3.

40


Warren Toole (CW#4) FACC Para. Allegation from FACC Quoted Excerpts from Confidential Witness Depositions

81 Confidential Witness #4 (“CW4”), is a former Bank employee who has A. Q: Okay. Let me hand you a document, and we’ll mark this as specific and detailed knowledge about the Bank’s CRE lending Toole, I believe. What I’m handing you, sir, is a copy of your practices and underwriting procedures during the Class Period, testimony at the Nardelli trial -- thank you -- on February 10th, stemming from CW4’s position as a managerial level employee 2009. (Toole Exhibit 6 was marked for identification.) directly involved in underwriting commercial loans at BankAtlantic A: Okay. during at least half of the Class Period. In this capacity, CW4 has Q: And if you could turn to Page 187, and I’ll direct your attention particular knowledge of the Steeplechase transaction gained as a to Line 13 of Page 187. You were asked the question, quote, managing member of commercial lending at BankAtlantic at the time within the bank, who was responsible for doing the analysis of of the Steeplechase loan. Based on personal knowledge, CW4 detailed the -- of this loan application? that the loan officer for Steeplechase underwrote the loan without A: I would have been. The lender would have done the loan Credit Department oversight. application analysis.

Q: Were you assisted by anybody in that regard? A: I was assisted by the credit department in the guarantor analysis

in doing the analysis of their financial statements, but you, dash, the lender underwrites the transaction himself -- itself.

A: Uh-huh. Q: Mr. Toole, is that truthful testimony? A: Yes. Depo. 60:15- 61:13.

86 CW4 recalled that BankAtlantic did not conduct its own appraisal for A. Q: So BankAtlantic didn't conduct its own appraisal [Steeplechase], Steeplechase. Rather, it relied on an appraisal conducted by correct? “Hutchinson” appraisers for “Columbus Bank”, and later submitted to Q: That's correct? BankAtlantic. A: That's correct. Depo. 65:9-12.

86 According to CW4, whose job duties allowed CW4 to see the loan A. Q: Okay. I'd like to mark as Toole Exhibit 5 documents -- a documents relevant to the Steeplechase loan and who participated in document Bates stamped BBX Hubbard 002 00001843 to 1889. the Major Loan Committee meeting related to the same, this second Do you recognize Toole Exhibit 5? “loan” was made because after the initial loan was made, Tringali was A: This is a modification to the original loan. experiencing problems related to the development of the Steeplechase Q: It's a modification to what original loan? property. In connection with these problems, Tringali advised the Bank A: The Steeplechase loan. that he needed more money to post a bond to Manatee County and the Q: Okay. What date did you submit Toole Exhibit 5 to the major Bank complied. CW2 recalls that this would have needed Major Loan loan committee? Committee approval prior to being made. This was confirmed by A: January 26th. Depo. 46:21-47:6 CW4, who indicated from personal knowledge that this new “loan”

41



was again approved by the Major Loan Committee. B. Q: Okay. Now, let me ask you, sir. After the Steeplechase loan was granted to Tringali and closed, you believed that Tringali began to develop the land as planned?

A: (Nods head.) Q: Correct? A: Yes. Q: And in order for him to further develop the land and sell it to

builders, he needed to post bond to Manatee County, correct? A: Needed to do what? Q: Post bond to Manatee County. A: Yes, uh-huh. Q: This is called getting plats, I think? A: You have to get a recorded plat. Q: Can you explain the process? A: A recorded plat is you take the raw land, which is typically now

being legally described in meets and bounds, and you -- and you will have a engineer draw up a underlot and block that is accepted by the county and then you can then convey title by lot and block as opposed to a meets-and-bounds description, is a very short summary of that.

Q: Let me ask you this: Was Manatee County slow in getting plats from Mr. Tringali?

A: Extremely. Q: And was that one of the problems in his -- in the slowness --

strike that. Was that one of the issues contributing to the slowness in his ability to develop the property?

A: Yes. Depo. 87:17-89:6.

97 (not cited by Defendants’ CW2 and CW4, who were both involved in underwriting, servicing A. Q: Were the underwriting processes for Steeplechase characteristic chart) and/or Bank closing practices in connection with CRE loans made of BankAtlantic's processes with respect to other land loans?

during the Class Period during and after the Steeplechase loan, A: Yes. Depo. 54:9-12. confirmed that the underwriting procedures BankAtlantic employed in connection with the Steeplechase transaction were characteristic of the B. Q: One further -- one final question, Mr. Toole. I think you testified Bank’s practices with numerous other CRE loans in the Bank’s BLB, earlier that the -- the underwriting procedures you undertook in

42



LAD and LADC portfolios, as described by CW1 above. connection with Steeplechase were characteristic of the bank’s procedures, correct?

A: Yes. Q: Was that testimony true?

A: Yes. Depo. 93:13-20.

43


Michael Blevins (CW#5) FACC Para. Allegation from FACC Quoted Excerpts from Confidential Witness Depositions

106 Notwithstanding the foregoing lax underwriting standards, and the A. Q: Okay. So you recall telling her [the investigator] that yours failure to comply with proper documentation and underwriting were mostly approved? requirements with respect to CRE loan underwriting, most of these A: Right. Depo. 34:12-14. loans received rubber-stamp approval from the Major Loan Committee – a fact confirmed by Confidential Witness #5 (“CW5”), a former B. Q: Do you recall discussing with this individual anything about Senior Vice President in one of the Bank’s Commercial Lending the major loan committee? Offices involved in managing commercial lending portfolios during A: Yes. the Class Period. CW5 was employed in this capacity during the entire Q: Okay. What do you remember saying? Class Period. Based on his experience as a loan officer most of the A: I remember saying that major loan committee for me was -- loans presented to the Committee were approved. CW5 observed this was fairly easy because I did such a great job in my as a telephonic participant in certain Major Loan Committee meetings, underwriting. I've been a banker for a long time; I understand which were comprised of participants including A. Levan, J. Levan, real estate loans really well. So they hardly ever had to ask me Abdo, Marcia Synder, Jay McClung, and Jeff Mindling. anything. So mine were pretty much slam dunks. I mean, they

would ask me a few questions, but, you know, they were – my packages were perfect. Depo. 33:16-34:2.

C. Q: And do you remember telling her that -- and, again, I am not referring to just your loans – but that all loans received rubber-stamp approval?

A: No. I think a better term for that is slam dunk, meaning that they do look at them, review them, but mine were so well underwritten that they approved them.

Q: But you are talking about your loans -- A: Yes. Q: -- not all loans? A: Yeah. Q: Do you recall using the phrase slam dunk and not rubber

stamp? A: I don't remember what I used, but to me they're kind of the

same thing, but I don't want to infer that just, you know, they got mine and stamped them, you know. They read them; they looked through them. I was on the phone with them at major loan committee. So they're more -- to me, slam dunk is more

44


Michael Blevins (CW#5) FACC Para. Allegation from FACC Quoted Excerpts from Confidential Witness Depositions

the proper term, meaning they were good, they were underwritten right and they got approved. Depo. 54:7-55:2.

D. Q: Did you ever have any interactions with an Alan Levan while you were employed at BankAtlantic?

A: Yes. Q: Okay. How frequently? A: Very infrequently. He came up to visit once with Marcia when

I opened the office to tour Jacksonville and find out what the market was like, and then he -- I would phone in or, actually, they would phone me on committee days if I had loans in committee.

Q: When you say committee, are you referring to the major loan committee?

A: Yes. Q: What do you mean they would phone in? A: They would call me at my office in Jacksonville on the

speakerphone and ask me about the loans. Q: So once a month you would participate in a major loan

committee meeting telephonically? A: Yes. Depo. 31:10-32:7.

E. Q: Okay. So it's your testimony that these were -- your loans were mostly all approved?

A: Yes. Q: Slam dunk? A: Yes. Depo. 36:8-12.

F. Q: Were there any of your loans that never made it to committee? A: No. Q: Every single loan that you originated made it to committee? A: Yes. Q: Was every single one approved? A: As I can remember they were. Depo. 40:22-41:3.

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Mark Meek (CW#6) FACC Para. Allegation from FACC Quoted Excerpts from Confidential Witness Depositions

59 That the Bank’s loan officers underwrote their own CRE loans during parts of the Class Period, and that this alleviated a typical banking A. Q: Now, is this -- "CW6 was a loan specialist officer in a “safety net” where separate underwriters conduct due diligence, commercial real estate department in BankAtlantic's Tampa instead of the loan officers, was also corroborated by Confidential Bay loan office." Is that true? Witness #6 (“CW6”). CW6 was a loan specialist officer in the A: I was a loan officer in commercial real estate. Depo. 30:9-14. commercial real estate department in BankAtlantic’s Tampa Bay loan office during parts of the Class Period, who actively worked on B. A: The only active work that I ever did in coordination of the coordinating the loan process between the customers, attorneys and loan process between – on behalf of the bank -- would have lenders/loan officers. been between my customers, attorneys that I had retained or

the bank had retained on behalf of the bank to represent them, but never ever for other lenders/loan officers. I mean, only in the performance of my own transactions did I work in that capacity. Depo. 31:7-14.

C. Q: Mr. Meek, when you were employed at BankAtlantic, did you -- you were a commercial -- you were a lender that dealt with commercial real estate loans?


81 This is corroborated by the fact that CW1 and CW6, as a member of the credit department and as a loan specialist in the CRE department, A. Q: And did you discuss with her the underwriting process at respectively, also stated that at BankAtlantic during the Class Period, BankAtlantic? the loan officers were responsible for underwriting their own loans. A: Yes.

Q: And did you tell her that during the time that you were employed at BankAtlantic, that loan officers underwrote their own loans?

A: Yes. Depo. 34:8-14.

B. Q: Mr. Meek, when you were employed at BankAtlantic, did you -- you were a commercial -- you were a lender that dealt with commercial real estate loans?


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in re: bankatlantic bancorp, inc. securities litigation 07...

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