rosner, joshua 5-6-08

Joshua Rosner - Confidential

I

UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF COLUMBIA

IN RE:

FEDERAL NATIONAL MORTGAGE

ASSOCIATION SECURITIES

DERIVATIVE, and "ERISAn

LITIGATION

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

IN RE:

FANNIE MAE SECURITIES

LITIGATION

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

* ** CONFIDENTIAL PURSUANT TO ORDER

Videotaped Deposition of JOSHUA ROSNER

Tuesday, May 6, 2008

New York, New York

Job No.: 186576

Pages 1 through 342

Reported by: Patricia Mulligan Carruthers, CSR

Esquire Deposition Services MD - 1-800-539-6398 D.C. - 1-800-441-3376 VA - 1-800-752-8979


Tuesday, May 6, 2008

10:30 a.m.

Videotaped Deposition of JOSHUA ROSNER, held at

the offices of:

O'Melveny & Myers

7 Times Square

New York, New York 10036

Pursuant to notice, before Patricia Mulligan

Carruthers, Certified Shorthand Reporter and

Notary Public of the State of New Jersey and

Notary Public of the State of New York.

I I '

A P P E A R A N C E S

ON BEHALF OF LEAD PLAINTIFFS

IN DERIVATIVE CASE

ON BEHALF OF J. TIMOTHY HOWARD:

LAURA E. NEISH, ESQUIRE

ZUCKERMAN SPAEDER, LLP

1540 Broadway

Suite 1540

New York, New York 10036-4039

(212) 704-9600

ON BBHALF OF PLAINTIFF:

FRANCIS P. KARAM, ESQUIRE

EMILY KERN, ESQUIRE

Page 3

BERNSTEIN LIEBHARD & LIFSHITZ, LLP

10 East 40th Street

22nd Floor

New York, New York 10016

(212) 779-1414

[email protected]

[email protected]

Esquire Deposition Services D.C. - 1-800-441-3376

Page 4

1

2 A P P E A R A N C E S C O N T I N U E D

3

4 ON BEHALF OF KPMG

5 CLAUDIA OSORIO, ESQUIRE

6 GIBSON, DUNN & CRUTCHER LLP

7 1050 Connecticut Avenue, N.S.

8 Washington, D.C. 20036-5306

9 (202) 955-8500

L 0 [email protected]

Ll

L 2

L 3 ON BEHALF OF LEANNE SPENCER:

L 4 LAUREN R. RANDELL, ESQUIRE

L5 MAYER, BROWN, ROWE & MAW, LLP

L6 1909 K Street, N.W.

L 7 Washington, D.C. 20006-1101

18 (202) 263-3000

19 1randellmayerbrown.com

2 0

2 1

22

2 3

24

25

Page 5

A P P E A R A N C E S C O N T I N U E D

ON BEHALF OF FRANKLIN RAINES:

JOSEPH M. TERRY, ESQUIRE

JOHN E. CLABBY, ESQUIRE

WILLIAMS & CONNOLLY, LLP

725 Twelfth Street, N.W.

Washington, D.C. 20005

(202) 434-5000

j terry@wc . com j clabbyawc . com

ON BEHALF OF FANNIE MAE:

MICHAEL WALSH, ESQUIRE

ROBERT STERN, ESQUIRE

O'MELVENY & MYERS, LLP

1625 Eye Street, N.W.

Washington, D.C. 20006-4001

(202) 383-5300

[email protected]

[email protected]

2 (Pages 2 to 5 )


Page 6

A P P E A R A N C E S C O N T I N U E D

ON BEHALF OF THE WITNESS:

MARK D. CAHILL, ESQUIRE

CHOATE HALL & STEWART, LLP

Two International Place

Boston, Massachusetts 02110

(617) 248-5000

mcahillchoate.com

ALSO PRESENT:

Terry Carruthers, Videographer

C O N T E N T S

EXAMINATION OF JOSHUA ROSNER

BY Mr. Terry

By Ms. Randell

By Ms. Neish

By Mr. Walsh

By Ms. Osorio

E X H I B I T S

ROSNER DEPOSITION EXHIBIT

1 Medley Global Advisors Background

MGA 01937

2 Medley Global Advisors GSEs Update

Dated 6-9-03

MGA 02036 -37


Dated 6-12-03

MGA 02071 -75


Dated 8-1-03

MGA 02317 -18

5 Contact Call Report, 8-27-03

P. Brereton

MGA 02420

Page 7

PAGE

16

267

269

273

317

PAGE

44

5 2

5 9

62

6 3

Lquire Deposition Services 1.C. - 1-800-441-3376

Page 8

1

2 E X H I B I T S C O N T I N U E D ; 3 ROSNER DEPOSITION EXHIBIT 'PAGE

4 6 Contact Call Report, 9-8-03 7 6

5 S. Blumenthal

6 MGA 02417 - 19

7 7 Contact Call Report 11-9-03 111

8 S. Blumenthal

9 MGA 02494 - 496 10 8 E Mail datedll-18-03 from S. 120

11 Blumenthal to J. Rosner

12 OFHEO-BLU-00058770

13 9 E Mail dated 2-27-04 from R. Seiler 121

14 To P. Lawler

15 OFHEO-LAW-00021348

16 10 White Paper, Fannie Mae's Abusive 123

17 Accounting

18 FMCIV 04 05026960 - 989

19 11 Contact Call Report 1-15-04 125

2 0 S. Blumenthal

21 MGA 02656 - 57 22 12 Equity Brief dated 1-29-04 132

2 3 MGA 09059 - 61

2 4

2 5

E X H I B I T S C O N T I N U E D


13 Contact Call Report 2-2-04

S. Blumenthal

MGA 02768


S. Blumenthal

MGA 0276


P. Brereton

MGA 02784


S. Blumenthal

MGA 02866


S. Blumenthal

MGA 03033

18 E Mail dated 5-14-04 from J. Reston

To S. Blumenthal

OFHEO-BLU-00036921

19 Equity Brief dated 5-17-04

MGA 09100 - 101

Page 9 t

PAGE

14 1

143

150

155

161

163

171

3 (Pages 6 to 9)


1

2 E X H I B f T S C O N T I N U E D

3 ROSNER DEPOSITI0N;EXHIBIT

Contact Call Report 5-18-04

S. Blumenthal

MGA 03108

E Mail dated 5-19-04 from J. Rosner

To S. Blumenthal

MGA 03109


B. Imperatore

MGA 03174


B. Imperatore

MGA 04091

E Mail dated 9-30-04 from K. Muehring

TO J. Rosner

MGA 09767 - 68

Medley Global Advisors GSE Update

Dated 12-2-04

MGA 03647 - 48

contact call Report 9-17-04

Fin Man

MGA 03414 - 15

Page 10

PAGE

179

186

188

192

192

205

213

E X H I B I T S C O N T I N U E D



Bob H

MGA 03409


Dated 9-17-04

MGA 03410

29 Medley Global Advisors Special Report

Dated 9-28-04

MGA 03587 - 589 30 E Mail and Contact Call Report

Dated 9-28-04

MGX 03608 - 609

31 E Mail and Contact Call Report

Dated 1-19-05

MGA03776 - 77 32 Medley Global Advisors Background

Dated 1-19-05

MGA 03779 - 80 33 E Mail and Contact Call Report

Dated 8-17-04

MGA 03308

Page 11

PAGE

215

218

225

229

233

239

248

Page 12

1

2 E X H I B I T S C O N T I N U E D

3 ROSNER DEPOSITION EXHIBIT PAGE

E Mail dated 3-11-05 from A. Canfield 245

TO J. Rosner

MGA 04202 - 204

E Mail dated 4-27-06 from J. Rosner 261

To A. Heiskell

MGA 05462 - 65 E Mail dated 12-22-04 from R. Medley 265

TO J. Rosner

MGA 03735 - 41 E Mail dated 10-30-03 from J. Rosner 292

To K. Medley

MGA 02578

E Mail dated 12-12-03 from Medley 303

TO TT

MGA 09054 - 57

E Mail dated 2-2-04 from Medley 307

TO TT

MGA 09062 - 64

E Mail dated 5-26-04 from J. Rosner . 309

MGA 03131 - 32

Page 13

1

2 E X H I B I T S C O N T I N U E D

3 ROSNER DEPOSITION EXHIBIT PAGE

4 41 E Mail and Contact Call Report 327

5 Dated 7-27-05

6 MGA 04420 - 21 7

4 (Pages 10 to 13)



Page 14

J. ROSNER - CONFIDENTIAL P R O C E E D I N G S

THE VIDEOGRAPHER: Good morning.

We're going on the record. Here begins Videotape

Number 1 in the deposition of Mr. Joshua Rosner

in the matter of In Re Federal National Mortgage

Association Securities Derivatives and ERISA

Litigation, and In Re the F a ~ i e Mae Securities

Litigation, Case Number MDL 1668.

Today is May the 6th. 2008. The

time is 10:03 a.m. This deposition is being held

at the offices of OIMelveny & Myers, Seven Times

Square, New York. It was made at the request of

Kimberly Newman of the law offices of O'Melveny &

Myers.

I am the videographer. My name is

Terry Carruthers, here on behalf of Esquire

Deposition Services, located at 1020 19th Street,

Washington, D.C.

Will all counsel and all present

please state their appearances for the record,

after which the court reporter, Patricia

Mulligan, will swear in the witness and we can

proceed.

MR. TERRY: Joe Terry with Williams

Page 15

J. ROSNER - CONFIDENTIAL & Connolly for defendant Frank Raines.

MR. CLABBY: John Clabby with

Williams & Co~olly for defendant Frank Raines.

MR. WALSH: Michael Walsh, OtMelveny

& Myers for Fannie Mae.

MR. STERN: Robert Stern, O'Melveny

& Myers for Fannie Mae.

MS. RANDELL: Laura Randell; Mayer,

Brown for Leanne Spencer.

MS. NEISH: Laura Neish, Zuckerman

Spaeder for Tim Howard.

MS. OSORIO: Claudia Osorio; Gibson,

Dunn & Crutcher for KPMG.

MS. KERN: Emily Kern, Bernstein

Liebhard & Lifshitz for the plaintiff.

MR. K A W : Francis Karam, of the

same firm for the plaintiffs.

MR. CAHILL: Mark Cahill, Choate

Hall & Stewart for Mr. Rosner.

JOSHUA ROSNER

4 Stuyvesant Oval, 4E

New York, New York, 10009,

A witness called for examination, having been

first duly sworn, was examined and testifies as

Esquire Deposition Services DOCo - 1-800-441-3376

Page 16

J. ROSNER - CONFIDENTIAL

follows : I

EXAMINATION BY COUNSEL FOR DEFENDANT RAINES

BY MR. TERRY:

Q. Hi, Mr. Rosner. My name is Joe

Terry. I represent Frank Raines, who's a

defendant in this litigation.

The deposition is being both

transcribed and it's being videotaped. In the

event that your deposition will be played before

the jury, we'll have a videotape to show them.

Because it's being transcribed,

however, I want to ask you questions. It's

important that you answer them verbally rather

than with a nod or a shake of the head so the

court reporter can transcribe it. It's also

important that we don't talk over each other, so

that the court reporter will be able to

transcribe what we're both saying.

Do you understand that?

A. Uh-huh.

Q. Okay. If you need a break at any

time, just let me know and I'll be happy to

accommodate you.

Mr. Rosner, have you ever been

Page 17

1 J. ROSNER - CONFIDENTIAL 2 deposed before?

3 A. NO.

4 Q. Is your primary residence the New

5 York, New York, residence?

6 A. Uh-huh.

7 MR. CAHILL: YOU need to answer yes

8 or no instead of uh-huh.

9 A. yes.

10 Q. Thank you.

11 Can you briefly describe your

12 educational background, starting with college.

13 A. Sure. Undergrad mass. Actually

14 comp. lit., and beyond that professional Series

15 7, 63 license.

16 Q. And Series 7 and 63 are both

17 securities professional?

18 A. correct.

19 Q. Do you have any formal training in

20 accounting?

21 A. Formal training, no.

2 2 Q. Do you have any formal training in

23 economics?

24 A. NO.

2 5 Q. Okay. And your undergraduate course

5 (Pages 14 to 17)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 18


of study was comparative literature?

A. Right. And social thought, and

political economy. Correct.

Q. Okay. Aside from your Series 7 and

your Series 6 3 , do you have any other

professional certifications?

A. NO.

Q. Are you a CPA?

A. NO.

Q. Are you a CFA?

A. NO.

Q. Have you ever - - Have you ever testified as an expert witness in any proceeding?

A. NO.

Q. Have you ever published any papers

in peer-reviewed journals?

A. Peer-reviewed, no.

Q. Do you consider yourself to be an

expert interpreting accounting standards?

A. That's-- That's a subjective. Do I

consider myself to? No.


expert in evaluating corporate internal control

environments for accounting purposes?

Page 19

J. ROSNER - CONFIDENTIAL A. NO.


expert in the bank examination process?

A. NO.

Q. Are you familiar with the term

"CAMELS " ?

A. Yes.


expert in the CAMELS process?

A. Could you actually clarify expert

for all of these because, frankly, that's a term

of art that I'm not sure I'm comfortable with

answering yes or no.

Q. Okay. Well, how would you define

the term "expert"?

A. I'm not sure. You're the one asking

the question.

Q. Have you ever held yourself out to

anyone as an expert in the CAMELS process?

A. NO.

Q. Okay. Do you have any formal

training in what's known as event studies?

A. NO.

Q. Have you ever held yourself out as


Page 20


an expert in event studies?

A. I'm not even sure -- Again, the term "event studiesn is sort of a term of art, so 1'm

going to say no, but I - - You know, if you want

to get more specific in that question we could

answer it, but have I held myself out as an

expert, no.

Q. Have you ever met before today with

anyone that you understood to be a representative

of the plaintiffs in this lawsuit?

A. As a representative of the

plaintiffs. Yes.

Q. And who was that?

A. Jim Cummings . Q. When did you first meet with

Mr. Cummings?

A. I'm not sure I remember the date. I

would guess it was sometime midyear 2006.

Q. And did you first communicate with

Mr. Cummings in person, or via a phone call or

E mail?

A. I don't remember.

Q. Okay. What was the subject matter

of your first meeting with Mr. Cummings?

Page 21

J. ROSNER - CONFIDENTIAL MR. KARAM: I'm going to object on

the basis of privilege. And without a waiver of

any assertion of privilege I'll allow you - - that question to go forward as long as it doesn't

address the subject matter of the conversation.

Q. Okay. What was the substance of

your first conversation with Mr. Cummings?

A. That--

MR. KARAM: Once again, my objection

is to any - - anything substantive. You can

generally describe the subject matter.

THE WITNESS: Absolutely.

A. That - - as I remember it, it was

essentially that they were anticipating or

already had taken action in this matter and were

interested in talking to me about it.

Q. Okay. And at the time of this

conversation had you been formally retained by

the plaintiffs in any capacity?

A. At the time of that? No.

Q. Okay. What else did you discuss in

that first meeting?

MR. KARAM: I object on the grounds

of privilege.

6 (Pages 18 to 21)


Page 22

J. ROSNER - CONFIDENTIAL Q. Who first contacted who; did

Mr. Cummings reach out to you?

A. Again, I believe so, but I don't

remember. I certainly didn't make the phone

call.

Q. Okay. So it was Mr. Cummings or

someone acting on his behalf.

A. Correct.

Q. Did you agree at some point to

provide consulting advice to the plaintiffs in

this litigation?

A. On a limited basis.

Q. Okay. And what was -- What was the limited basis?

MR. KARAM: I object, but I will

allow the witness to describe the broad terms of

his consulting agreement as long as he doesn't go

into the substance of any communications.

A. It was as a consulting expert, I

guess. I don't even know if that's the term that

was used, nontestifying in this matter, to help

them understand background and parties.

Q. Was there a general subject area of

your consulting advice, general topic?

Page 2:


Q. Did you enter into a written

agreement at any point with the plaintiffs?

A. Yes.

Q. And when did you enter into a

written agreement?

A. Again, sometime in I believe

midyear, '06.

Q. Okay. How many times did you meet

with Mr. Cummings or someone else you understood

to be a representative of the plaintiffs?

A. In regard to this matter?

Q. In regard to this matter.

A. Less than - - Less than a handful. Q. And did you have E-mail

communications with anyone you understood to be a

representative of the plaintiffs?

A. Not to my - - Not to my recollection. Q. Okay. You said that you only had a

handful of communications with individuals you

understood to represent the plaintiffs with

respect to this matter.

A. Uh-huh.

Q. Have you had conversations with

Page 24

1 J. ROSNER - CONFIDENTIAL

2 Mr. Cummings about consulting on other matters?

3 A. I'm not sure I understand how that's

4 relevant. Not on any matter outside of - - Not on

5 any matter that would be related to Fannie or

6 Freddie, or any of the individuals named.

7 Q. Okay. My question is, have you

8 provided consulting services to Mr. Cummings and

9 his firm for other matters?

10 MR. CAHILL: You can answer that yes

11 orno.

12 A. yes.

13 Q. And I won't ask you about the

14 subject matter of this.

15 You mentioned you entered into a

16 written agreement, correct, with the plaintiffs?

17 A. Correct.

18 Q. What were the terms of that

19 agreement?

20 A. I don't recall off the top of my

21 head.

2 2 Q. Did it establish a rate by which you

23 would be paid for your services?

24 A. It did.

2 5 Q. And what was that rate?

Page 25


A. Again - - I believe that it was 500

an hour.

Q. Okay. Did you create any written

work product through your consulting work?

MR. KARAM: I'm going to object, and

I'm going to assert privilege on that.

Q. Did Mr. Cummings explain to you why

he wanted to retain you?

MR. KARAM: I object to any

communications, a direct - - the substance of any

communications between Mr. Rosner and

Mr. Cumrnings.

Q. Are you still providing consulting

services to plaintiffs?

A. Have I spoken to them about the

matter or provided them with any information

regarding the matter at any time over the past

nine months to a year? No.

Q. Did your relationship formally

terminate or did you --

A. Itdidn't.

Q. Okay. So as far as you know, as of

today you still have a consulting relationship

with the plaintiffs?

7 (Pages 22 to 25)



Page 26

J. ROSNER - CONFIDENTIAL A. AS far as I understand.

Q. Are the plaintiffs compensating you

for your appearance today?

A. NO.

Q. Did they compensate you for the time

you spent preparing for this deposition?

A. NO.

Q. How much time did you spend

preparing for this deposition?

A. I met with Mr. Cahill on I guess one

occasion and had a handful of conversations

beyond that.

Q. In preparing for this deposition did

you meet with anybody that you understood to be

representing the plaintiffs?

A. No. I've had no contact with them

in several months. I can't remember the last

time I did.

Q. Do you recall how much in total

compensation you received for the work that you

performed for the plaintiffs?

MR. KARAM: Mr. Rosner is looking at

me. I don't know, so I can't help him.

THE WITNESS: Oh, no. I'm wondering

Page 27

J. ROSNER - CONFIDENTIAL if that's - -

MR. KARAM: Look. I will assert my

objection, but 1'11 allow him to answer it as

long as it's not considered a waiver. Our idea

here is to be as forthcoming as possible so that

there's no inferences to be drawn of any

impropriety.

MR. STERN: For the same time, for

the record, the amount he's received is obviously

not privileged.

A. I mean, I can give you a range,

because I honestly don't remember off the top of

my head. I would guess it's between 5,000 and

$7500.

Q. Do they still owe you anything, or

are you all square at this point?

A. No, they don't.

Q. Setting aside the - - Setting aside the consulting work you performed for the

plaintiffs, what - - where else have you worked

during the past ten years?

A. During the past ten years I've

worked at Oppenheimer. It's the firm that - - it

was purchased by CIBC. Graham Fisher & Company,

Page 28

J. ROSNER - CONFIDENTIAL Medley Advisors.

Q. Okay. And what is Oppenheimer?

A. Non - - Well, nonexistent at this point. Oppenheimer was an investment bank.

Q. And what did you do at Oppenheimer?

A. I was in institutional research

sales. I was on their stock selection committee,

and I founded a specialty practice in financial

service research sales and analysis for them.

Q. During your time at Oppenheimer did

you cover Fannie Mae at all?

A. I didn't. Well, did I cover them.

Was I the publishing analyst on it? No. Did I

cover them? Yes.

Q. Is that because you were responsible

for all financial services - - A. Right.

Q. And Fannie Mae fell - - A. Correct. I - -

MR. CAHILL: Let me caution you to

slow down. Let him finish his question before

you start your answer.

Q. Did you, yourself, perform any work

while you were at Oppenheimer relating to Fannie

Page 29

J. ROSNER - CONFIDENTIAL Mae?

A. Could you be more specific?

Q. Sure. Did you, yourself, write any

research reports concerning Fannie Mae?

A. NO.

Q. Okay. Did you oversee the

preparation of any research reports - -

A. NO.

Q. - - concerning Fannie Mae? Just going back to your consulting

work with the plaintiffs, how much time total

would you estimate you spent providing consulting

advice to the plaintiffs?

A. Oh, I think I answered that with the

reimbursement rate of between 5,000 7500, and I

gave you a billing.

Q. Okay. I can probably do that math.

SO maybe ten to 12 hours - - A. Probably.

Q. - - somewhere in that range.

You mentioned you also worked at a

firm named Graham Fisher?

A. Correct.

Q. What is Graham Fisher?


8 (Pages 26 to 29)

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Page 30

J. ROSNER - CONFIDENTIAL A. It's an independent financial

service consulting and advisory firm.

Q. m d when did you work at Graham

Fisher?

A. Two different periods. 2001 to

early 2000 - - well, late 2002, and then again from May of 2006 to the present.

Q. And what is your current position at

Graham Fisher?

A. Managing director and sole

proprietor.

Q. So you own Graham Fisher.

A. Correct.

Q. What was your position from 2001 to

late 2002?

A. TO late 2002.

Q. I'm sorry. During your first stint

at Graham Fisher.

A. Managing director.

Q. And what did you do as managing

director?

A. I actually - - I was a partner,

actually. So the work title was managing

director. I was also a partner of the firm.

Page 3 1


I actually did research and analysis

on housing and financial-service-related issues.

Q. Did your work relate at all to

Fannie Mae?

A. Relate? Yes.

Q. Did you cover Fannie Mae?

A. My partners and I actually covered

it from a joint perspective.

Q. Okay. And did Graham Fisher publish

research reports?

A. We actually published one large

research report on Fannie Mae and Freddie Mac,

which was - - which was someone else's work product.

Q. Another individual at Graham Fisher?

A. Correct.

Q. You said that you published a single

publication on Fannie Mae on Freddie Mac.

A. Correct.

Q. Is that a single one per year or -- A. No. It was one large published

piece. Correct.

Q. During what period of time did you

work at Medley Global Advisors?

9 (Pages 30 to 33)

Page 32

J. ROSNER - CONFIDENTIAL A. From - - I can't give you the precise

date, but it was March of 2003 until May of 2006.

Q. And what line of business is Medley

Global Advisors in?

A. Advisory to institutional investors

on regulatory, legislative, and policy issues

domestically and abroad.

Q. And what type of services does - - does Medley provide to its clients?

A. What type of services. Reports and

advisory on likely policy outcomes, central bank

activities, legislative movement on proposed

bills, regulatory issues, and that's really the

essence of it.

Q. Did Medley sell its - - sell reports

to its clients?

A. Didn't sell - - I wasn't on that side

of the business, on the administrative side, so

I'm not sure that I'm the best person to actually

give you the clear answer as to how the services

were sold. It's my understanding that the

reports were not sold on a report-by-report basis

but it was client subscriptions to Medley.

Q. And would the clients subscribe to a

Page 33

J. ROSNER - CONFIDENTIAL particular report, or would they just subscribe

to Medley services and Medley would provide them

with --

A. Again, I can only give you my

understanding. I can't give you an authoritative

answer. My understanding is that they had

different subscription areas; central banks, as

example, regulatory, legislative and policy,

et cetera.

Q. Is it fair to say that Medley

provided its clients with advice regarding the

political and regulatory risks that faced various

sectors of the economy or various companies?

MR. CAHILL: Object to the form.

YOU can answer.

A. Could you repeat it?

Q. Sure. Is it fair to say that Medley

provided its clients with advice regarding the

political or regulatory risks facing different

companies or sectors of the economy?

A. I wouldn't - - I wouldn't acknowledge or say that it's fair to say that it was advice

as opposed to information. Advice would suggest

a particular actionable event or approach, and it



Page 34

J. ROSNER - CONFIDENTIAL was very clearly not the intent of the firm to

advise as much as inform.

Q. Understood. And did you provide - - Did Medley provide information regarding

particular companies, or just sectors of the

economy?

A. For the most part it was - - Well, it was sectors, and often times where regulatory,

legislative, or policy issues came down to

specific companies it was at times mentioning of

specific companies.

Q. And was one of the specific

companies that you provided information to your

investors about Famie Mae?

A. Yes.

Q. Did you develop any understanding as

to why Medley's clients were interested in

information about political and regulatory risks?

A. That was the substance of the entire

firm's business.

Q. Okay. And did you develop an

understanding as to why that was something that

your clients were interested in?

A. Well, of course. You know, I think

Page 35

J. ROSNER - CONFIDENTIAL that for the most part institutional investors

rely on traditional sell-side research for

specific financial analysis, but for the most

part sell-side research coming out of the

investment banks does a - - This is an opinion. - - a fair at best job on understanding regulatory legislative and policy issues.

Q. Did you develop an understanding as

to why your clients felt that political and

regulatory issues were important to them?

MR. CAHILL: Objection.

YOU can answer.

A. Did I develop an understanding?

Q:- - Did you ever --- Did.you ever talk to clients trying to sell Medley services to those

clients?

A. I never sold Medley services.

Q. Who would be the person at Medley

who was responsible for bringing in clients?

MR. CAHILL: During what time frame?

Q. During the time period you worked

there?

A. There were - - There were a whole host of people. You know, there was a head of

10 (Pages 34 to 37)

Page 36


sales.

Q. Did Medley employ any financial

analysts?

A. No. You know, again, to my - - Well, no. To my understanding, no, but I also - - I wasn't running the firm and I didn't really know

the backgrounds of everyone there, so I can't

actually answer that question authoritatively.

, THE VIDEOGRAPHER: Excuse me for

interrupting, counsel. Someone's BlackBerry is

still on, and it's actually drowning out. Can

you just check again?

Q. Did you have any interaction with

Medley's clients during the period you worked

there?

A. Some of them, yes.

Q. What would be the - - sort of the nature of your interaction?

A. Again, it depends on the particular

day, the particular client. Different clients

find different things of differing importance and

interest, so I'm not sure that there's a standard

answer.

Q. What types of clients did Medley

Page 37


2 have during the period you worked there that you

3 were aware of?

4 A. Institutional investors.

5 Q. What do you mean by "institutional

6 investors"?

7 A. Large pension plans, fund complexes,

8 hedge funds.

9 Q. Do you know if the Ohio State

10 Teachers Pension Fund was one of the clients?

11 A. I don't know. I don't believe so,

12 though.

13 Q. Did you ever during your time at

14 Medley ever interact with any of the plaintiffs

15 in this litigation?

16 A. To be honest, I don't know who the

17 plaintiffs are per se specifically.

18 Q. We've got OPERS, which is the

19 Ohio - - 20 A. I'm fairly certain the answer is no

21 on that.

2 2 Q. Okay. And do you know whether the

23 Ohio State Teachers Fund - - Ohio State Teachers 24 Retirement System was a client of Medley?

2 5 A. I don't believe so.



Page 38

J. ROSNER - CONFIDENTIAL Q. Who - - During the period you were at

Medley, who owned Medley?

A. Again, in terms of the - - In terms of the structure, I know that Richard Medley was

the - - the managing partner. I don't know the

partnership structure in terms of other ownership

interests, but functionally Richard Medley - -

Q. Okay.

A. - - during the time I was there.

Richard sold the firm somewhere, I

want to say probably second or third quarter of

2005.

Q. And going back to Medley's clients,

do you know whether an individual name Alan

Warner was a client or a client contact?

A. I don't know. I don't recognize the

name, and I don't believe that I've ever had

contact with him.

Q. How about John Emboden (phonetic) ?

A. Same.

Q. Kathy Dodd?

A. What firm?

Q. She was with STRS, I believe.

A. I don't believe so.

Page 39


Q. Steve Huber?

A. Not to my knowledge.

Q. Steve Mitchell?

A. Could you give me the names of the

firms?

Q. I believe all of these individuals

were individuals who worked with STRS.


Q. Bill Katrell (phonetic) ?

A. As I said, I don't believe I had any

interaction to my knowledge, to my recollection,

with that firm. And instead of the acronym could

you give me the name?

Q. Yes. I believe it is the State

Teachers Retirement System?

A. All right. So as I said before, I

don't believe that they were a client, and I

don't believe I had any interaction with them

whatsoever.

MR. KARAM: Of Ohio. Because many

states refer to their state teacher's retirement

system.

MR. TERRY: Appreciate it.

Q. How about the Ohio Bureau of


Page 40

J. ROSNER - CONFIDENTIAL Worker's Compensation?

A. That's a bureau. That's not an

institutional investor, to my knowledge. No.

Q. Okay. What was your position at

Medley?

A. Managing director of financial

service practice.

Q. What were your job duties?

A. Advise - - Well, research, remain informed on significant regulatory legislative

policy issues domestically and globally as they

were impacting the financial sector.

Q. And did your sector include Fannie

Mae?

A. My sector included housing and

mortgage finance which, obviously, includes

Fannie Mae.

Q. How long did you cover the financial

services sector while you were at Medley?

A. The entire time. Well, that's not

quite correct. I was really responsible for what

they called the - - the regulatory legislative side of it, from probably mid-2003 - - Now, there

were other people who had been involved with it

Page 41

1 J. ROSNER - CONFIDENTIAL 2 prior to my time there. So, you know,

3 functionally it was my area from mid-2003.

4 Q. And who was your predecessor in that

5 area?

6 A. I think it was a number of people.

7 I don't think it was one specific person.

8 Q. Can you give me their names, please?

9 A. I would - - Again, I believe that 10 involved in it were Kevin Muehring and Richard

11 Medley. I'm not sure if anyone else.

12 Q. Is Kevin Muehring still at Medley?

13 A. To my knowledge.

14 Q. Is Mr. Medley still involved with

15 Medley?

16 A. No to my knowledge.

17 Q. How many people worked at Medley

18 during the time you were there?

19 A. Again, I can only give you a - - a 20 guess. I would guess that it was somewhere

21 around 60.

2 2 Q. Was there an individual who was

23 specifically assigned to Fannie Mae?

2 4 A. NO.

2 5 Q. How many individuals at Medley while

11 (Pages 38 to 41)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 42

J. ROSNER - CONFIDENTIAL you were there worked on getting information

about Fannie Mae?

A. The way the firm works is - - I don't think that it's specifically tasked with working

on a particular name, a particular issue. So in

the course of gathering information, frankly,

there were a lot of people who were able to feed

information in, but for the most part I was the

primary. Did occasionally other people provide

information to me? Yes.

Q. And who are the other individuals,

if you recall?

A. I gave you - - I gave you Kevin, and

beyond that it was, you know - - I can't give you a specific recollection, but there were probably

others.

Q. Did you prepare research reports for

your clients on Fannie Mae?

A. Research reports. In the - - On the

regulatory, legislative, and policy issues I did.

Q. Did Medley have a number of

publications that it would offer to its clients

somewhat?


Page 43

J. ROSNER - CONFIDENTIAL Q. Sure. Did Medley provide some sort

of research product to its clients?

A. Several, as I said before.

Q. Did those different publications

have names?

A. Yeah. Remember, it's - - or not

remember. It's not per se in the publications.

They had different tags, different titles that

were put on them. I can't really recall what

they were.

Q. Okay. We'll go through some

specific examples later, which will make it

easier. . - Do you know how - - how wide your "

readership was for the documents that you sent to

clients?

A. Idonlt.

Q. Do you have any sense of how large

your client base was?

A. I don't.

MR. CAHILL: By "your" you mean

Medley s . MR. TERRY: Medley's, yes.

A. I don't.


Page 44

J. ROSNER - CONFIDENTIAL Q. Do you know if a firm name Sonic

Capital was a client of Medley?

A. Idonttknow.

Q. I'm going to show you a document

which will be Rosner Exhibit 1, which is dated

March 11, 2003, and it has the Bates stamp at the

bottom MGA 01937.

(Whereupon, Exhibit Rosner-1 is

marked for identification by the reporter.)

Q. Mr. Rosner, do you recognize this

document?

A. I actually don't.

Q. Okay. Looking at it, can you tell

me what it is?

A. It looks like it's a note titled

Background. I don't know whether it's internal,

external. It has Sassan Ghahramani's name at the

top of it, and it seems to be some background on

the Washington regulatory legislative issues

surrounding Fannie Mae and its regulator.

Q. Okay. Looking at the line at the

top that has Mr. Ghahramani's name on it?

A. Yes.

Q. What does that line there indicate?

Page 45


A. Probably - - MR. CAHILL: Let me caution you not

to speculate. If you know the answer, you should

give it.

A. Yeah, I don't know.

Q , Do you know if that indicates

whether Mr. Ghahramani was the author of this

document?

A. Idon'tknow.

Q. You see the date at the top says

March 11, 2003. Was that before or after you

joined Medley?

A. Again, it was probably within a week

or two weeks one-side-or the other of my joining.

And I don't know - - I don't remember the exact date.

Q. When you joined Medley, what did you

do to familiarize yourself with the tasks you

would be carrying out there?

A. What did I do to familiarize myself.

Q. Did you go through old Medley

research reports?

A. Actually, I did not:

Q. Have you had a chance to read this

12 (Pages 42 to 45)


Page 47


2 his current title is.

3 Q. But he's still with Medley.

4 A. He is.

5 Q. If you could take a look at the

6 first line, it says, "In the post LTCM days of

7 the NASDAQ bubble, MGA got involved in a web of

8 powerful forces in Washington jockeying to reign

9 in the GSEs out of concern that they were growing

10 far too fast for comfort, and could pose systemic

11 risk."

12 Do you see that line refers to a

13 "web of powerful forces in Washington"?

14 Do you see that?

15 A. yes.

16 Q. Do you know what that's referring

17 to?

18 A. I don't.

19 MR. CAHILL: Objection. Form and

2 0 foundation.

21 Q. Did you have a concern when you

22 joined Medley that Freddie Mac and Fannie Mae

23 were growing too fast?

2 4 MR. CAHILL: Did he, personally,

25 have a concern?

Page 46

J. ROSNER - CONFIDENTIAL document?

A. I have - - just now? Q. Yes.

A. No. I skimmed it.

Q. If you could just take a look at it,

and when you're done let me know whether you

think this is something that you would have

received as your background when you started at

Medley.

A. Okay. I've read it.

Q. Okay. Having read it, do you

believe that this is something that would have

been provided to you for your background when you

started at Medley?

A. I have no recollection.

Q. Okay. And do you know whether this

was something that would have been provided to

Medley's clients?

A. Again, Idon'tknow.

Substantively - - Again, I don't know.

Q. Okay. And who is Mr. Ghahramani?

A. At the time he was a - - one of the managing directors. Today he is - - holds an executive position. I'm not actually sure what


Page 48


Q. Did you, personally, have a concern?

A. Have a concern? No. I didn't have

a concern.

Q. Was it your view that Fannie Mae

posed systemic risk?

A. It was not my view that they posed

systemic risk. It was my view that the entire

housing market was rapidly becoming at risk, and

it was my view that the company - - the company - - both Fannie and Freddie and many of the mortgage

market players had become increasingly willing to

take risks that - - that historically they might not have.

Q. During your time at Medley Advisors

was there ever a point that you believed that

Fannie Mae was a good investment?

A. That actually was never part of my

job function to have such a view one way or the

other, a good or bad investment.

Q. Okay. What was your job function?

A. To advise institutional investors on

regulatory, legislative, and policy issues that

were confronting the financial service sector and

participants.

Page 49

1 J. ROSNER - CONFIDENTIAL 2 Q. Okay. Did your view of the

3 political and regulatory risks facing Fannie Mae

4 change during the period you were covering the

5 firm?

6 A. Did my view of the political,

7 regulatory - -

8 MR. KARAM: I'm going to object.

9 It's a compound question.

10 A. Yeah. Could you actually rephrase

11 it?

12 Q. Sure. Did your view of the

13 political risks facing Fannie Mae change over

14 time while you were at Medley?

15 A. I don't believe they really did.

16 Q. Okay. Does that mean in your view

17 that the political risks facing Fannie Mae in

18 your view were constant between the March, 2003,

19 through 2006 period?

20 MR. KARAM: Objection. No

2 1 foundation.


You can answer if you - - Do you

24 understand the question?

2 5 THE WITNESS: NO. Actually, I would

13 (Pages 46 to 49)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 50


2 love it rephrased.

3 Q. Okay. I believe you testified that

4 you did not believe that the political risks

5 facing Fannie Mae changed over the time when you

6 were at Medley. Let me ask first, did you

7 believe that the intensity of the political risks

8 facing Fannie Mae - - 9 A. of course.

10 Q. - - changed? 11 Okay. And when did that begin to

12 change?

13 A. Significantly at about the time of

14 Freddie Mac's accounting scandal.

15 Q. And how did it change?

16 MR. CAHILL: Just SO we're clear,

17 you're asking Mr. Rosner for his - - 18 MR. TERRY: For his view. Yeah.

19 A. It seemed rather clear that the

20 regulatory and policy issues presented in the

21 Freddie Mac accounting scandal were likely to

22 result in increased risk to Fannie Mae.

23 Q. Increased risk how?

2 4 A. From a policy perspective, that

25 Fannie is one of two housing - - private housing

Page 5 1

J. ROSNER - CONFIDENTIAL GSEs and, therefore, what was a negative for one

of them was likely to become a negative event for

the other from a policy perspective.

Q. And by that do you mean that it

increased the likelihood of negative legislative

outcomes for Fannie Mae?

A. It increased the chances of negative

legislative outcomes, I wouldn't say that. I

would say that it increased the risk of movement

of legislation that might be negative for them.

Q. And was it your view that the

Freddie Mac report also increased the risk of

adverse regulatory action against Fannie Mae?

A. - It increased my view that there was likely to be a similar investigation of Fannie

Mae.

Q. And was it your view that that

investigation would pose substantial risks to

Fannie Mae?


A. I'm not sure I understand the

question.

Q. Well, did you have a view as to what

the result of that investigation would be?

Page 52

J. ROSNER - CONFIDENTIAL A. Did I - - Did I have a particular

view? No. Did I believe that once we saw the

output from the Freddie investigation in the form

of a report, that it might actually create a

context and a sense of what the regulator might

be considering or looking at or concerned with or

interested in with regard to Fannie Mae.

Q. I'm going to show you another

document.

Why did you believe that the Freddie

Mac investigation meant that Fannie Mae would

also be investigated?

A. The investigation - - Again, the investigation report became the basis for that

view; but more specifically, they're one of two

entities regulated by the same regulator.


which is dated June 9, 2003. It's Bates-stamped

MGA 02036. And this will be Rosner Exhibit 2.



Q. Mr. Rosner, do you recognize this

document?

MR. CAHILL: Do you want him to read

Page 53

J. ROSNER - CONFIDENTIAL the document or just want - -

Q. Yes. Take as much time as you need

to familiarize yourself with it. I'll ask you

about specific parts.

Okay. Mr. Rosner, do you recognize

this document?

A. Honestly, I don't recall. I don't

believe that it's mine.

Q. Looking at the format, do you know

whether this is something that would have been

provided to investors?

A. In my view it very well might have,

but I don't - - I can't say for certain.

Q. Okay. Who in your view is the

person at Medley most likely to know that?

A. Currently at Medley, I don't know.

Q. Taking a look at the top line, it

says, "Richard Medley, Medley Investment Group."

Does that indicate to you whether

Mr. Medley was the author of this report?

A. It doesn't.

Q. Was this report authored after you

had begun at Medley?

A. Itwas.

14 (Pages 50 to 53)



Page 54


Q. Take a look at the top. There's a

title that says, "Medley Global Advisors GSEs

Update. "

Is the GSEs update a regular

publication that Medley would provide to its

customers?

A. Could you define "regular"?

Q. Sure. It says "update." I assume

that's updating something. Did Medley provide

GSEs updates on some periodic basis to its

clients?

A. Not with any specific periodicity.

Q. Okay. Do you have a sense of how

often GSE updates would be provided to Medley's

clients?

A. It depended on the regulatory,

legislative, and policy issues at hand.

Q. It would be driven by what was going

on in the world.

A. correct.

Q. If you could take a look at the top

line. It says, "From a wide range of calls

today, we are now certain that Freddie Mac's

stunning announcement took the White House,

Page 55

J. ROSNER - CONFIDENTIAL Treasury, and OFHEO by surprise."

Does that mean that this report was

issued after the announcement by Freddie Mac of

its earnings restatement?

MR. CAHILL: Objection. Foundation.

If you know - -

A. Idon'tknow.

Q. Okay. Taking a look at that first

line, does that provide you with any context for

when this document was written?

A. Other than speculation, no.

Q. Okay. It's referring to Freddie

Mac's "stunning announcement." Do you know what

it means by that?

A. Again, it would be speculation.

Q. At some point did Freddie Mac

announce an earnings restatement?

A. At some point they announced a

earning restatement. At some point they

announced an accounting pxoblem was uncovered.

There were a number of announcements this could

refer to.

Q. Okay. Do you know the time of

Freddie Mac's announcement of an earnings


Page 56

1 J. ROSNER - CONFIDENTIAL 2 restatement?

3 A. Off the top of my head I don't.

4 Q. Okay. Looking at this document,

5 this document is dated June 9, 2003. Does that

6 refresh your recollection that Freddie Mac's

7 restatement was around that day?

8 A. It doesn't refresh my recollection.

9 Does it intuitively make sense that that is what

10 it's referring to? Yes.

11 Q. Can you take a look, there are a

12 bunch of points on the first page, 1, 2, 3, 4 ?

13 A. Uh-huh.

14 Q. Take a look at Point 3, it says

15 ''OFHE0 has one last chance to prove itself before

16 being dismantled and replaced by a super

17 regulator. The Freddie blow-up could not have

18 come at a better time for Treasury officials, who

19 have been directing an internal working group

20 that will recommend folding the regulatory

21 jurisdiction of OFHEO and FHFB together into one

22 significantly empowered regulator housed directly

23 in the Treasury Department."

24 Looking at that, do you recall if

25 you wrote that?

Page 57

J. ROSNER - CONFIDENTIAL A. I did not write that.

Q. Do you know who did?

A. Idon't.

Q. Do you know what it's referring to?

A. Again, I could speculate.

Q. Well, did you ever talk to anyone at

the time about what effect the Freddie

announcement would have on OFHEO?

A. Well, "would have on OFHEO' is a

certain statement. I would actually never have

had a certain view of what was going to happen as

opposed to possible, probable, or potentially

could happen.

Q. Okay. Was it your view that Freddie

Mac's announcement of the earnings restatement

provided OFHEO with one last chance to prove

itself before being dismantled?


Q. YOU can answer.

A. It was not.

Q. Okay. You see Point 4? It says,

"OFHEO will become proctologically inclined"?

A. I do.

Q. It's fair to say that you would

15 (Pages 54 to 57)


Page 58

1 J. ROSNER - CONFIDENTIAL 2 recall if you had authored that line?

3 A. I think I believe - - I believe I

4 would recall. I don't believe I did.

5 Q. Have you ever heard that expression

6 before?

7 A. Ido. Ihave.

8 Q. Who did you hear it from?

9 A. Oh, I mean, it became sort of a

10 catch phrase that was not only within Medley but

11 used outside of Medley.

12 Q. As a result of this report?

13 A. Which report?

14 Q. That we're looking at now.

15 A. No. No. As a result of a regulator

16 who has an increased need to actually look at

17 companies that perhaps it hadn't had.

18 Q. Okay. What does that sentence mean?

19 I'm not asking for the literal definition, but as

20 used in context? Do you - - 2 1 MR. CAHILL: What does it mean in

22 this document?

2 3 Q. In the context of this document, do

24 you have an understanding of what it means?

2 5 MR. CAHILL: Objection. Foundation.

Page 59 1 J. ROSNER - CONFIDENTIAL 2 He didn't write it, Joe.

3 Q. Well, you said you've used the

4 phrase "proctologically inclinedn - - 5 A. Absolutely.

6 Q. - - in your time at Medley.

7 And what does that mean?

8 A. To me?

9 Q . yes.

10 A. It means that you have an increased

11 interest in doing detailed regulatory and

12 examination work.

13 Q. Was it your view that as a result of

14 the Freddie Mac announcement of earnings

15 restatement-'OFHEO would become proctologically

16 inclined?

17 A. Based on my understanding or my use

18 of that term, yes.

19 Q. I'm going to show you another

20 document, which is dated June 12, 2003.

21 ~ates-stamped MGA 02017.

2 2 (Whereupon, Exhibit Rosner-3 is

23 marked for identification by the reporter.)

2 4 Q. Do you recognize this document?

2 5 A. Let me review it.


Page 60 J. ROSNER - CONFIDENTIAL

Q . sure.

A. I don't specifically recognize it.

Q. Going back for one second to that

last document, specifically back to the phrase

"proctologically inclined,' you mentioned it had

been used a number of times throughout Medley.

Have you ever used it in connection with a

regulator other than OFHEO?

A. Absolutely.

Q. And which regulator?

A. Many. I would say I've probably

even used it in relation to recent events with

the Financial Service Authority in the Northern

Rock situation. I think it's typically a term

that would be used when a regulator has not

actually been as aggressive in its execution of

its authority as it probably or regulatorily is

expected to.

Q. Okay. Looking at the document which

I just provided you, which is Rosner Exhibit 3,

looking at the format, it says, "Medley global

advisors background."

Does that indicate to you what this

document is?

Page 61

J. ROSNER - CONFIDENTIAL A. Where does it say "backgroundn? I'm

sorry. I pulled the - - I was still on the - -

Q. Proctologically inclined?

A. Yes. I'm sorry. Could you repeat

the question?

Q. Sure. Taking a look at the title of

this document, does that indicate to you what

this document is?

A. To my recollection, background was

internal only.

Q. Okay. Do you know whether you were

the author of this?

A. I am fairly certain that I was not.

Q. You see Mr. Muehring's name at the

top?

A. Uh-huh.

Q. Does that indicate he was the

author?

A. It indicates he might have been the

author, but - - but I don't know. Q. You don't have any recollection of

whether he was the author?

A. Idonlt.

Q. Let me show you another document,

16 (Pages 58 to 6 1)


Page 62

J. ROSNER - CONFIDENTIAL which is dated August lst, 2003, to be marked as

Rosner Exhibit 4. Bates stamp is MGA 02317.



Q. Can you identify this document?

A. DO you want me to - - Q. You can take whatever time you need

to make yourself comfortable that you know what

it is.

A. Uh-huh.

Q. Okay. Can you identify this

document?

A. I believe that it's a call report.

Q. What's a call report?

A. In other words, it's an internal

background. It's not a specific call - - I should

correct myself. I don't believe it's a call

report; I believe that it's an internal

background note.

Q. IS this a document that you

authored?

A. It's a document that I don't recall

authoring. It may well have been.

Q. And the fact that your name appears

Page 63

J. ROSNER - CONFIDENTIAL at the top, does that give you any indication as

to whether you were the author?

A. Again, the way their internal

systems worked, you could actually put something

in background and others could edit it, which

would just switch the name at the top. So it

doesn't give any clear indication.

Q. Okay. If you could take a look at

the second paragraph?

A. Uh-huh.

Q. Well, first let me ask: You said

this not a call report but this a background.

A. Uh-huh.

Q. Were these - - Let's take a look at a

call report first.

I'm going to show you a document

which is Bates-stamped MGA 02420, marked as

Rosner Exhibit 5, and why don't we keep these two

documents both together. Hopefully it will help

out in context.



Q. Okay. Mr. Rosner, can you identify

this document?

Page 64

J. ROSNER - CONFIDENTIAL A. Yeah. Well, I can tell you that it

appears to be a call report.

Q. Okay. Is it a call report authored

by you?

A. I don't specifically recall. It may

well be.

Q. Do you see at the bottom it says,

"Author Josh Rosner"?

A. Then it probably was.

Q. What is a call report?

A. The firm had a policy that - - which was loosely followed, that when you had

conversations you filed call reports.

Q. Did you regularly prepare these in

connection with your job at Medley?

A. Regularly. Did I often? Yes.

Q. Okay. Why did you prepare them?

A. Firm policy.

Q. Okay. Did you use them at all in

drafting reports for clients?

A. The call reports specifically? No.

Q. Okay. Did you distribute the call

reports to others at Medley?

A. The - - I did not specifically


distribute them.

Q. Was there some system that

distributed them?

A. Yes.

Q. How did that system work?

A. My understanding is at the time most

of the content and client-facing folks had access

to them.

Q. And what was the purpose of these

call reports?

A. I can't answer. I mean, it's - - That was not my - - It was not my decision. It

was not my system. It was not my ... Q. Okay. In terms of the timing of

when you prepared them, would you prepare them

contemporaneously while you were on the call,

after the call?

A. Depends.

Q. Typically would you do it shortly

after the call?

A. I don't know if there was a typical.

Q. On average when would you prepare

them?



17 (Pages 62 to 65)

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Page 66

1 J. ROSNER - CONFIDENTIAL 2 A. mean-- 3 Q. Well, did you ever prepare them a

4 week after a call?

5 A. yes.

6 Q. Okay. Is there any time stamp on

7 this that would indicate when it was prepared?

8 A. There's a time stamp that would

9 indicate when it was filed, not necessarily when

10 it was prepared.

11 Q. Okay. You see the box that says,

12 Date, 8-27-03?

13 A. correct.

14 Q. What date is that referring to?

15 A. That merely means the last time it

16 was edited in the system.

17 Q. Okay. So that's not necessarily the

18 date of meeting.

19 A. correct.

2 0 Q. Okay. When you drafted these, did

21 you try and make sure these were accurate?

2 2 A. That's - - The system was one that

23 many of us at the firm didn't agree with, and

24 different - - people at the firm used them 25 differently.

Page 67

J. ROSNER - CONFIDENTIAL They were in some sense used

initially, at about this time I would guess, as a

benchmark of a number of calls out that - - that a

salesperson made or an analyst made, and so the

context of them were by and large correct.

Different people actually used different - - different approaches to, you know, specific

quoting and, you know, specific context.

Q. Well, what was your approach?

A. It depended on the - - on the report.

Again, did I rely on the reports to write - - the call reports to write my reports? No. So quite

often they were really just, from my perspective,

more done because of a requirement that they be

done rather than a focus on the content.

Q. Okay. Was there a requirement that

they be done accurately?


Q. Well, did you view that you had any

responsibility to accurately reflect your - - A. Generally yes.

Q. And did you do your best to make

sure the call reports were accurate?

A. Most of the time.


Page 68


Q. Did you ever put anything in a call

report that you believed to be false?

A. NO.

Q. And did you know that others at

Medley would be looking at these call reports?

A. Yes.

Q. And they might be relying on these

call reports in some aspect.


A. I can't answer whether they would be

relying on them. It was a small enough

organization that for the most part there were

iterative discussions with people, and I think we

all had the same view of call reports or

generally the same view of call reports.

Q. Did you take notes during your

calls?

A. I don't believe I did, actually.

Q. Did you tape-record them or

anything?

A. NO.

Q. At the top it says, "Outbound call

to Peter Brereton of OFHEO."

A. Uh-huh.

Page 69

J. ROSNER - CONFIDENTIAL Q. What does that mean?

A. That would mean that that was who

the call was to.

Q. And you made the call to

Mr. Brereton.

A. Yes.

Q. Who was Mr. Brereton?

A. He was - - I don't know his specific title. He was an information officer at OFHEO.

Q. During your time at Medley how

frequently did you talk to Mr. Brereton?

A. Itdepends.

Q. Dozens of times?

A. I don't know if I would say dozens,

plural. Probably - - probably somewhere - - I can't even guess because of, you know, I mean,

you're talking about three years ago. was it - -

Was it as information came out of OFHEO that made

sense to verify or dig in deeper on or - - Yes. Q. Did you have a preexisting

relationship with Mr. Brereton from your previous

employment?

A. NO.

Q. Do you recall when you first

18 (Pages 66 to 69)


Page 70

1 J. ROSNER - CONFIDENTIAL 2 contacted Mr. Brereton?

3 A. Idon't.

4 Q. How did you - - When you had 5 discussions with Mr. Brereton, were they always

6 by phone?

7 A. NO.

8 Q. Did you ever meet with him for

9 drinks or anything like that?

10 A. yes.

11 Q. HOW frequently?

12 A. Occasionally.

13 Q. Did you ever meet with Mr. Brereton

14 for dinner?

15 A. I don't believe so.


17 summary, what is the summary section of the

18 contact call report in general terms? Not this

19 specific summary, but what role does that play in

20 the document?

21 A. Again, for my purposes or for other

22 people - -

23 Q. For your - - Under your practices. 24 A. ~t was a general recapping of some

25 of the points of a discussion or inferences drawn

Page 7 1

J. ROSNER - CONFIDENTIAL from a discussion.

Q. Do you see on the first line it

says, "he saidu and then there's quotes, which I

guess goes on to the end of the document?

A. Uh-huh.

Q. What does your use of quotes in your

practice mean?

A. Again, in call reports it's not a

literal verbatim. It is a general and

substantive recap.

Q. Is it an attempt by you to reflect

the substance of the conversation?

A. To reflect the substance.

Q. m d is your attempt to reflect the

substance of that conversation accurately?

A. In this specific case I have no

recollection.

Q. Do you recall any instance where you

tried to inaccurately capture what someone said?

A. No, but, you know, we all know that

at times the accent is on different syllables.

Q. Okay. If you take a look at the

second clause in the section that appears in

quotes, it says, "I got a call, I cannot confirm


Page 72

J. ROSNER - CONFIDENTIAL the info is right, telling me the Federal

Elections Commission is doing an investigation of

Freddie's and perhaps Fannie's fundraising based

on lobbyists restaurant deal and anything that

comes up in the search. The FEC is not

particularly strong, but if they turn up

something they can hand it over to the U.S.

Attorney.

Do you recall having a discussion

with Mr. Brereton about that?

A. I recall not specifically having a

conversation with Mr. Brereton about that.

Q. Okay. Does that mean you recall

having a conversation about that subject matter?

A. I recall there being numerous

conversations with people outside of OFHEO about

that subject matter.

Q. Who else did you have conversations

with?

A. I can't recall with specificity.

This is a - - This was a rumor that was actually circulating fairly broadly around the Washington

community at the time.

Q. Was it accurate?

Page 7!


A. I have no idea.

Q. Do you have any idea why

Mr. Brereton was providing you with this

information?

A. I don't.

Q. Is election law part of OFHEO1s

regulatory duties, as far as you know?

A. NO.

Q. Do you have any understanding as to

why Mr. Brereton would ever agree to provide you

with information?

A. Would ever agree to provide me with

information?

Q. Yes.

MR. CAHILL: Objection. Calls for

speculation.

Q. Did you ever talk to Mr. Brereton

about why he was providing you with information?

A. Mr. Brereton was an information

officer . Q. Okay. Do you know if he met for

drinks with all the analysts covering Fannie - -

A. Idon'tknow.

Q. The information that you provided in

19 (Pages 70 to 73)


Page 74


your Medley reports, was that exclusive

information that was already in the public realm?

MR. CAHILL: That's a very broad

question. Objection.

A. Yeah. That wasn't "yes," yeah.

That was yes, it was a broad question. So could

you make it more specific?

Q. Do you have any sense of how much a

subscription to Medley services costs clients?

A. Idon't.

Q. Do you have any sense of whether it

was in the six figures or seven figures?

A. Subscription annually, weekly?

Q. Annually.

A. Depends on which services they took,

but I don't know the specific pricing on any, and

my understanding is there was - - there were different prices for different services or

clients or - - and I don't know how that was

defined.

Q. Okay. Do you know whether the

information that Mr. Brereton was providing you

about the federal elections commission was public

at that time?

Page 75


A. I don't know. I doubt that that

information was information that I hadn't heard

elsewhere.

Q. Did you ever have any discussions

with Mr. Brereton about why he ought to provide

you with information?

A. No. Not to my recollection. No.

Q. Okay. Did you find that

Mr. Brereton was open in his communications with

you from the beginning, or did you have to

persuade him to provide you with information?

A. I don't recall. What I will tell

you, just to clarify, is quite often - - And it probably was the case in this situation, but I

can't recall specifically. - - he would

distinguish between his official views and his

personal views, and he would explicitly do so in

the call.

Q. Did you ever get a sense of what

made that distinction?


A. Did I ever get a sense - - Q. Of how he distinguished what was

official OFHEO views and what were his views?


Page 76



speculation.

Q. YOU can answer.

A. I always assumed that they were

whether it was specifically on things of OFHEO's

purview.

Q. Okay. You can put away Exhibit 5.

Keep out Exhibit 4 for a minute. I'm going to

show you another exhibit which we'll mark as

Exhibit 6, which is a document dated September

8th. 2003, Bates-stamped MGA 02417.



Q. Can you take a look at the very last

page of this document.

Okay. This document appears to have

two Bates numbers. At the top it says MGA 09704

on the first page. At the bottom it says MGA

02417.

Mr. Rosner, can you take a look at

the last page of this document?

A. Uh-huh.

Q. Do you see where it says "author"?

MR. KARAM: Which page?

Page 77

J. ROSNER - CONFIDENTIAL MR. TERRY: The last page. I'm

sorry.

A. Yes.

Q. And is that your name?

A. That is my name.

Q. Does that indicate to you that you

were the author of this call report?

A. Again, it may - - if it - - It's possible that it doesn't indicate that, based on

the way their systems worked. Because if I was

the last one to go into the document and edit any

of it, it would have made me the author of all of

it in the system, whether that was, in fact, the

case or not.

Q. Would you - - Did you ever edit other

people's call reports?

A. For - - For factual issues of record,

at times other people did. Do I think - - Do I

remember specifically doing so myself? I don't.

Q. Okay. Do you have any reason to

doubt that you were the author of this document?

A. I don't have any specific reason,

because I don't specifically recollect this

document.

20 (Pages 74 to 77)


Page 78

J. ROSNER - CONFIDENTIAL Q. You see the top says, "Outbound call

to Steven Blumenthal of OFHEO1'?

A. Yes.

Q. Who is Mr. Blumenthal?

A. Mr. Blumenthal was the deputy

director and then the acting director at OFHEO,

and prior to that I think was counsel to the then

director.

Q. And do you know what he did before

that?

A. Well, it states it here in the - - in the background.

Q. Okay. And looking at the

background, does that refresh your recollection

as to what Mr. Blumenthal did prior to that?

A. It does.

Q. Okay. And he was, himself, a

political analyst for Schwab Capital Markets?

A. correct.

Q. Did you know Mr. Blumenthal when he

was an analysts -- A. I didn't.

Q. - - for Schwab? And I guess prior to that he served

Page 79

J. ROSNER - CONFIDENTIAL as finance counsel for the House Commerce

Committee, and was vice president and director of

regulatory relations at the Securities Industry

Association.

Did you know Mr. Blumenthal when he

was with the House Commerce Committee?

A. I didn't.

Q. Do you know which - - which party he was serving when he was with the finance

committee?

A. If my recollection is correct, I

believe he was a republican.

Q. If you could take a look at the

summary line at the top, it says, "Great call,

great sourceu?

A. Uh-huh.

Q. Did you write that?

A. I don't recollect.

Q. Did you view Mr. Blumenthal as being

a great source?

A. Yes, but not on all matters.

Q. Okay. Do you have any reason to

doubt that you wrote this document?

A. Do I have any reason to doubt it? I


Page 80

J. ROSNER - CONFIDENTIAL haven't read it in its entirety. As I said, I

don't have reason to doubt that I wrote much of

it. I don't know whether anyone else edited it

at any point.

Q. Okay. Did you have a number of

conversations with Mr. Blumenthal while you were

at Medley?

A. I did.

Q. Do you recall if you had

conversations with him in September of 2003?

A. I don't specifically recall.


first line on that, it says, "Great conversation

with Steve, a major source."

A. Uh-huh.

Q , The word "major" is in all caps.

Did you have a practice of using all

caps to emphasize something?

A. Did I have a practice of it? No.

Did it - - Did I occasionally do it? I guess at

times . Q. You see the - - At the end of the

first paragraph it says, "All of this is

currently off the record"?

Page 81


A. Uh-huh.

Q. Underlined? What does that mean,

"All of this is currently off the record"?

A. That is to say that I did not want

anyone discussing any of this, and that his views

were not to be discussed and were - - my understanding were largely his views.

Q. What -- What was your understanding

of matters that were off the record? Could you

report on them at all, or just without

attribution?

A. I don't believe that I could report

on them at all, but I don't think there was a

specific practice. It was - - It was not a specific term that was used with any regularity.

Q. If you take a look at the first

line, it says, "The FRA investigation."

A. Uh-huh.

Q. "People are going to be shocked by

what is in the report. We took a lot of flak

about the Parsegian thing. But as the person

heading up the investigations, I can tell you

that the things that we were told under oath by

Parsegian and others made it very clear that we

21 (Pages 78 to 81)


Page 82


needed to clean house. The board was asleep at

the switch. If we were the SEC, based on what we

found we would have forced the company into

bankruptcy. I don't think the stocks will get

crushed because the investigation will be looked

at, memorialized in the past, but it is

important. "

Do you recall Mr. Blumenthal making

comments along those lines to you?

A. Not specifically. Is it possible?

Yes.

Q. And the fact that quotes are used

there, under your practice does that mean you

were trying to reflect - -

A. Correct.

Q. - - the substance of what

Mr. Blumenthal - -

A. Correct.

Q. If you take a look at Point 3, it

says, "Legislation and the treasury." And there

appear to be quotes at the beginning of that

point and then at the end?

A. Uh-huh.

Q. Again, does that purport to capture

Page 83


the substance of what Mr. Blumenthal said?

A. Again, not with specificity, but I

would not be surprised if those were his

personal, not necessarily professional, opinions

in our conversation.

Q. If you take a look, sir, in the

middle of that paragraph, it says, "As we speak,

F&M is working with Treasury to draft the

administration's bill. There will be a five-year

moratorium preventing Treasury from increasing

capital requirements of the agencies as part of

the trade with F&M. Thatps like a

get-out-of-jail-free card. I will tell you,

especially having seen what I have seen during

the investigation, that this is a rat's nest. I

can't tell you when or how, but I, Steve

Blumenthal, personally would never own a single

share of either stock. At some point these

companies will get crushed under their own

weight. "

DO you see that?

A. I do see that.

Q. And do you recall Mr. Blumenthal

making comments along those lines?


Page 84


A. I don't specifically. It

wouldn't - - It wouldn't surprise me, but neither would it surprise me to have had him make

comments to the contrary of that at other times.

Q. Okay. Do you recall Mr. Blumenthal

ever describing Fannie Mae in September of 2003

as a rat's nest?

A. Idon't.

Q . Do you recall Mr. Blumenthal in

September of 2003 telling you that he would

personally never own a single share of either

Fannie Mae of Freddie Mac stock?

A. I don't specifically recall that.

Q. Okay. Is that consistent with what

he was telling in September of 2003?

A. My recollection of September, 2003,

specifically is obviously not terrific, so I - - I really can't answer that. I think that - -

MR. CAHILL: Let me caution you not

to speculate.

THE WITNESS: Right.

MR. CAHILL: If you know the answer,

give the answer.

A. SO no.

Page 85 1 J. ROSNER - CONFIDENTIAL 2 Q. September, 2003, was that before or

3 after OFHEO had issued its report on Fannie Mae?

4 A. I don't recall off the top of my

5 head.

6 Q . Okay. Is that in September of 2004?

7 A. I think it - - I think it was.

8 Q. Okay. Do you know when OFHEO began

9 its special investigation of Fannie Mae?

10 A. I don't recall. I recall that it

11 was sometime after the Freddie investigation was

12 completed.

13 Q. Do you know if it was before or

14 after September, 2003?

15 A. I don't recall.

16 Q. Can you take a look at Point 5 on

17 this document. Middle of that paragraph it says,

18 "These companies" - - all caps - - "will fail at

19 some point, and no one is acting responsibly

20 now."

21 Do you recall Mr. Blumenthal making

22 comments along those lines to you?

2 3 A. I don't.

2 4 Q. Okay. Do you see that paragraph

25 appears in quotation marks?

22 (Pages 82 to 85)


Page 86


A. Yes.

Q. Does that mean you're attempting to

reflect Mr. Blumenthal's comments?

A. In all likelihood. But, again, not

verbatim, so it may have been in tone.

Q. By "in tone" you mean the substance

of the comments?

A. The sentiment, or what I inferred.

Q. Can you take a look at Point 6?

A. Yes.

Q. It says, "1 tell Steve that I've

been concerned about these issues and that I

would be interested in knowing anything that may

help embarrass officials into doing the right

thing or give me pressure to exert through

investors on the agencies. Steve tells me that I

should expect him to help me in that way."

A. Uh-huh.

Q. Do you recall making those comments

to Mr. Blumenthal?

A. I don't.

Q. Okay. That paragraph doesn't

appear - - That sentence doesn't appear in quotes,

does it?

Page 87

J. ROSNER - CONFIDENTIAL A. Itdoesnot.

Q. Does that indicate to you that these

are comments that you are making rather than

Mr. Blumenthal?

A. It doesn't. You know, again, the

value of the call reports was more a functionary

requirement, a functional requirement at Medley

than necessarily reflective of the specific

substance. Most of us hated doing them. Some of

us did do them. Some of us didn't do them, you

know, so it doesn't necessarily mean anything.

Q. Well, you didn't make these things

up, did you?

A. NO.

Q. If you wrote in your report, "1 tell

Steve that I've been concerned about these issues

and that I would be interested in knowing

anything that may help embarrass officials into

doing the right thing or give me pressure to

exert through investors on the agencies," would

that be something that you, in fact, said?

A. Perhaps if you go back to the date,

this is at a point where there were internal

issues within Medley which may actually have


Page 88

J. ROSNER - CONFIDENTIAL caused more color to be put into reports than

actually reflected my view. And as I said, I

didn't use the reports as the basis of my

published reports.

Q. So what you wrote down in this

report might not actually be true.

A. Correct.

MR. TERRY: Why don't we take a

short break. They need to change the tape, but

take time to refresh ourselves.

THE VIDEOGRAPHER: The time is

11:21. We're going off the record. This is the

end of Tape 1.

(Whereupon, a recess is taken.)

THE VIDEOGRAPHER: We are now back

on the record. The time is 11:33 a.m. This

marks the beginning of Tape 2 in the deposition

of Mr. Joshua Rosner, which is being taken at

OtMelveny & Myers. The videographer is Terry

Carruthers, here on behalf of Esquire Deposition

Services, located at 1020 19th Street, Northwest,

Washington, D.C.

Counsel may proceed.

Q. Mr. Rosner, you understand you're

Page 89

J. ROSNER - CONFIDENTIAL still under oath?

A. Uh-huh. Ido.

Q. Did you tell Mr. Blumenthal that you

would be interested in knowing anything that

might help embarrass the officials into doing the

right thing regarding Fannie Mae?

A. I don't recall.

Q. Did you write that in this memo?

A. I don't recall.

Q. Did you ever tell Mr. Blumenthal

that you would be interested in knowing anything

that might give you pressure to exert through

investors on the agencies?

A. Through - - Absolutely not. Q. Did you write that?

A. Through investors? I don't recall.

Q. If you could take a look at Point 6.

Do you see the first line? It says, "I tell

Steve that I have been concerned about these

issues and that I would be interested in knowing

anything that may help embarrass officials into

doing the right thing or give me pressure to

exert through investors on the agencies."

A. I don't recall saying that.

23 (Pages 86 to 89)


Page 90

1 J. ROSNER - CONFIDENTIAL 2 Q. Did you write that?

3 A. I don't recall. I already said that

4 I don't recall writing this.

5 Q. Do you have any reason to think that

6 anyone else wrote that?

7 A. Do I have any reason to believe?

8 NO.

9 Q. Who was the primary contact, during

10 your time at Medley, with Mr. Blumenthal?

11 A. I believe I was.

12 Q. Do you recall Mr. Blumenthal ever

13 telling you that, quote, "I should expect him to

14 help me in that way?

15 A. Idon't.


17 telling you he would provide you with

18 embarrassing information regarding Fannie Mae so

19 you could put pressure on their investors?

20 A. Absolutely not.

2 1 Q. You mentioned earlier that there

22 were some internal issues at Medley that may have

23 colored what you wrote in these call reports?

2 4 A. Correct.

2 5 Q. What are those issues?

Page 91

J. ROSNER - CONFIDENTIAL A. The issues were that the firm

historically had a view that everything had to be

viewed as exclusive information whether it was or

it wasn't and, therefore, had to be supported by

sources which quite often could have been public

documents, but that wouldn't have satisfied the

internal pressure.

Q. So sometimes you relied on public

documents but claimed in your call reports that

you had spoken to individuals?

A. NO.


.Q. Okay. Can you explain a little .more

what you mean by that?

A. That the pressure was to have

everything sourced to a person.

Q. Did that pressure cause you to alter

your call reports?

A. NO.

Q. Did that pressure cause you to

include information in your call reports that was

false?

A. No. Typically it caused me to seek

to confirm information that was already in the


Page 92


2 public domain.

3 Q. Did you ever write anything in your

4 call reports that was false?

5 A. Did I - - I wrote things in my call 6 reports only that I believed to be correct. That

7 doesn't mean that they were fact.

8 Q. Okay. Did you ever claim in your

9 call reports that somebody had said something

10 which they had not said?

11 A. Again, in the call reports, as we

12 say and we discussed earlier, the - - It's the 13 interpretation. It was my understanding. It was

14 my inference. It was often the tone and the

15 accent as opposed to a specific statement.

16 Q. Did you ever intentionally

17 mischaracterize the substance of anyone's

18 comments, or the tone?

19 A. Intentionally, no.

20 Q. Did you ever make up things in these

21 call reports that you said to other people?

2 2 A. Not to my knowledge. Not to my

23 recollection I should say.

2 4 Q. If you wrote in the call report that

25 you told Mr. Blumenthal something, did that, in

Page 93


fact, happen?

A. It may, it may not have.

Q. Okay. Are there any instances where

you claimed in your call reports that you said

something that you had not said?


A. I don't recall.

Q. Do you recall ever making up in your

call reports something that you had said?

A. I don't recall.

Q. Sitting here today, can you deny

that you wrote in your call report that you told

Mr. Blumenthal that you wo.uld be interested .in

knowing anything that might give you pressure to

exert through investors on the agencies? Can you

deny writing that?

A. No, but I can't affirm writing it

either, as I said before.

Q. Okay. So sitting here today, can

you deny that you, in fact, told that to

Mr. Blumenthal?

A. I can't deny it, but neither can I

affirm it.

Q. Sitting here today, can you deny

24 (Pages 90 to 93)


Page 95

1 J. ROSNER - CONFIDENTIAL 2 reports if you didn't think that anyone was going

3 to read them?

4 MR. CAHILL: Objection to form.

5 Q. Why would you feel pressured to

6 write your call reports in a certain way if you

7 didn't think that anyone would read them?

8 A. Anyone other than management.

9 Q. Okay. So you thought that

10 management was reading the call reports.

11 A. I -- I probably believed that. Yes.

12 Q. And by "management" you mean

13 Mr. Medley.

14 A. Probably, yes.

15 Q. DO you recall any instances where

16 you invented something on a call report that

17 didn't happen in order to make Mr. Medley happy?

18 MR. CAHILL: Objection.

19 A. A, I don't recall; and, B, it was

20 never to make Mr. Medley happy in writing any of

21 the call reports. There's nothing about it that

22 was to make Mr. Medley happy.

2 3 Q. Okay. Did you ever write a call

24 report in a way designed to avoid incurring

25 Mr. Medley's wrath?

Page 94

J. ROSNER - CONFIDENTIAL Mr. Blumenthal told you that, quote, "I should

expect him to help me in that way"?

A. I don't recall, but I actually would

doubt that he said that.

Q. Okay. So you think that's something

that you just made up.


A. I don't recall. Again, tone,

substance and internal pressures. The call

reports, you have to understand the internal use

utility of them, which for most people was

insignificant.

Q. Did these internal pressures affect

how you wrote your call reports?

A. I think I said at times they did,

yes.

Q. Why?

A. Because that was a functional

requirement put in place by the firm and had

outlived its practice.

Q. Did you think anyone was going to

read this?

A. ldonltknow.

Q. Well, why would you alter your call


Page 96 J. ROSNER - CONFIDENTIAL MR. CAHILL: Objection.

A. Nor was it wrath.


the next sentence on this Section 6. It says,

"He also urges me to continue down the road on

the loan modification issue, delinquency skewing,

and the seller contribution issue, and to

continue to point out that by moving them to

treasury there will be a larger implicit

guaranty."

Now, do you see that?

A. I do see that.

Q. Do you know what that's referring

to?

A. Id0.

Q. What is that?

A. It's actually sort of incongruous,

because it's referring to different issues, I

would believe. I have long had concerns about

the loan modification issue, long before I knew

Steve Blumenthal or anyone else in the regulatory

or policy world impacting the GSEs regarding the

manner in which they modified and reported

modification of loans.

Page 97

J. ROSNER - CONFIDENTIAL And so I don't specifically

recollect it in regard to this report, but I

would assume that it's regarding that concern

having been expressed to the regulator, that they

look into it.

On the treasury side, I would assume

that that actually is referring not to

modification or delinquency skewing, but I would

assume that that is the moving them to treasury

in the legislative process.

Q. Okay. And the "he" in that

sentence, is that referring to Mr. Blumenthal?

A. Again, I don't specifically recall.

I would assume so.


ever urging you to look into certain research

issues?

A. NO. And I think that actually

that's not the context of that comment.

Q. What is the content of the comment?

A. I think the context of that comment

is that I had actually raised the issue with the

regulator. I had raised the issue separately

with many others in the policy world and

25 (Pages 94 to 97)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 98

J. ROSNER - CONFIDENTIAL otherwise, and I think that he was encouraging me

on a personal level to actually, if I felt it was

an issue, raise it and continue to raise it as an

issue. I don't think it was a directive or

encouragement of ... Q. Do you recall whether Mr. Blumenthal

urged you to continue to point out that by moving

OFHEO to treasury there would be a larger

implicit guaranty?

A. I don't remember that specifically.

Q. What does that mean by moving them

to treasury there will be a larger implicit

guaranty?

A. Well, again, there were

conversations, just as with Mr. Brereton and just

as with other sources. There were conversations

that were explicitly stated or understood to be

personal opinion as opposed to professional

judgement or opinion by the source. And part of

the value that I had was - - with them was on

their legislative understanding.

We had discussed the legislative

process, and I would expect that that was his

personal view on - - on what would happen if he

Page 99


2 moved the regulator.

3 Q. Was it your understanding that it

4 was Mr. Blumenthal's personal understanding that

5 moving the regulator to the Treasury Department

6 would mean there was a larger implicit guaranty?

7 A. Again, I don't specifically recall.

8 But that's what it says, and that's probably

9 correct.

10 Q. Okay. What does that mean, "a

11 larger implicit guaranty"? What does that phrase

12 mean?

13 A. Implicit - - well, guaranty or larger 14 implicit guaranty?

15 Q. Larger implicit guaranty.

16 A. That it would enhance the market

17 perception that if Fannie or Freddie ended up

18 with a financial problem they would become a

19 bigger risk to the government.

20 Q. And in Mr. Blumenthal's opinion,

21 based on what you knew, was that a good thing or

22 a bad thing?

23 A. I couldn't speak to that. I don't

24 know.

2 5 Q. Did you have a view as to whether a


Page 100

J. ROSNER - CONFIDENTIAL larger implicit guaranty was good or bad?

A. A personal view?

Q. Uh-huh.

A. Did I? Yes.

Q. What was your view?

A. That a larger implicit guaranty of a

private corporation is not a good thing.

Q. Okay. And did you ever make that

known to Mr. Blumenthal?

A. I don't know if I did specifically.

I have no reason to believe I did not.

Q. Do you know if subsequent to this

conversation you did point out in your - - any of

your published work that moving OFHEO to treasury

would increase the implicit guaranty?

A. I don't recall. I probably would

have said that not based on a single source if I

did but based on the views of multiple sources

and based on, more specifically, my own analysis.

Q. Could you go back to Exhibit 4,

which I previously provided you with?

A. Uh-huh.

Q. Why don't you take a look at the

first line. It says, "Fredo Macs concession.

Page 101

J. ROSNER - CONFIDENTIAL The early 1970s were an interesting time in the

American culture. They gave us both The

Godfather, a story about small-time cheats

growing into a sophisticated group of bullies and

crooks, and they gave us Freddie Mac, whose older

brother, Fannie, was born during prohibition."

A. Uh-huh.

Q. Taking a look at that line, does

that refresh your recollection of whether or not

you were the author of that?

A. I don't believe I was.

Q. Do you know who was?

A. Idon'tknow.

Q. Take a look at the second paragraph.

Well, first, do you know whether

this is a - - this document was created by a single author, or was it a conglomeration of - -

A. I don't recall. I don't know.

Q. Take a look at the second paragraph?

A. Uh-huh.

Q. It says, "I have had conversations

with FM Watch, OFHEOts counsel, Famie Mae, Brian

Gardner, Brant Imperatore."

During the Fall, 2003, time frame

26 (Pages 98 to 101)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 102


2 were you having conversations with those

3 individuals?

4 A. I would expect I was. I'm not sure

5 that I was the only one.

6 Q. If you take a look at towards the

7 middle there's a sentence with a lot of

8 capitalization. "I heard from a GREATn - - all

9 caps - - "source that OFHEO is turning their 10 microscopes on Fannie and KNOWS" - - all caps - -

11 "they will find something."

12 A. Uh-huh.

13 Q. DO you know whether you wrote that?

14 A. I might have. But, you know, again,

15 I don't specifically recall the document, so I

16 very well could have.

17 Q. Who were your sources at OFHEO?

18 A. Well, that doesn't say a source from

19 OFHEO, and I would suspect that I never would

20 have gotten that from OFHEO.

21 ' Q. Who else was providing you with

22 information on the OFHEO investigation?

2 3 A. It Wasn't on the OFHEO

24 investigation. It was the regarding the

25 goings-on with the housing market, legislation,

Page 103

1 J. ROSNER - CONFIDENTIAL 2 regulatory, policy issues surrounding any number

3 of issues, including the GSEs. And my sources

4 included everything from large shareholders of

5 the enterprises who were trying to give me their

6 views and their information, lobbyists from both

7 sides. You know, None of - - No one particular 8 view was viewed as sacrosanct.

9 Q. Why don't you take a look at the

10 next paragraph. It says, "I had a good call with

11 the chief counsel of OFHEO who was leading the

12 investigation, he was a repub chief counsel, and

13 prior to that an analyst for Schwab Washington

14 Group. He told me the investigation would be

15 completed by mid- September."

16 Is that referring to Mr.

17 Blumenthal?

18 A. I would assume so.

19 Q. Do you know whether you wrote that?

2 0 A. I don't recall.

2 1 Q. Taking a look at that, does that

22 refresh your recollection, the second paragraph

23 that refers to a great source about the OFHE08s

24 investigation was, in fact, Mr. Blumenthal?

2 5 A. I would actually, if this was my


Page 104

J. ROSNER - CONFIDENTIAL authorship, I would doubt that it would have

actually referred back to Mr. Blumenthal.

Q. Why is that?

A. Because I think I probably would

have actually included Mr. Blumenthal in that

prior paragraph if he was the source.

Q. Who were your other great sources on

the - -

A. Anynumberofthings.

a . Who?

A. F a ~ i e and Freddie shareholders who

seemed to have better information coming out of

the company than - - than the broader markets.

Q. Okay.

A. Lobbyists on both sides who felt

they were going to try to spin us. Policy folks,

trade associations. I mean, it was a myriad. It

was pretty much anyone that anyone would talk to

who seemed to have a degree of knowledge or basis

for knowledge.

Q. And you viewed all those sources as,

all caps, a - - great sources about the OFHEO

investigation?


Page 105

J. ROSNER - CONFIDENTIAL A. Actually, no. I didn't.

Q. Which of those did you consider to

be great, all caps, sources of - - A. Again, I think - - On the OFHEO

investigation?

Q. Yes.

A. I don't know if I really had a

specific view of one as being a great source. I

would guess that the - - the better sources would not have been within OFHEO. I'm fairly certain

of that.

Q. Why don't we take another look at

Paragraph 3. Towards the bottom it says - - Let's

look in the middle. It says, "I offered him

details of the conversation I had with an

internal audit employee at FRE on 3-20-02, see

below, in which the employee admitted to earnings

manipulation, questionable derivatives

transactions, and bad internal accounting

practices, and he' - - all caps - - "loved me and offered me a meeting, even though he said I can't

talk now.

A. Uh-huh.

Q. Did you ever provide Mr. Blumenthal

27 (Pages 102 to 105)


Page 106


2 with information about a conversation you had

3 with a Freddie Mac employee?

4 A. I don't know if I specifically did.

5 Q. Do you know whether you wrote that

6 sentence?

7 A. I believe that I did. But you know,

8 I don't specifically recall, but I believe that I

9 probably did.

10 Q. The next sentence says, "He said (we

11 can't use it in this form or with any attribution

12 as to where it same from.)"

13 What does that mean, We can't use it

14 with any attribution as to where it came from?

15 A. I assume that it means just what it

16 says, that we can't use it with any attribution,

17 and we can't use it specifically.

18 Q. Does that mean - - What does - - IS 19 there a difference in saying you can't use it or

20 saying you can't use it with attribution?

2 1 A. Is there a difference between saying

22 you can't use it and saying you can't use it as

23 attribution. Not necessarily.

2 4 Q. What does - - In your practice do 25 people ever provide you with information and tell

Page 107

1 J. ROSNER - CONFIDENTIAL 2 you, You can use this, but not with attribution?

3 A. NO.

4 Q. So whenever anyone's provided with

5 information, they've told you that it's okay to

6 use their name?


8 A. If you notice, we actually - - As by

9 practice Medley never sources or never details

10 sources in any of its reports.

11 Q. Okay. So it's implicit, whenever

12 anyone is talking to you, that you can't use

1 3 attribution.

14 A. COTEC~.

1 5 Q. And it's fair to say it doesn't say

1 6 in this sentence that you can't use this

1 7 information.


1 9 Q. Well, does it say anywhere that you

20 can't use that information?

2 1 MR. CAHILL: Same objection. The

22 document speaks for itself.

23 A. I'm not sure I understand the

24 question.

25 Q. Okay. Take a look at the rest of

Page 108

J. ROSNER - CONFIDENTIAL the sentence. It says, "I'm going to be one

shocked boy if we go into Fannie with the same

set of microscopes that we were using on Freddie

and don't find significant things. They will not

be the same things that we have done at Freddie,

but I'm confident that Raines is not the angel he

purports to be."

Do you recall Mr. Blumenthal telling

you that?

A. I don't specifically.

Q. Do you recall him making comments

along those lines?

A. I don't. I would say that that

wouldn't surprise me, because I think that was

many people's view at that point.

Q. A n d t h a t ' s b a c k i n A u g u s t o f 2 0 0 3 ?

A. Correct.

Q. And that would be more than a year

before OFHEO had issued the results of its

special examination?

A. Correct.

Q. Do you know if Mr. Blumenthal was

telling that to other analysts as well?

A. Idon'tknow.

Page 109

1 J. ROSNER - CONFIDENTIAL 2 Q. Did you have any sense as to whether

3 or not you had a closer relationship with

4 Mr. Blumenthal than did other analysts?

5 A. I don't believe I did.

6 Q. What other analysts did you believe

7 that Mr. Blumenthal was regularly communicating

8 with?

9 A. I believed that there were a number

10 of firms -- And I can't recall specifically. - - 11 that actually had better access to him than I

12 did, and that he hosted or OFHEO hosted meetings

13 with clients and with the analysts for.

14 Q. Setting aside formal meetings, do

15 you believe there were any analysts that had

16 greater informal contact with Mr. Blumenthal that

1 7 you did?

18 A. I would assume there were.

19 Q. DO you know who?

2 0 A. Idon'tknow.

2 1 So - - andby - - 2 2 MR. KARAM: Wait for the next

23 question.

2 4 Q. Why don't we take a look at the very

25 bottom of the document.

28 (Pages 106 to 109)


davidfiderer

Highlight


Page 110


A. Uh-huh.

Q. It's in a different text?

A. Correct.

Q. You see, if you refer back to the

last paragraph on the first page, it says, "I

offered him details of the conversation I had

with an internal audit employee at FRE on

3-20-02, see below"?

A. Uh-huh.

Q. Is this -- Is that what it's

referencing on the top, see below?

A. Again, I don't specifically recall

this document, so all I can do is infer, as you

are.

Q. Okay. And see the very bottom it

says, "Will not be disclosed to any third parties

without my express written consent, as

technically belongs to Graham Fisher & Company"?

A. correct.

Q. Does that refresh you recollection

that you were the person who wrote this?

A. I believe that I'm the person who

wrote that bottom piece. Correct.

Q. Okay. And does that also mean that

Page 1 1 1


2 you are the person who wrote the last paragraph

3 on the first page of this document?

4 A. As I said, I don't recall. So you

5 could infer that, but I can't - - I can't recall 6 that.

7 Q. Okay. And you don't have any reason

8 to doubt that you were that person?

9 A. I don't have reason to doubt that.

10 Q. Okay. Let's look take a look at

11 another document.

12 This document is dated October 9,

13 2003, and its Bates number is MGA 02494.

14 Oh. And at the top it's

15 Bates-stamped MGA 09241.

16 (Whereupon, Exhibit Rosner-7 is


18 Q. Mr. Rosner, can you take a look at

19 the last page of this document?

20 A. yes.

2 1 Q. It says "author, Josh Rosner. " 2 2 Do you see that?

2 3 A. Uh-huh.

2 4 Q. Do you have any reason to doubt you

25 were the author of this document?


Page 112

J. ROSNER - CONFIDENTIAL A. Again, I keep repeating this, but

the way the systems work, that fact that it says

"author Josh Rosneru merely means that I was the

last person in it before it was filed. There may

have been others who actually accessed it prior

to that point.

Q. Do you know if this is a report of a

Call you had with Mr. Blumenthal?

A. I don't - - Specifically I don't have

reason to doubt that it was.

Q. Okay. And you see the date is

October 9th, 2003?

A. Uh-huh.

Q. Did you prepare your own contact

call reports, or did you have a support person do

it for you?

A. Typically I did.

Q. Okay. Would you take a look at Page

2.

A. Uh-huh.

Q. Sort of in - - There's a long paragraph at the top?

A. Uh-huh.

Q. And - - let's see. It says, "He goes

Page 1 13

1 J. ROSNER - CONFIDENTIAL 2 on to say that after OFHEO is done with their FRE

3 investigation, wants me to sit down with a senior

4 member of his research and analysis group, Forest

5 Pfaffenburg, to explain this to him and help

6 OFHEO draft a demand for information from the

7 GSEs. "

8 DO you see that?

9 A. NO.

10 Q. Okay. It's a little hard to find.

11 MR. CAHILL: It starts there.

12 A. Okay. I see that.

13 Q. Did you write that?

14 A. I don't recall, but I probably did.


16 asking you to sit down with Forest Pfaffenburg

17 with his research and analysis group?

18 A. I don't specifically recall. It

19 wouldn't surprise me.

20 Q. Did you ever meet with OFHEOrs

21 research and analysis group?

22 A. Ididn't.


24 asking you to help draft a demand for information

25 from the GSEs?

29 (Pages 1 10 to 1 13)


Page 114

J. ROSNER - CONFIDENTIAL A. I don't, but - - I don't, but this is

actually referring to not something that OFHEO

was bringing to my attention but something that I

was concerned about.

Q. Okay. For the part of the sentence

where it says "help draft a demand for

information from the GSEs," is that referring to

something that Mr. Blumenthal was asking you to

do?

A. Again, I don't recall. That's what

this implies or states.

Q. Did you ever draft a demand for

information from the GSEs - -

A. Ididn't.

Q. - - on behalf of - -

Did you ever draft any documents on

behalf of OFHEO?

A. Ididn't.

Q. Did you ever provide OFHEO with any

assistance in connection with its investigations

of either Fannie Mae Freddie Mac?


Q. Sure. Did you ever tell OFHEO what

they should be looking for in their

Page 115


investigations of Fannie Mae and Freddie Mac?

A. I told actually in written reports

everyone who read the reports things that should

be looked at. So in that sense, yes.

Q. Aside from that sense, are there any

other instances where you provided OFHEO with

advice as to what they should be looking for in

their investigations?

A. Not other than issues that I had

actually brought up in written reports.

Q. And did your written reports bring

up certain accounting issues at Famie Mae from

time to time?

A. They did.

Q. And those reports were written well

before OFHEO's special investigation was

completed?

A. On Fannie Mae.

Q. On Fannie Mae?

A. At times.

Q. If you take a look at the last

sentence of Page 2 of this document?

A. Uh-huh.

Q. It says quote - - It says, "As he


Page 116


2 walks me to the elevator he quitely whispers, I1

3 know I shouldn't utter this, and I will deny ever

4 saying it, but the guys running these GSEs are

5 really evil. ' "

6 First, does your use of quotes here

7 purport to sum up the substance of what

8 Mr. Blumenthal had said?

9 A. Again, I would assume so. I don't

10 have a specific recollection.

11 Q. Okay. Looking at this, do you

12 recall Mr. Blumenthal having made a comment that

13 the guys running the GSEs are really evil?

14 A. I don't recall that.

15 Q. Okay. Do you have any reason to

16 doubt that he made that comment?

17 A. Idon't.

18 Q. Is that something you would have

19 made up in your report?

20 A. Made - - Made up? No.

21 Q. If you wrote it in your report, it

22 was true. Right?

2 3 A. Not necessarily. It was - - it was 24 my perception.

2 5 Q. It was your perception - -

Page 117

1 J. ROSNER - CONFIDENTIAL 2 A. Right. It was - - 3 Q. -- that as Mr. Blumenthal walked to 4 the elevator he quietly whispered, I know I

5 shouldn't utter this, and I will deny ever saying

6 it, but the guys running these GSEs are really

7 evil?

8 A. Correct. In tone, in substance, in

9 inference, that is actually the - - the overall 10 feeling I got. As I said to you before, the

11 quotes doesn't necessarily mean that it was a

12 direct, exact quote.

13 Q. So your testimony is where it says,

14 quotations, "I know I shouldn't utter this and I

15 will deny ever saying it, but the guys running

16 these GSEs are really evil' is something you just

17 inferred?

18 MR. CAHILL: Objection. You

19 mischaracterized his testimony.

20 Q. You can answer.

21 A. As I said, I don't specifically

22 recall this, so I can't even answer the question.

2 3 Q. Sitting here today, do you think

24 it's likely that you are just describing an

25 inference you got from a conversation with

30 (Pages 1 14 to 1 17)

MD - 1-800-539-6398 VA - 1-800-752-8979


A. From personal experience and from

other information, from various sources.

Q. Did Mr. Blumenthal ever tell you he

thought the companies were trying to assassinate

his character?

Page 1 19

1 J. ROSNER - CONFIDENTIAL 2 A. NO.

3 Q. Did you ever hear that it was

4 Mr. Blumenthalts view that companies were trying

5 to assassinate his character?

6 A. I don't believe so.

7 Q. Whose - - Whose characters are you

8 referring to?

9 A. I am including Mr. Blumenthalls

10 character. I don't believe I ever heard him say

11 it.

12 Q. Who else?

13 A. I had - - Really, anyone who was of a 14 different view than the company's.

15 Q. Company ever try and assassinate

16 your character?

17 A. I believe possibly more recently.

18 Q. Okay. In what way?

19 A. I was recently told by a

20 congressional staffer that the company had told

21 them they should ignore my views because I'm

22 being paid by FM Watch.

2 3 Q. Are you being paid by FM Watch?

2 4 A. Never have and am not.

2 5 Q. Do you know if Medley is being paid

Page 118


Mr. Blumenthal?

A. I think that it would not be tied to

a specific or isolated view. I do think that

there was a sense at times that the companies

were effectively trying to assassinate

characters.


ever saying that he thought Mr. Brenzel

(phonetic) was evil?

A. Idonlt.

Q. DO you recall Mr. Blumenthal ever

saying that he thought Mr. Raines was evil?

A. I don't recall so.

Q. Okay. You mentioned that you

thought there was a sense at times that companies

were effectively trying to assassinate

characters?

A. Correct.

Q. Where did you get that sense?


Page 120


by FM Watch?

A. To my knowledge, never have and are

not.


document, which is Bates-stamped

OFHEO-DLU-00058770. I'm just going to ask you to

identify that document for me.



A. Uh-huh.

Q. What is it?

A. It appears to be an E mail.

Q. Okay. An E mail from who?

A. It appears to be an E mail from Josh

Rosner to Steve Blumenthal and a response from

Steve Blumenthal.

Q. And it says [email protected]? Is

that your e-mail address?

A. It isn't, actually. I was just

looking at that, trying to remember if it ever

was, but I have no reason to believe that it

wasn't . Q. Okay. Sitting here today, you have

no reason to think this is not, in fact, an - -

Page 121

J. ROSNER - CONFIDENTIAL A. Correct.

Q. - - E mail exchange between you and

Mr. Blumenthal?

MR. CAHILL: Let me just interrupt,

because the court reporter is giving me a look,

deservedly.

THE WITNESS: I'm sorry.

MR. CAHILL: Let him finish. She

can't take two people talking at the same time.


document, which is Bates-stamped

OFHEO-LAW-00021348.



Q. You see the bottom E mail is from

someone named Anne Canfield?

A. Yes.

Q. Who is Anne Canfield?

A. Anne Canfield is, my understanding,

with FM Watch and has a private consultancy.

Q. Does she work for FM Watch?

A. I don't know if she officially works

for FM Watch. I know that many of her clients

are members of FM Watch.

31 (Pages 118 to 121)


Page 123


2 picture. I heard through the grapevine that

3 people at OFHEO thought that Burt Ely had written

4 the paper. Burt had nothing to do with the

5 paper. The paper was written by a group on Wall

6 Street, sophisticated analysts and accountants."

7 Do you know what white paper that's

8 referring to?

9 A. Idon't.

10 Q. Let me show you another document

11 that's Bates-stamped FM SIF 0405026960.



14 Q. Have you ever seen this document

15 before?

16 A. I don't specifically recall. I can

17 say that I've never read it.

18 Q. Do you recall that a white paper was

19 published in 2003 that was highly critical of

20 Fannie Mae's accounting?

2 1 A. Other than - - Not specifically,

22 other than recollecting as a result of this

23 E mail that there was a white paper, yes. I

24 don't know if I ever saw the white paper.

2 5 Q. Okay.

Page 122

J. ROSNER - CONFIDENTIAL Q. What is FM Watch?

A. FM Watch, I don't know how to define

it. It's a group of mortgage market institutions

who have viewed it as their role as to take a

stance on the GSE's policies.

Q. What is - - Is their stance pro GSE's

policies?

A. I don't know if it's particularly

pro or anti. I think that it views itself as a

watchdog group.

Q. Is it fair to say that the members

of FM Watch are largely competitors of Fannie Mae

and Freddie Mac?

A. It is.

Q. Okay. Did you ever refer to Miss

Canfield in your call reports or other documents

as Annie Fannie?

A. I - - I believe I probably did.


the text of her E mail?

A. Uh-huh.

Q. It says, "Rob, awhile ago I

forwarded to you a copy of a white paper that had

been written reviewing Fannie Mae's financial


Page 124

J. ROSNER - CONFIDENTIAL Does this E mail refresh your

recollection that there was a white paper

critical of Fannie Mae's accounting policies

being circled - - circulated around this time?

A. I don't know whether it was being

circulated, but that there was a white paper that

was critical, yes.

Q. Did you receive that white paper?

A. I don't - - I don't recall receiving

that white paper.

Q. Do you know who authored it?

A. Idon't.

Q. Do you recall ever discussing that

white paper with anyone?

A. I don't recall.

Q. Do you recall ever referencing that

white paper in your reports?

A. In my published reports? I don't

recall.


document, which is dated January 15th, 2004,

Bates-stamped on the top MGA 09715 and on the

bottom MGA 02656.


Page 125

J. ROSNER - CONFIDENTIAL marked for identification by the reporter.)

MR. TERRY: And it's Rosner Exhibit

11.

Q. Do you see on the last page it says,

"Author, J O S ~ Rosner"?

A. Uh-huh.

Q. Any reason to think you were not, in

fact, the author of this document?

A. There is no reason to believe that I

wasn't at least one of the authors.

Q. Okay. And looking at this document,

do you believe that you were, in fact, one of the

authors of this document?

A. There's no reason to believe that I

wasn' t . Q. Okay. And does this document appear

to be a contact call report that you drafted, at

least a part of - - A. ~t appears - -

Q. - - outbound call with Steven Blumenthal of OFHEO?

A. It appears to be.

Q. Any reason to think it is not, in

fact, that?

32 (Pages 122 to 125)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 126

1 J. ROSNER - CONFIDENTIAL 2 A. While I don't recall, there is no

3 reason not to believe that that's the case.

4 Q. Okay. If you could take a look

5 under the Call Notes section, it says, "Well, we

6 have reorganized the infamous office of

7 examinations, created an office of compliance,

8 and an office of the chief accountant. You can

9 guess which senior person who was in the GSE's

10 pocket will be leaving soon (Scott Calhoun). We

11 have changed the incentive structure for

12 advancement here. Now you make your bones by

13 being an aggressive regulator."

14 Do you recall Mr. Blumenthal telling

15 you that OFHEO had changed its incentive

16 structure for its regulators?

17 A. I don't specifically. I do recall

18 the general period, and I do believe that that

19 actually is - - is what happened. 2 0 Q. Okay. And you see that section I

21 just read you is in quotations?

2 2 A. Uh-huh.

2 3 Q . Does that mean you're trying to

24 reflect the substance of Mr. Blumenthal's

25 comments?

Page 127

1 J. ROSNER - CONFIDENTIAL 2 A. Correct.

3 Q. Did Mr. Blumenthal ever make any

4 comments about Scott Calhoun?

5 A. You know, again, that's in

6 parenthesis, so I don't know whether that was a

7 specific - - hidden referencing Scott Calhoun or 8 my understanding that that's who he was referring

9 to.

10 Q. That could be an inference?

11 A. Correct.

12 Q. Did he ever suggest to you that

13 Mr. Calhoun was in the GSEts pocket?

14 A. Again, he suggested that someone

15 was. It was my understanding that that was Scott

16 Calhoun.

17 Q. Did he suggest they were being paid

18 by the GSEs?

19 A. I don't believe that anyone ever

20 suggested - - it was ever being suggested they 21 were paid by the GSEs.

2 2 Q. Well, you wrote the phrase in here

23 that you can guess which person who was in the

24 GSE's pocket will be leaving soon. Right?

2 5 A. Right.


Page 128

J. ROSNER - CONFIDENTIAL Q. What did you mean by that?

A. DO you know what the term

"regulatory capture' is?

Q. Well, why don't you explain it.

A. Regulatory capture is when an

examiner works so close with an institution that

they actually form a relationship that is not - - is more comfortable than necessarily a regulator

should have, and it's not necessarily a result of

anything tawdry but, rather, a result of - - of

comfort as opposed to the traditional strict

regulatory relationship with an overseeing

institution.

Q. Did Mr. Blumenthal ever comment to

you that OFHEO needed to change its regulatory

incentive structure?

A. I don't specifically remember that.

I do remember the general view that it had not

been as distanced a regulator from the

institutions that it regulated as a strong

regulator should be.

Q. And Mr. Blumenthal was trying to

change that?

A. That's my understanding.

Page 129


Q. If you could take a look at the next

paragraph, at the very bottom last sentence, it

says, "Steve says that he wishes the conversation

would turn to the P word (privatization) as that

would ultimately eliminate the need for

regulatoru - - A. Hold on. Could - - Okay.

Q. - - (other than the SEC) and would reduce the government's risk. (Steve again says,

I will tell you I have zero doubt that these

things will ultimately blow up. I can't tell you

when, but we need to get them out of the

government. ) '' Do you recall Mr. Blumenthal ever

expressing sentiment to you that he believed that

F a ~ i e Mae and Freddie Mac should be privatized?


Q. Okay. Seeing it there in writing,

can you deny that Mr. Blumenthal said that?

A. I can tell you that the inference

that I received was certainly of that.

Q. So your testimony is you received

the inference from Mr. Blumenthal that he was in

favor of privatization of Fannie Mae?

33 (Pages 126 to 129)

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Joshua Rosner - Confidential --

Page 13C

J. ROSNER - CONFIDENTIAL A. That - - that - - again, on a

personal, not necessarily professional basis,

it's my understanding that that was his view.

Q. Do you ever recall Mr. Blumenthal

ever telling you something along the lines, I

have zero doubt these thing will ultimately blow

up, I can't tell you when, but we need to get

them out of the government?


Q. Is that in line with comments that

he made about Freddie Mac and Fannie Mae?


A. Yeah, I don't recall - - I don't recall that being specifically ...

Q. You see that part is the quotations

in your document here?

A. Uh-huh.

Q. And again, that's your attempt to

reflect what the substance of Mr. Blumenthalls

comments were?

A. Correct. But the piece that's

missing which - - and I posit this as a possibility is, that may have been a response to

my comment of, you know, I think these will

Page 13 1


ultimately blow up, and he may have actually just

responded in the affirmative whether that was his

view or not or he was responding to my view.

Q. Either way, is it fair to say that

the view, whether he was merely agreeing with

your view or expressing his own, was that he

thought Fannie Mae and Freddie Mac would

ultimately blow up?

A. That certainly is what's inferred

there.

Q. Okay. And do you have any reason to

doubt that that's, in fact, what he said?

A. NO, but I guess I'm not sure what

"ultimately blow up" means his view as opposed to

my view.

Q. Sure. And would you have written

that in quotations if Mr. Blumenthal had not said

something along those lines?

A. Again, I would have written if that

was what I walked away with as a perception of

his intent or his view.

Q. Okay. The next exhibit is

Bates-stamped MGA 09059. It's dated January

29th, 2004.


Page 132 1 J. ROSNER - CONFIDENTIAL



4 Q. What is this document?

5 A. It appears to be an equity brief.

6 Q. What's an equity brief?

7 A. It was a note put out by Medley to

8 its clients.

9 Q. Do you know whether you were the

10 author for this?

11 A. I believe that I was the author not

12 of the final edited version but certainly of '

13 the - - of the - - the general report. 14 Q. Can you take a look at the middle

15 section.

16 A. Okay. Middle section - - 17 Q. Of the first page, I'm sorry, with

18 the subheading "White House to play Texas hard

19 ball with GSE"? Do you know if that's a section

20 that you drafted?

2 1 A. I'm sure that it probably was.

2 2 Q. OKAY. Take a look at the first full

23 paragraph under that section. It says, "Besides

24 the announcements, we have met with several key

25 sources who have suggested that both Fannie and

Page 133

J. ROSNER - CONFIDENTIAL Freddie are now playing against a different kind

of White House, a Texas team with pro hard-ball

experience. Furthermore, sources suggest that

White House ace Andrew Card, chief of staff, is

pitching for the home team. For a White House

player of Card's stature to be pitching against

the GSEs is highly unusual, and highlights how

important this game is to the White House team."

First, what did you mean by Andrew

card is pitching for the home team?

A. Well, again, I don't believe - - I believe that someone actually, in editing my

report, changed the actual metaphor, but the

overall substance of it is probably my writing.

Andrew Card was chief of staff, and

for the chief of staff in the White House to

become so deeply involved in an issue affecting a

specific company or industry was - - seemed unusual. "The home team" meaning the government.

Q. Okay. What do you mean that

Mr. Card became involved in - - issue? What

issue, first of all, is this discussing?

A. Administration's official

perspective and policy on the need for a stronger

34 (Pages 130 to 133)


Page 134

J. ROSNER - CONFIDENTIAL regulator.

Q. And what do you mean by Mr. Card

became involved in that effort?

A. It was my understanding that the

White House actually had formed an internal

working group to discuss and come up with a plan

for approaching the overall GSE issue.

Q. And what was the overall GSE issue?

A. Questions ranging from what the

legislation should look like to the systemic risk

posed by the enterprises to whether they should

become privatized companies or otherwise.

Q. Take a look at the last sentence?

A. Uh-huh.

Q. The last paragraph on this page. It

says, "One person close to the situation

commented, the White House is clearly willing to

play hard. If Famie and Freddie don't give on

these three issues next year, it promises to

become even more difficult for them, as a larger

issue of subsidiaries tied to government and

mission will become increasingly discussed

issues. "

A. Uh-huh.

Page 135

J. ROSNER - CONFIDENTIAL Q. Did you write that paragraph?

A. Again, I probably did. I don't

specifically recall, but I probably did.

Q. Do you know who you're referring to

when you say "one person close to the situation"?

A. Idon't.

Q. What do you mean by the "White House

is clearly willing to play hard"?

A. The White House had actually made

its views known that it had a very strong view on

the GSEs and the risks that they posed and that

they were actually not willing to just accept

legislation that they felt would create a

regulator that was weaker than one they viewed as

necessary.

Q. What were they going to do?

A. I'mnotsure.

Q. If you take a look at the end of

this sentence I just read, it says, "tied to the

government and mission will become increasingly

discussed issues. 'I

What did you mean by that?

A. Just what it says.

Q. Well, discussed by who?

Page 136

J. ROSNER - CONFIDENTIAL A. Broadly. I mean, we saw any number

of discussions of that in policy circles, in

think tanks, in the press, in statements from the

administration.

Q. Was it your view that the White

House was going to try and increase the public

discussion about Fannie Mae's mission and ties to

the government if it was not willing to give on

issues related to where it would be housed and

its regulation?

A. Well, it was my view that, in

connection with the investigations of the two

companies, those issues were going to become more

and more important issues, and that the

administration would not shy away from making

sure that people understood that there were

significant policy considerations regarding the

enterprise's risk to the government.

Q. And the administration would

continue to give those issues visibility until

F a ~ i e Mae and Freddie Mac gave up on the issues

the government - - A. Right. But the administration,

remember, is not a specific monolith. Even as we

Page 137

J. ROSNER - CONFIDENTIAL see in various housing issues today, treasury

will have a different view than HUD. And I

think, therefore, when I spoke to the

administration I really am specifically speaking

to my understanding of the White House's view.

Q. The Bush administration?

A. The White House's view.

Q. The White House's.

YOU mentioned there was a White

House working group.

A. That's my understanding.

Q. What do you mean by a working group?

A. White House staff, legislative

staff, policy staff, economic staff who were

assessing the GSE's situation, financial

situation, and the risks or view of the risks

that they posed, as well as the administration's

view that the regulator was a - - was a weak regulator and an underpowered regulator.

Q. Who is a member of the White House

working group?

A. Andrew Card. I'm not sure who else.

I believe Kevin Warsh. Current Governor Warsh.

Beyond that I don't know.

35 (Pages 134 to 137)



Page 138

J. ROSNER - CONFIDENTIAL Q. Have you ever heard the phrase,

"Project Noriega"?

A. Ihaventt.

Q. Can you take a look at the last page

of this document. It says, "While the bulk of

the Freddie specific problems are behind them,

accepting more board turnover, the result of SEC

and DOJ investigations and other small issues" - -

end parenthesis - - "we expect that Fannie is just now entering the spotlight."

Did you write that?

A. I probably did.

Q. What did you mean by that?

A. I - - I probably am among the only

two, three, maybe four people on Wall Street who

actually read the entirety of the Baker Botts

report and the OFHEO report. And it became clear

in reading it that there were significant issues

raised in the Freddie reports that had relation

and suggested that - - that there was likely to be

an investigation of Fannie Mae.

Q. And the Baker Botts report at that

time was publicly available?

A. I believe it was.

Page 139

J. ROSNER - CONFIDENTIAL Q. And just by reading the Baker Botts

report you were able to come to the conclusion

that Fannie Mae would be subjected to a similar

investigation?

A. Absolutely.

Q. And were you able to form the

conclusion as to whether or not Fannie Mae would

be found to have committed some of the same types

of errors as - - A. Insomeofthe - - Q. - - as Freddie Mac? A. - - areas, absolutely.

Q. And that was back in January, 2004?

A. If I recollect the release of the

Baker Botts report correctly, yes.

Q. What specific accounting errors did

you believe that OFHEO would also find out about

or rule on when they were reviewing Fannie Mae?

That was kind of awkwardly phrased.

What other accounting errors do you

think would be raised in OFHEO1s investigation of

Fannie Mae?

A. There were - - You know, I don't specifically recall. I recall a number of areas


Page 140


that highlighted the manner in which OFHEO was

looking at the issues, including portfolio growth

relative to G&A expenditures, relating to

treatment of other than temporary impairments,

relating to the various internal control issues.

I don't remember the specific

substance of it, but there was actually a passage

in which I believe board members of Freddie

specifically highlighted their view of their

conservatism relative to Fannie's.

Q. And what do you mean by that last

part?

A. There was excerpts in the report of

a conversation that was - - that existed within

Famie, board members or between Fannie - -

Freddie board members, on their view that they

were conservative and especially relative to

Fannie . Q. And so reading that, was it your

view that it was even more likely that some of

these things would turn up at Fannie May than - -

A. Absolutely.

Q. And did one of those issues include

accounting for derivatives?

Page 141


2 A. As I recollect, yes.

3 Q. That would be accounting for

4 derivatives under FAS 133?

5 A. Correct.


7 document, which is Bates-stamped MGA 02768, dated

8 February 2nd, 2004.



11 Q. Can you identify this document for

12 me?

13 A. It's a call report dated February

14 2nd, 2004, outbound call to Steve Blumenthal,

15 appears to be written by me.

16 Q. You see the top it says, "Monday

17 morn, check in Steve"?

18 A. Uh-huh.

19 Q. Did you regularly check in with

20 Mr. Blumenthal on Mondays?

2 1 A. I did not.

2 2 Q. How often did you speak to

23 Mr. Blumenthal during the period you were at

24 Medley?

2 5 A. Typically every few weeks to a

36 (Pages 138 to 141)

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Page 142


2 month.

3 Q. And let's take the 2004 time frame.

4 This would be the time frame after the Baker

5 Botts report has been issued, up through I guess

6 the end of 2004, when the SEC made a

7 determination about some of F a ~ i e Mae's

8 accounting.

9 During that period did you talk to

10 Mr. Blumenthal more frequently?

11 A. Less frequently.

12 Q. Okay. And when was the period where

13 you would say you had the most frequent

14 communication with Mr. Blumenthal?

15 A. I don't recall specifically. I

16 recall at that point him making it very clear

17 that we - - we really couldn't talk, and where we 18 could talk it was really more on legislative

19 issues, in his opinion, as opposed to OFHEO

20 business.

2 1 Q. Okay. You see the second sentence,

22 the first line, it says, "He told me that OFHEO

23 will propose and publish comments for new

24 corporate governance regulations for Fannie Mae

25 and Freddie this week!"?

Page 143

J. ROSNER - CONFIDENTIAL A. Uh-huh.

Q. Do you recall Mr. Blumenthal telling

you that then?


Q. Do you see there's an exclamation

point at the end?

A. Uh-huh.

Q. Do you have any reason why you would

have used an exclamation point for that?

A. Because I think that would have been

an important thing to try and follow up with

other sources.

Q. Was that public at that time?

A. Idonrtknow.

MR. TERRY: The next document is

Bates-stamped MGA 02776. It's dated February

3rd, 2004.



Q. Can you identify this document for

me?

A. It similarly seems to be outbound

call report between Steve Blumenthal and myself.

Q. And does it appear to be authored by


Page 144


YOU?

A. It appears to be so.

Q. Appears to have taken place around

February 3rd. 2004?

A. Correct.

Q. Is this a report of a call you had

with Mr. Blumenthal on February 2nd?


Oh. It appears to be so.

Q. And that would be your second call

that day with Mr. Blumenthal about the OFHEO

regulations?

A. Correct.

Q. Okay. Take a look at what looks

like the second paragraph. It says, "He also

told me that Fannie is telling people that the

OFHEO investigation is just about accounting, but

he said that this is wrong, '1 will never say

this on the record, and you can never say it, but

we are going top to bottom. I'm comfortable that

we have looked at every issue that could spark a

surprise at Freddie and I will stake my

reputation there are no new surprises there. I

cannot say that about Fannie, and our

Page 145

J. ROSNER - CONFIDENTIAL investigation's goal is to make sure we can

ultimately say that. We have specific

nonaccounting leads to go after."

Do you see in the middle there

there's these quotations right before "I will

never say that on the record"?

A. Uh-huh.

Q. Does that mean you're attempting to

capture the substance of Mr. Blumenthalls

comments?

A. Yeah. I mean, as I read it, it

really is reflection of the public stance of the

regulator during that period.

Q. So it's your testimony that the

quote that begins with "I will never say this on

the record and you can never say it,' is a

reflection of OFHEO's public commentary?

A. I believe that not that particular

line but, obviously, that - - I believe that the director was not going to say it specifically,

but the - - My understanding of what seems to have

been said there was that they had finished and

were comfortable there were no new surprises at

Freddie and that they would not actually conclude

37 (Pages 142 to 145)

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Page 147

1 J. ROSNER - CONFIDENTIAL 2 A. No. The Baker Botts report made it

3 clear that OFHEO was interested in things other

4 than accounting issues, including internal risk

5 issues and operational risk issues, and,

6 therefore, it, to anyone who read that, would

7 have been clear that they weren't limiting their

8 investigation. And my understanding is that

9 Fannie had specifically been telling its larger

10 shareholders that its investigation really only

11 related to financial accounting issues.

12 Q. Okay. You see it says, "We have

13 specific nonaccounting leads to go after"?

14 A. Uh-huh.

15 Q. Was it your understanding after

16 reading the Baker Botts report that OFHEO would

17 have nonaccounting leads - - 18 A. Yes.

19 Q. - - regarding Fannie Mae? 20 A. Absolutely.

21 Q. And that was evident to you just

22 from reading the - - 23 A. Correct.

2 4 Q. - - Baker Botts report. 2 5 And you think that would have been

Page 146

J. ROSNER - CONFIDENTIAL the investigation of Freddie until they could say

the same. Of Fannie until they could say the

same.

Q. Do you see where it say, "we have

specific nonaccounting leads to go after"?

A. Uh-huh.

Q. Is that referring to Fannie Mae or

Freddie Mac?

A. Idon'tknow.

Q. Do you see the sentence before, it

says, "I cannot say that about Fannie, and our

investigation's goal is to make sure we can

ultimately say that"?

A. Uh-huh.

Q. Does that inform you that the next

sentence - - A. It does appear that there are

nonaccounting leads to go after, but again, in

reading the Baker Botts report, that information

was already out there. There's no particular

value to me of that comment.

Q. Did the Baker Botts report say that

Fannie Mae had engaged in nonaccounting

wrongdoing?


Page 148

J. ROSNER - CONFIDENTIAL evident to anyone reading the Baker Botts report?

A. Correct.

MR. CAHILL: Would you slow down.

Let him finish.

Q. Including any shareholder who wanted

to read the Baker Botts report.

A. correct.

Q. The next part it says, skipping down

a little ways, "By the way, Medley had been on my

shit list for a long time because of a report you

put on February 3rd, 2003.''

IS that before or after you were at

Medley?

A. I believe that's before I was at

Medley.

Q. It goes on to say, "You guys said

that we're sitting on the systematic risk report

for over a year. That is bullshit! The report

that we were sitting on was a freelance tirade by

one of our former research staff. It was poorly

sourced, full of inaccuracies, and he chose to

leak without approval. It nothing to do with our

risk report. By the way, that employee has been

disciplined under the Civil Services Act."

Page 149


What is that referring to?

A. My understanding is - - And, again, I'm recollecting. I don't have specific memory

of this, but my understanding is - - or my

recollection is there was a report on the

systemic risk that Fannie and Freddie posed to

the federal government that was put out as a

white paper by an OFHEO employee and that that

report actually highlighted significant risks

that the GSEs posed.

And Steve was actually disavowing

that as an official report that they were sitting

on; rather, he was suggesting that the report was

a reckless report by someone who had a personal

view on the GSEs.

Q. And that personal view was negative?

A. Correct.

Q. And that was - - That was leaked by somebody at OFHEO?

A. Idon'tknow.

Q. That's what Mr. Blumenthal was

telling you, anyway?

A. That's what it appears to be.

Q. Okay.

38 (Pages 146 to 149)

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Page 150

J. ROSNER - CONFIDENTIAL MR. TERRY: The next document is

dated February 6, 2004. It's Bates-stamped MGA

07284, and on the top it's Bates-stamped MGA

09726. It's Exhibit 15.




me?

A. Let me look at it.

It appears to be a call report that

I am identified as writing.

Q. And it's a call report with Peter

Brereton of OFHEO?

A. Correct.

Q. And the report is dated February 6,

2004?

A. That's the date on it.

Q. If you take a look towards the

bottom it says, "1 explained to Peter that I had

put out a report and had, based on the hints

dropped, ascertained that these would be two big

changes. "


A. Where are you?

Page 151

1 J. ROSNER - CONFIDENTIAL 2 Oh. Okay.

3 MR. KARAM: Counsel, would you

4 direct me in the document.

5 MR. TERRY: Yeah, it's maybe six

6 lines from the bottom. It starts, "I explained

7 to Peter."

8 MR. KARAM: Thank you.

9 Q. Is this referring to proposed

10 corporate governance rules from OFHEO?

11 A. It appears to be.

12 Q. If you take a look at the next line,

13 it says, "I told him that I had just assumed they

14 would follow from the 16 points in the Freddie

15 recommendations.

16 And it goes on to say, "Good

17 reasoning, but you could have just called me and

18 asked."

19 "I explained that I would rather

20 have been be slightly off than have the world

21 know that my source was obviously inside OFHEO,

22 because that wouldn't be good for either OFHEO or

23 Medley."

2 4 What did you mean by that?

2 5 A. Well, I meant by that that every


Page 152

J. ROSNER - CONFIDENTIAL conversation I have -- and it's not my duty to, but every conversation I ever have with an

official source, I start with or at some point

make it known that I do not want them to give me

any information that I shouldn't have or can't

have. And that's generally an understanding that

goes both ways.

And so I could have actually called

the information officer and asked him if that

actually was what was likely to be in the rules,

the proposed rules and regs. I chose not to. He

would have either typically in another matter

said, I can't talk about it or, you know, Give me

the - - the official position. Q. So was it your view that it would

not have been good for Medley for the world to

know that you had a source inside of OFHEO?


A. It's my view that Medley by practice

doesn't disclose its sources.

Q. Would it have been bad for Medley if

the world found out that you had a source inside

OFHEO?

A. Idonltknow.

Page 153


Q. But you wrote that, didn't you?

A. I did write that.

Q. Would it have been bad for OFHEO if

the world knew that you had a source inside of

OFHEO?

MR. CAWILL: Objection.

A. Again, depending on what the

information from the source is.

Q. Do you believe that the information

that Mr. Brereton was suggesting he would have

provided to you was information that it was

somehow inappropriate for you to have?

A. I don't believe that I ever received

any information from any source within OFHEO that

was not public domain or was information that I

shouldn't have had.

Q. So it's your view that all of the

information that you received from OFHEO that's

contained in these call reports we've been going

through was accessible in the public domain?

A. Or affirmation or - - Or affirmation of information that was accessible in the public

domain. Correct.

Q. Okay. In your view it was

39 (Pages 150 to 153)

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Page 154


information that was all accessible to investors

somewhere.

A. Correct.

Q. And it wasn't anything secret that

OFHEO was just telling you.

A. Correct.

Q. If that's the case, why do your

clients pay Medley for your research reports if

it's just out there in the public domain?

A. I think you, A, should ask clients

rather than ask me that question; and, B, because

historically Wall Street investors don't

necessarily understand how to contextualize

information that's in the public domain and often

don't have the time to read 500-page documents

that are released into the public domain.

Q. But in your reports you condense

that information and make it available to

investors?

A. Absolutely.


dated March 2nd, 2004. It's Bates-stamped at top

MGA 09729 and at the bottom MGA 02866, and it's

Rosner Exhibit 16.

Page 155

J. ROSNER - CONFIDENTIAL (Whereupon, Exhibit Rosner-16 is



me?

A. Again, it appears to be a call

report from me detailing a conversation with

Steve Blumenthal at OFHEO.

Q. And that was around March 2nd of

2004?

A. Uh-huh.

Q. Why would you call Mr. Blumenthal?

A. For the most part, actually I -- I

called Mr. Blumenthal. I called folks from

various policy circles. I called folks on the

hill on both sides to try and

actually triangulate information that I was

hearing or had read in the public domain or was

hearing through sort of the Washington grapevine.

He was one of the hundreds of people that I spoke

to.

Q. So is it your testimony that you

called Mr. Blumenthal to confirm publicly

available information?

A. Quite often. Or my interpretation


Page 156

J. ROSNER - CONFIDENTIAL of that publicly available information.

Q. Did you ever hope, in your

conversation with Mr. Blumenthal, to learn

information that was not publicly available?

A. Actually, as I said before, I quite

expressly made it clear and continued to, in

other source relationships, that I don't want

information that's not publicly available.

Q. And it's your view that you were

not, in fact, receiving - - A. Correct.

Q. - - nonpublic information from

Mr. Blumenthal?

A. It's my understanding that I never

received nonpublic information.

Q. Take a look at the first line. It

says, "Called to check in and ask a few

questions. Steve tells me that there's a working

paper that they are completing and reviewing,

that I would be interested in manufactured

housing and Fannie Mae."

Do you know what that's referring

to?

A. Idon'trecall.

Page 157

J. ROSNER - CONFIDENTIAL Q. Did OFHEO in Spring of 2004 release

findings about Fannie Mae's manufactured housing

accounting?

A. I don't recall.

Q. Take a look at the last paragraph.

It says, "We have been working on a manufactured

housing working paper that was based on an

inquiry into these F W portfolios. What our

initial findings are is that there are no major

flaws in their modeling for these assets. There

are - - They are too large in this area." Is that referring to a working paper

that -you were .working.on or OFHEO was working on?

A. You know, I don't know.

Q. Take a look at the last sentence on

this paragraph. It says, "1 tell Steve that

senior accounting staff at FASB and SEC have told

me the accounting for credit losses under

temporary impairments is improper accounting and

asked if he would refer it. He responds, Perhaps

will you write on it, too."

Did you ask Mr. Blumenthal to refer

Fannie Mae's accounting to the SEC or FASB?

A. No. I had actually spoken to both

40 (Pages 154 to 157)


Page 158


the SEC and FASB about concerns that I had found

on differing language that they used for their

analysis of other than temporary impairments

relative to information that Freddie Mac got

nailed for in the OFHEO investigation of Freddie

Mac.

And the treatments were so visibly

different between the acceptable treatment that

OFHEO and the SEC had found relative to the

stated treatment that Fannie Mae actually told

investors it used.

Q. And that was evident to you from

public documents?

A. That was evident to me from public

documents.

Q. You laugh. Is that because it was

easily - - A. It was quite easily. You know, I

mean, frankly, that's a lot of what really exists

here is investors - - just seemed many investors seemed to want to turn a blind eye and not do the

work or read the public documents.

Q. where it says "and asked if he would

refer it," what does that mean?

Page 159

1 J. ROSNER - CONFIDENTIAL 2 A. I don't know, actually.

3 Q. Did you write that?

4 A. well, I mean, it says it. I have no

5 reason to believe I didn't. I don't know what I

6 intended by it.

7 Q. But your testimony is that you did

8 not ask Mr. Blumenthal to refer Fannie Mae's

9 accounting to the FASB or SEC?

10 A. AS I recall it, that was not - - That 11 was not something I asked him to or directed him

12 to.

13 Q. And it says, "He responds, Perhaps

14 will you write on it, too."

15 What does that mean?

16 A. I don't know. Again, I believe by

17 this time I had already spoken to - - Actually,

18 I'm fairly certain that by this time I had

19 already spoken to both FASB and the SEC to see if

20 the accounting treatment that Fannie made public

21 in terms of its major remember accounting

22 principles jived with the interpretation by the

23 SEC and FASB.

2 4 Q. was Mr. Blumenthal asking you to

25 write a research paper on that as well?


Page 160



Q. Did Mr. Blumenthal ever ask you to

write on certain topics?

A. Absolutely not.

MR. TERRY: Let me take a quick

survey. You think we should take a break for

lunch pretty soon or ... general sentiment. I

think this is probably a good time, if this works

for you or if you want - -

THE WITNESS: I would almost rather

keep going.

MR. TERRY: It's going to be awhile.

MR. CAHILL: AS in how much?

MR. TERRY: Probably - - Probably

have at least another hour and a half.

Okay. Let's go off the record.

THE VIDEOGRAPHER: The time is

12:47. We're going off the record, end of Tape

2.

(Whereupon, a luncheon recess is

taken. )

THE VIDEOGRAPHER: We are going back

on the record. The time is 1:23 p.m.

This is the beginning of Tape Number

Page 161

1 J. ROSNER - CONFIDENTIAL 2 3 in the deposition of Mr. Joshua Resner - - 3 Rosner, excuse me, which is being taken at

4 OIMelveny & Myers, New York. The videographer is

5 Terry Carruthers, here on behalf of Esquire

6 Deposition Services, located at 1020 19th Street,

7 Northwest, Washington, D.C.

8 Counsel may proceed.

9 Q. Good afternoon, Mr. Rosner. You

10 understand you're still under oath?

11 A. I do.

12 Q. During the break did you have any

13 conversations with anyone who represented the

14 plaintiffs in this matter?

15 A. NO.

16 Q. Did you have conversations with

17 anyone about this matter other than your own

18 counsel?

19 A. NO.

2 0 MR. TERRY: The next document is

21 Bates-stamped MGA 03033, and at the top it's

22 Bates MGA 09736. It is Rosner Exhibit 17, it's

23 dated April 19th, 2004.



41 (Pages 158 to 161)

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Page 162



me?

A. Appears to be a call report from

myself to Steve Blumenthal.

Q. And the date is April 19th, 2004?

A. correct. - Q. If you take a look at the last line,

Point 4. It says, "He hints that the

manufactured housing resolution of the FNM

investigation will come off in the next few

weeks. He also says that the CFRA estimate of

the FNM problems is probably way off the mark.

'They show 1.2 billion here and 1.5 billion

there.

DO you know what that section is

referring to?


Q. DO you know what the manufactured

housing resolution is referring to?

A. I assume that it related to

questions about the accounting for their

manufactured housing exposures.

Q. And was that an issue that OFHEO was

looking into in this time period?

Page 163

J. ROSNER - CONFIDENTIAL A. You know, I don't really remember

specifically. I don't remember it as a major

issue, and I really don't recall the time frame.

Q. Do you know what it's referring to

when it says, "The CFRA estimate of the FNM

problems is probably way off the mark"?

A. Again, I don't specifically

recollect, but I would assume that it's the

Center for Financial Accounting, CFRA is an

analytic firm, and so I assume it relates to a

report they put out.

Q. They issue research reports for

investors as well?

A. Correct.

Q. And do you think the Numbers 1.2

billion and 1.5 billion are referring to the

amount - - A. I have no idea.

MR. TERRY: We will move on to

another document then. This one is Bates-stamped

OFHEO-BLU-00036921. It's Rosner Exhibit 18.



Q. Can you identify this for me?


Page 164

J. ROSNER - CONFIDENTIAL A. Again, appears to be an E mail from

me to Steve Blumenthal.

Q. Dated May 14th, 2004?

A. Right.

Q. Do you see the E mail references a

Piper Report?

A. correct.

Q. Do you recall sending Mr. Blumenthal

a report from Piper?

A. I don't specifically recall. I do

somewhat recall the - - a conversation about a research report.

Q. What is Piper?

A. I assume that we're talking about

Piper Jaffray here.

Q. That's another firm that offers - -

A. Correct.

Q. - - analyst reports to investors.

Do you recall the context of this

E mail?

A. To the best of my recollection, I

believe that Mr. Blumenthal had told me that

there was an analyst meeting where - - I think it was Piper it may not be the same instance. I

Page 165

1 J. ROSNER - CONFIDENTIAL 2 think it was. - - where they had had analysts

3 in - - well, a sell-side analyst with clients in

4 to OFHEO for an update meeting, and that the

5 report that Piper put out after was not only

6 inaccurate but very strongly distorted things

7 that Mr. Blumenthal had said, and he was

8 disturbed by that and concerned that the conflict

9 of interest that may have arisen between the

10 analyst and the investment banking business might

11 have actually had something to do with it.

12 Q . Is that incident you're referring

13 to, did that involve Piper or was that Freeman,

14 Billings & Ramsay?

15 A. I don't - - I don't remember 16 specifically.

17 Q. Okay. If you take a look at this

18 E mail, it says, "They are disturbed that OFHEO

19 would cause such a market disruption over a

20 disputable and immaterial amount."

2 1 A. Uh-huh.

2 2 Q. Is that referring to OFHEO's

23 published findings about Fannie Mae's

24 manufactured housing?

25 A. I don't recall. So I could

42 (Pages 162 to 165)

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Page 166

J. ROSNER - CONFIDENTIAL speculate, but I don't recall specifically.

Q. okay. And does the timing of this

E mail provide you with any context for - - A. Not off the top of my head. Sorry.

Q. Take a look at the last sentence.

It says, "I'm doing my best to help investors

gain correct perspective on the legislative,

regulatory, and policy goings-on.''

Did you write that?

A. I probably did.

Q. And why did you write that to

Mr. Blumenthal?

A. Because I had been given what I

believed ample reason to believe that the

sell-side research community was either, for lack

of understanding, lack of sophistication, or,

frankly, being spun by a very large investment

banking client, not understanding the - - the correct exposures and risks.

Q. What do you mean by "not

understanding the correct exposures and risks"?

A. There was a lot of cheerleading

going on, quite frankly, from the sell-side

community for Fannie, and by, frankly, its

Page 167

1 J. ROSNER - CONFIDENTIAL 2 largest shareholders, several of whom were making

3 very aggressive statements that seemed to have

4 been fairly clear distortions given other

5 statements that were made in the public record.

6 Q. And it was your view that your

7 reports corrected that?

8 A. It's my view that my responsibility

9 was to be independent, to be unconflicted and not

10 to rely on any particular source as the basis for

11 judgement but, rather, on information in its

12 entirety and public record.

13 Q. And do you think that the reports

14 you released provided a correct perspective on

15 the legislative, regulatory, and policy risks

16 that faced Fannie Mae?

17 A. By and large, I think that the

18 history has demonstrated that they are and have

19 been more accurate and - - and more insightful 20 than those of most of the sell side.

2 1 Q. Was there information that you are

22 somehow privy to that sell-side analysts were

23 not - -

24 A. NO.

2 5 Q. - - that led you to those


1 J. ROSNER - CONFIDENTIAL 2 conclusions?

3 A. NO.

4 Q. So it was the same public

5 in£ ormation.

6 A. Absolutely.

7 Q. Why did you want Mr. Blumenthal to

8 know that you were doing your best to help

9 investors get a correct perspective of the risk

10 facing Fannie Mae?

11 A. Because I wanted him to understand

12 that I took my role seriously as an independent

13 voice, unconflicted from any pressures.

14 Q. Why did you want him to know that?

15 A. Because I think that given some of

16 the information that was being put out there, I

17 felt it important for there to be some

18 understanding of that.

19 Q. Are there any specific distortions

20 of perspective that you were discussing?

21 A. That I was discussing ... 22 Q. In your testimony. We were talking

23 about part of the document that says, I'm doing

24 my best to help investors gain correct

25 perspective on the legislative, regulatory,

Page 169

J. ROSNER - CONFIDENTIAL policy goings-on, and I believe you stated you

were trying to correct some distortions?

A. Absolutely.

Q. What were the specific distortions

you were trying to correct?

A. The distortions were, you know, many

and frequent, ranging from, the OFHEO

investigation is about nothing but financial

accounting issues, which is one of the

distortions we talked about earlier, to, frankly,

what I believe was information that was provided

to several of Fannie and Freddie's largest

shareholders but not publicly provided to

investors, on the HUD internal audit

investigation of OFHEO that was commenced at the

direction of Kip Bond. And Dwayne Duncan has

acknowledged that he had actually asked Kip Bond

to actually request that HUD do a audit of OFHEO.

There was information, there were

market rumors flying around about how the

internal audit of OFHEO by HUD was going to

essentially shut down or slap down or disembowel

the regulator. And I received phone calls from

some of the largest shareholders, sharing

43 (Pages 166 to 169)

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Page 170

J. ROSNER - CONFIDENTIAL information that apparently was in that report

though never made it into the public domain

because ultimately that report was released in a

redacted version.

And so it became very clear to me

that some of the largest shareholders were

working essentially to protect their positions by

advancing statements that the company was making.

Q. Who were those shareholders?

A. The one that stands out most in my

mind is Taylor Hinshaw, who as I recall, and I

can't put a date to it, but I actually believe it

was somewhere around this time, called me and

gave me information about specific items in that

HUD Inspector General report which have never

come out in the public light and implied that he

got that information directly from the company.

Q. What were the specific items?

A. Sexual harassment issues regarding

Steve Blumenthal, a myriad of personal

allegations against Steve Blumenthal that

Fannie - - or I should say that Taylor Hinshaw told me were in the report.

Ultimately Barney Frank released a

Page 171

J. ROSNER - CONFIDENTIAL redacted version of the report and many of those

personal issues were pulled out of it, so it was

apparent, given public record at the time, that

the only people who had access to that report

were Kip Bond's office and other members of the

house financial services committee.

Q. Okay. Any other -- Any other sources of - -

A. Many.


dated May 17, 2004, and it's Bates-stamped MGA

09100. It's Rosner Exhibit 19.



Q. Just to be clear, to go back to

something we just discussed, did you have any

personal knowledge that Fannie Mae was providing

investors with information that was in the OFHEO

report, or was it all secondhand?

A. It was from the investors. So to

the degree that the investors said it, that was

the only information I had, but I found it

credible, given the fact that it, as in that

case, was information that apparently was correct


Page 172


2 and wasn't available to other investors or in the

3 market.

4 Q. Did you ever report, yourself, that

5 the HUD IG report would contain allegations about

6 sexual harassment by Mr. Blumenthal?

7 A. I don't believe that I reported it,

8 to my recollection. I do remember, obviously, as

9 I said, getting a phone call, and actually I

10 can't put a date to it, but getting that phone

11 call on a specific night from Taylor Hinshaw

12 telling me that the report had just actually been

13 released and he had just gotten ahold of it.

14 Q. Why didn't you report that?

15 A. Because it was speculation, and my

16 job was to actually triangulate information to

17 make sure it was based in some credible sourcing.

18 Q. And you did not believe you had

19 credible sourcing to say that the report would

20 contain allegations of sexual harassment?

21 A. Right. Considering the fact that I

22 felt that Taylor Hinshaw was exceptionally

23 biased, had been proven incorrect, and was

24 continually trying to feed information to me to

25 advance his cause. I discounted the veracity of

Page 173


it. Historic, you know, information proves that

he was actually truthful on that issue.

Q. What historic information is that?

A. That the only version that - - that there was a battle over the information and the

information having to be redacted for personal

matters. The fact that Barney Frank ultimately

agreed to release it with personal information

about officials involved in allegations was

redacted, that none of those officials, according

to public record, agreed to sign waivers allowing

that part of the HUD IG report to be released.

Q. Did-you ever.talk to Mr. Blumenthal

about the HUE IG report?

A. I'm sure that I must have. I don't

remember with any specificity. I think that I

did after it came out and after I had gotten this

phone call from Taylor Hinshaw.

Q. Did you ever talk to him about

specifically the allegations that you testified

were redacted from the report?

A. Thatwhat?

Q. The allegations of a personal nature

that were redacted from the report?

44 (Pages 170 to 173)


Page 174


A. I don't believe I did.

Q. Did you ever speak to anyone other

than Mr. Hinshaw about these allegations?

A. Yes.

Q , Who else did you speak with?

A. There were a number of clients who

had called me with similar information a couple

of days later - - I'm trying to remember who off

the top of my head. - - and they had informed me that they were all seeming to get the same

information from the same couple of institutional

investors, Fidelity and Taylor Hinshaw.

Q. Did you view information about

whether the HUD IG report contained allegations

of sexual harassment to be material to investors

in Fannie Mae?

A. No, I viewed it as immaterial, which

is why I felt it was inappropriate and, frankly,

uncomfortable to even bring that matter up with

Mr. Blumenthal.

Q. Let's take a look at Rosner Exhibit

19. Can you identify this document for me?

A. ~t's a Medley report. I'm not sure

of whether it went out, but given the format of

Page 175 1 J. ROSNER - CONFIDENTIAL 2 it, I would assume it did go out to clients.

3 Q. Did you draft this?

4 A. I believe I probably did. Again,

5 that doesn't mean that it wasn't edited and it

6 was my final product.

7 Q. But it's your belief you provided

8 substantive - -

9 A. Absolutely. I believe I did.

10 Q. Can you look at the second

11 paragraph? The last sentence says, "As one

12 regulatory source points out to us, 'Fanniels

13 accounting can be GAAP compliant, but that

14 doesn't necessarily mean anything to a safety and

15 soundness regulator, nor should it.'"

16 Was the source for that comment

17 Mr. Blumenthal?

18 A. I actually don't remember, but I

19 actually think I had that conversation with

20 someone within the fed.

2 1 Q. And who would that be?

2 2 A. I don't remember. I had so many

23 sources within the fed. I believe that that

24 conversation happened as a result of me again

25 trying to triangulate information.

Page 176

J. ROSNER - CONFIDENTIAL Q. What does that mean, Fannie's

accounting could be GAAP-compliant, but that

doesn't necessarily mean anything to a safety and

soundness regulator, nor should it?

A. That the SEC has a different level

or burden than the regulator. The regulator's

primary charge is safety and soundness. The

SEC's is the materiality and the accuracy of the

accounting treatment. And the safety and

soundness regulator in some sense has a higher

burden to meet in terms of the safety and

soundness of examined institutions.

Q. Take a look -- There's a subheading

that says, "OFHEO likely to review additional

practices." And the third paragraph down says,

"Contrary to the belief of most investors, the

investigation is not merely a reaudit of Fannie's

finances. The OFHEO investigation will certainly

include a forensic review of their accounting,

but it also includes a review of their systems,

operational risks, executive compensation, board

independence and oversights and market risks."

Was that something that

Mr. Blumenthal told you?

Page 177

J. ROSNER - CONFIDENTIAL A. That was something that was - - Again

you're missing a report here, but that was

something that was made fairly clear from the

Freddie examination report.

Q. And that would have been clear back

in the Fall of 2003?

A. That would have been clear in the

Fall of 2003. Correct.

Q. Okay. Can we go back and take a

look at Exhibit 4, which is the August lst, 2003,

Medley report.

A. What number?

Q. Four.

A. Okay.

Q. And if you take a look at the last

paragraph, the last sentence on that page spills

over to the next page, says, "He said we can't

use it in this form or with any attribution as to

where it came from. I'm going to be one shocked

boy if we go into Famie with the same set of

microscopes that we were using on Freddie and

don't find significant things. They will not be

the same things that have been found out at

Freddie, but I am confident that Raines is not

45 (Pages 174 to 177)



Page 178

J. ROSNER - CONFIDENTIAL the angel he purports to be."

And that was something that

Mr. Blumenthal told you back in August of 2003?

A. correct.

Q. Is it your view that was not

nonpublic information?

A. Is it -- is it - - Q. Was it your view that that was

public or nonpublic information?

A. I think - - I think that the accounting problems at Freddie were largely

known, by Freddie's own admission, prior to the

creation of an examination report. And I think

that it was clearly known that they had issues,

that F a ~ i e likely had issues before even the

release of the OFHEO Freddie report. And, in

fact, I had been highlighting and drawing concern

about many of those issues for the better part of

three years, having not spoken to Steve

Blumenthal prior to that, you know, Medley

experience.

Q. And you believe that those issues

were - - Knowledge of those issues was available

in the public domain as far back as August of

Page 179

J. ROSNER - CONFIDENTIAL 2003 if - -

A. I do.

MR. TERRY: Okay. The next document

is Bates MGA 03108. It's Rosner Exhibit 20. At

the top it's Bates-stamped MGA 09783. I'm sorry.

738.




me?

A. Appears to be a call report outbound

from me to Steve Blumenthal, May 18, 2004.

Q. Is it a call report. you drafted?

A. ~t appears so.

Q. Okay. If you look at the first

line, it says, "I called SB immediately after

hanging up with Vincent"?

A. Uh-huh.

Q. Who is Vincent?

A. Vincent Daniel.

Q. who is Vincent Daniel?

A. He was a client, and prior to that

he was a partner at Graham Fisher.

Q. The next line says, "Steve answers

Page 180

J. ROSNER - CONFIDENTIAL the phone and I say, Hi, Steve. I thought we

were friends. Steve responds, Josh, how are you?

I just finished reading your report. You are so

spun on the analysis it's scary:

First of all, do you know what

that's referring to when it says, "Hi, Steve, I

thought we were friends"?

A. I don't recall.

Q. Take a look at the next line. It

says, "I continue, Steve, I just got a call from

a client, and he commented that, as usual, my

view is so far out of sync with the other

sell-side folks and then told me that FBR is

taking him to see you."

Were you explaining to Mr.

Blumenthal that you were unhappy that he was

meeting with FBR and not you?

A. Not that he was meeting with FBR and

not me, but that I had actually made prior

requests to bring clients into OFHEO and was

rebuffed. And I assume that actually my "I

thought we were friends'' was based on the fact

that I seemed to have not even the same level of

access as others.

Page 181

J. ROSNER - CONFIDENTIAL Q. And you were complaining about that.

MR. KARAM: I object. Counsel, can

we clarify who FBR is?

Q. Who is FBR?

A. Friedman, Billings & Ramsay.

Q , And what is Friedman, Billings &

Ramsay?

A. It's an investment bank.

Q. In this E mail were you complaining

to Mr. Blumenthal that he was going to FBR and he

hadn't done the same thing for you?

A. Not for me. For Medley's clients,

yes.

Q. And then it goes on to say, "Steve

says that if you want to set something up all you

need to do is ask. I can get anyone you want

from this organization to come and would be happy

to do so. "

Do you see that?

A. Uh-huh.

Q. Do you recall Mr. Blumenthal making

comments along those lines?

A. I do. Not this specific, but I do

remember that.


46 (Pages 178 to 181)

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Page 182

J. ROSNER - CONFIDENTIAL Q. If you take a look at the next line,

it says, "As for your client, why don't you tell

him to ask me during that FBR meeting why

Medley's view is so far out of the mainstream. I

ask why? What will you say? Steve says, 1'11

tell the truth, that I read a lot of what the

street says, not that I care, and that Medley is

the only firm that gets it."

Do you recall that conversation with

Mr. Blumenthal?

A. Not that specific, but that was a

theme that came up quite often.

Q. Do you recall Mr. Blumenthal

offering to tell one of your clients his view of

Medley's research?

A. Yeah. I - - I - - Again, not specifically, but I don't think that - - I don't

think there's any reason for me to doubt that

that was a comment.

Q. Did Mr. Blumenthal ever comment to

you that he regularly read research reports?

A. Yes.

Q. And he said that he did, in fact,

read them?

Page 183

J. ROSNER - CONFIDENTIAL A. I believe so.

Q. Did he ever tell you if he followed

Fannie Mae stock price?

A. He - - He didn't. Q. That's what he told you?

A. No, he didn't - - He didn't ever say

whether he followed.

Q. Oh. So you don't know one way or

another.

A. Right.

Q. Going back to the first line, he

says, "Josh, how are you, I just finished reading

your report. You are so spun on the analysis it

is scary."

A. Uh-huh.

Q. Is he referring to the May 17th

report we just looked at?

A. I don't - - I don't remember specifically. I think that might be a fair - -

fair comment.

Q. And this call was around May 18,

2004?

A. Correct.

Q. Any reason to doubt he wasn't


Page 184

J. ROSNER - CONFIDENTIAL referring to - -

A. NO.

Q. - - this report? Going back to the conversation about

your client, at the end it says, "I ask if you

would really say that, and he said, Yes, if he

asks, I would. The client won't be invited to

too many FBR functions."


A. That many of the sell-side firms had

very, very, very large investment banking

relationships with Fannie Mae, and Fannie Mae

quite clearly exerted some influence over the

analysts and their views, and so to publicly

stand out as a client at an FBR-sponsored event,

raising questions and concerns about either

Fannie or FBR coverage would not bode well for

the relationship or the ability of that client to

get invited to other FBR events.

Q. Was it Mr. Blumenthal's view that

Wall Street firms were excessively positive in

their analysis of F a ~ i e Mae and the risks it

faced?

MR. KARAM: Objection.

Page 185

J. ROSNER - CONFIDENTIAL A. I don't know.

Q. Did he ever express that to you?

A. Not that they were positive, but

that they seem not to be reading public

documents.

Q. Mr. Blumenthal was, however, happy

with your coverage. Right?

A. Yeah. He was - - I think at times he

was confused by it. At times he was concerned by

it.

Q. But at least with respect to the May

17, 2004, report, his view was that it was so

spun on the analysis that it's scary. Right?

A. That's what it says. I mean,

there's a lot in that report. So whether he's

speaking to a specific issue or the report in its

entirety I can't say.

Q. Do you recall any other

conversations where he made statements along the

lines of, Medley's the only firm that gets it?

A. I remember him repeatedly making

comments about the fact that he was concerned

that my analysis was so good and making comments,

including comments that I believe I put in other

47 (Pages 182 to 185)


Page 187

1 J. ROSNER - CONFIDENTIAL 2 A. It appears to be an E mail

3 between - - from me to Steve Blumenthal.

4 Q. And it's dated May 19th, 2004?

5 A. Uh-huh.

6 Q. ~ n d that's one day after the call

7 report we just looked at?

8 A. Uh-huh.

9 Q. If you take a look at the last line,

10 it says, "In the mean time, I do expect the

11 client to ask your view on the veracity of my

12 work during the FBR meeting"?

13 A. Uh-huh.

14 Q. Is that referring to

15 Mr. Blumenthal's offer on May 18th to tell your

16 client what he thinks of your work?

17 A. I don't know whether it's referring

18 to Mr. Blumenthal's offer or whether it's

19 referring to the fact that my client, who we

20 spoke about as being Vincent Daniel, who was a

21 client of mine and a former partner of mine, was

22 frustrated because he felt that Friedman,

23 Billings' work was not up to par. So I don't

24 know if it had anything to do with Steve offering

25 or Vincent just asking.

Page 186


call reports, that he was concerned that if there

was - - that there may have been a leak within

OFHEO, giving me information, and if there was he

was going to have to shut it down, and he was

fuming. But I think that he made it very clear

to me that - - that my analysis and my triangulation of publicly available information

was - - was clearly differentiated from the rest of the street.

Q , Do you recall if you, in fact, asked

Mr. Blumenthal to give your client his view of

your research?

A. No. I don't believe I did.


~ates-stamped MGA 03109. ~ t ' s dated May 19,

2004.




me?

A. Let me look at it, please.

Q . sure.

A. Uh-huh.


Page 188


Q. Nevertheless, you were telling

Mr. Blumenthal that you did expect one of your

clients to ask him about the veracity of your

work. correct?

A. correct.

Q. And that was in connection with the

FBR meeting. Right?

A. I assume so.

Q. And that's the same meeting in

which - - with respect to which Mr. Blumenthal

said that if your client asks he would tell your

client what he thought about your work, that

you're the only one on the street that gets it.

A. I assume that's correct.


dated June 9, 2004. It's Bates stamped on the

bottom MGA 03174, and on the top it's Bates stamp

MGA 09741. It's Rosner Exhibit 22.




me?

A. It appears to be a call report of a

conversation between myself and Brant Imperatore.

Page 189

1 J. ROSNER - CONFIDENTIAL 2 Q. Is it a call report written by you?

3 A. Appears to be.

4 Q. Who is Brant Imperatore?

5 A. Brant Imperatore is a Washington

6 lobbyist.

7 Q. And he works for the firm of Barbour

8 Griffith & Rogers Inc.?

9 A. Correct.

10 Q. What is Barbour Griffith & Rogers,

11 Inc.?

12 A. A lobbying firm.

13 Q. Do you know who the Mr. Barbour in

14 the name is?

15 A. Hailey Barbour.

16 Q. What is Hailey Barbour's - - what did 17 he do before he was a lobbyist?

18 A. Idon'tknow.

19 Q. Was he the head of the RNC at some

20 point?

21 A. I believe he was.

2 2 Q. Is Barbour Griffith & Rogers a

23 partisan firm?

24 A. I believe it is.

2 5 Q. Were they close to the

48 (Pages 186 to 189)



Page 190

J. ROSNER - CONFIDENTIAL administration?

A. I don8 t know.

Q. Did you view them as being close to

the Bush administration?

A. I - - I didn't view them as being

close to the Bush administration. I viewed them

as having actually insights on the GSE issues

legislatively.

Q. Have you ever described them to

anyone as having close ties to the Bush

administration?

A. Idon'trecall.


line, it says, "Brant and I speak about the

Fannie Freddie, quote, proposal stuffM?

A. Uh-huh.

Q. Do you know what that's referring

to?

A. I don't specifically, but reading

this, I would assume that it refers to the

legislative proposals.

Q. Legislative proposals as to what to

do with F a ~ i e May and Freddie?

A. No. As what to do with the creation

Page 19 1

J. ROSNER - CONFIDENTIAL of a new regulator overseeing the Fannie and

Freddie.

Q. He goes on to say, "He tells me that

his admin sources say that, yes, Syron has been

having discussions with the Fed and Treas. He

asked for the meetings, and he threw out ideas to

end the impasse but that the WH saw these as

ideas, not proposals, and did not and will not

agree to anything (informally or otherwise) until

after the elections."

When you write "WH" in here, is that

referring to White House?

A. I assume so.

Q. Do you know the identity of

Mr. Imperatore's administration sources?

A. Idonlt.

Q. Did he appear to you to have pretty

good inside sources within the administration?

A. You know, it's spotty. Sometimes

yes, sometimes no. Didn't rely on him as being

completely accurate.

Q. Did you ever describe Mr. Imperatore

as being a reliable source?

A. I may have. I don't know.

Page 19;

J. ROSNER - CONFIDENTIAL Q. Did you ever describe him as someone

who is conservative and has never given me bad or

false info?

A. I have no idea.

Q. Would that statement be accurate?

A. NO. YOU know, as I'm sure you know

from your personal and professional business,

there are people who you talk to who may be

spot-on in their insights, in their informed view

on certain issues, and completely off-base on

other issues. I would view every one of my

sources as actually being great in some areas and

terrible in some, and none are infallible on any.

(Whereupon, Exhibit Rosner-23 and

Rosner-24 are marked for identification by the

reporter. )

Q. I'll give you two documents, Rosner

Exhibit 23, which is Bates-stamped at the bottom

MGA 04091, and Rosner 24, which is Bates-stamped

at the top MGA 0967.

Can you identify Exhibit 23 for me?

A. It appears to be a call report from

Brant Imperatore dated November 30th, 2004.

Q. And written by you?

Page 19?

J. ROSNER - CONFIDENTIAL A. Appears so.

Q. And what is Exhibit 24?

A. What is Exhibit 24?

Q. Can you identify it for me?

A. It appears to be compounded. It's

an E mail from Kevin Muehring to me to - -

actually to RJ, commenting on a call report from

me, dated September 30th, 2004, with Brant

Imperatore.

Q. And Exhibit 24 includes a call

report authored by you?

A. Correct. That's what I just said.

Q. If you take a look at the bottom of

24, it says, in all caps, "I understand these are

outrageously seriously allegations. I also know

Brant as someone who is conservative and has

never given me bad or false info.''

Did you write that?

A. Imaywellhave.

Q. was it true?

A. I don't know. As you see at the

top, as happened on several other occasions, in

the summary it says "radio silence, need to

confirm," so I don't think that I actually relied

49 (Pages 190 to 193)



Page 194


on it as true at the time.

Q. I'm sorry. My question was whether

or not your statement at the bottom that "Brant

is someone who is conservative and has never

given me bad or false info," was that true when

you wrote it?

A. I can't recall whether that's true

when I wrote it. I have - - You know, it probably

was substantively true.

Q. Would you have written it in all

caps at the bottom of your E mail if it was

false?

A. I dont t know.

Q. Okay. Take a look at Exhibit 23,

please?

A. Uh-huh.

Q. Under Summary it says, "Ouch,

background, Brantts shop is an unabashedly

partisan firm with close ties to the

administration. 'I

Did you write that?

A. Probably.

Q. Was that true when you wrote it?

A. Again, I believe that it probably

Page 195

J. ROSNER - CONFIDENTIAL was true.

Q. Going back to Exhibit 22, in the

call note section it says "They believe that six

months from now Freddie's stock price will not

have gone up and that shareholder pressure may

get FNM and FRE to be more willing to cut a

deal. 'I

Is that something that you wrote?

A. Again, I don't specifically recall,

but it appears so.

Q. And that's something you wrote based

on information that was given to you by Brant

Imperatore?

A. In that instance, correct.

Q. Is the "they" referring to the White

House?

A. I don't know. I would assume so.

Q. In the context of this E mail?

A. In the context of this E mail it

would seem so.

Q. Do you recall Mr. Imperatore telling

you that the White House believed that

shareholder pressure would get Fannie Mae and

Freddie Mac to be willing to cut a deal?

Esquire Deposition Services DeCe - 1-800-441-3376

Page 197

J. ROSNER - CONFIDENTIAL Griffith & Rogers had been retained by the Bush

administration?

A. That's a silly question. I have no

knowledge of who their clients were.

Q. Well, is that - - Reading this, is that what you read Mr. Imperatore to be telling

YOU?


speculation.

Q. Did Mr. Imperatore ever tell you

that he had been hired by the Bush

administration?

A. No. He hadn't. .

Q. But it was your understanding that

his firm had been tasked by the Bush

administration to perform -- A. No. It was merely my understanding

that he actually suggested that they were asked

to, not whether they actually were asked to and

not what that actually meant.

Q. Okay. Let's go through 23 a little

bit more.

It says, "The administration has

tasked me with a new assignment which my firm has

Page 196

1 J. ROSNER - CONFIDENTIAL 2 A. I don't specifically recall that.

3 It may have been. I never really assumed that

4 Brant was working for the administration, so I'm

5 not sure how much faith I put in that statement.

6 Q. Could you take a look at Exhibit 23

7 real quickly. Keep all three in front of you.

8 Under Call Notes it says, "The

9 administration has tasked me with a new

10 assignment which my firm has directed me to

11 pursue.

12 Does that quote reflect this is - -

13 you're attempting to reflect the sum or substance

14 of Mr. Imperatore's comments to you?

15 A. I would assume that that is what I

16 was trying to reflect. Yes.

17 Q. And you were trying - - And

18 Mr. Imperatore was telling you that he was

19 getting an assignment from the administration?

20 A. Yeah. I don't know what

21 "assignment" means, but yes.

2 2 Q. And the administration, does that

23 refer to the Bush administration?

24 A. I don't know, but I would assume so.

2 5 Q. Was your understanding that Barbour

50 (Pages 194 to 197)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 198

J. ROSNER - CONFIDENTIAL directed me to pursue. I am expected to get a

letter drafted by a member of congress in the

next week requesting HUD to release the

investigation/study of Fannie Mae's regional

partnership offices."

Was it your understanding, based on

your conversation with Mr. Imperatore, that the

Bush administration had requested that Barbour

Griffith & Rogers get a member of congress to

request HUD to release a study on Fannie Mae's

partnership offices?

A. It was my understanding that Brant

Imperatore stated that. It isn't my

understanding that the administration had

actually tasked him or asked him to do so.

Q. On September 30th, 2004, did you

still consider Mr. Imperatore to be a person who

has never given me bad or false info?

A. Again, on specific matters and

specific subjects. I said that before. There

isn't - - There isn't a single source who I could rely on across the board. On the areas where I

did rely on Brantls information, he had never

given me bad information.

Page 199


Q. What areas did you rely on

Mr. Imperatore's information?

A. Primarily what was going to be

important on both sides in the legislative

wranglings and how far the dems would be willing

to bend and the republicans on the other side

would be willing to bend on what would be

required to pass legislation.

Q. Okay. Exhibit 22. That's dealing

with Mr. Imperatore's views of what the

administration will do. Correct?

A. I'm sorry?

Q. Exhibit 22, is that talking about

what congress wants to do or what the

administration is saying?

A. Twenty-two is what - - Brant's understanding of what the administration is

saying.

Q. And 23, is that also dealing with

the administration?

A. Apparently.

Q. What is 24 dealing with?

A. Again, HUD administration issues.

Q. And Exhibit 24, which deals with

Page 200

J. ROSNER - CONFIDENTIAL administration issues, meaning dealing with the

Bush administration, at the bottom of that you

write, "I also know Brant as someone who is

conservative and has never given me bad or false

info." Right?

A. Uh-huh.

Q. And that's in the context of

administrative issues.

A. NO. That's actually in a broader

context, and I think you're mischaracterizing the

document, because if you see at the top, "We need

to confirm this before we can do anything."

Okay? And next he comments at the end, I write,

"He's obviously relying on a source he says is a

good source. Unless we can get confirmation from

other sources we can't even begin to consider

doing anything with this."

Which, obviously, highlights my

skepticism about the nature of the information he

was providing or its credibility.

Q. But up to that point your view was

that he was someone who had not yet given you any

bad or false info.

A. Again--

Page 201

J. ROSNER - CONFIDENTIAL MR. CAHILL: Objection.

A. Again, as it related to legislative

matters.

Q. But you didn't write that, did you?


Argumentative, form.

A. I didn't write that because ... Q. Well, you were passing along

Mr. Imperatore's comments about what the

administration was doing, and in that E mail you

say that he has never given you bad or false

information. Correct?


A. In the literal terms of what you're

seeing here, yes. As I've said to you repeatedly

during this process, a lot of information

actually was inference, had color that was either

added or not in the reports, and I said to you

repeatedly during this line of questioning I

relied on Brant not solely or exclusively, but as

a good source of information on legislative

issues, not administrative issues, which is why

if you notice in that call report, at the top I

say "radio silence." At the bottom I actually

5 1 (Pages 198 to 201)



Page 202

1 J. ROSNER - CONFIDENTIAL 2 raise questions as to his veracity and my

3 confidence in the quality of his information.

4 Q. Okay. Exhibit 22 you don't tell

5 anyone they should use radio silence for that

6 information, do you?

7 A. No. This is actually - - There's

8 nothing particularly interesting in it. There's

9 nothing particularly surprising in it, and this

10 is a perception of information that, frankly, was

11 circling around Wall Street and anyone would have

12 given you at that time.

13 Q. So it's your testimony it was

14 well-known in May of 2004 that the White House's

15 view was that six months from then, meaning

16 through December, 2004, Fannie Mae and Freddie

17 stock price will not have gone up?


19 A. First of all, it doesn't say

20 anything about Fannie's stock price in that

21 report, either inferred or otherwise. It says

22 Freddie stock price.

2 3 Q. Okay. It says, "Shareholder

24 pressure may get FNM and FRE to be more willing

25 to cut a deal."

Page 203

1 J. ROSNER - CONFIDENTIAL 2 What is that referring to?

3 A. That's referring to the fact that

4 for the past five years at that point, or four

5 years at that point, there had been a massive

6 legislative overhang on the GSEs concerns that

7 there was going to be legislative change for a

8 stronger new regulator, and that investors were

9 becoming very weary of it, and actually

10 increasingly making it known that they were weary

11 of it.

12 Q. And was it widely known that the

13 administration's view was that pressure on the

14 stock price of Fannie Mae would make Fannie Mae

15 more willing to cut a deal with the

16 administration?


18 A. Again, I'm not sure that this is

19 Brant's view or this is the administration's

20 view. I don't think that it was reliable as the

21 administration's view, given the fact that, as I

22 said, I have reasons to repeatedly doubt the

23 accuracy or the credibility of Brant's

24 information on administrative issues,

25 administration issues.


Page 204

J. ROSNER - CONFIDENTIAL Q. On Exhibit 24, what is the - - What

is the general topic of the allegations that

Mr. Imperatore is discussing?

A. That HUD had actually done

investigations on Fannie's conforming loan

limit - - I'm sorry. - - affordable housing

purchases and also on the partnership offices of

Fannie.

Q. And if you take a look at Exhibit

23, is that also referring to the same issue?

A. I would assume so.

Q. At least according to this contact

call report, Mr. Imperatore describes the

allegations as "explosive"?

A. Correct.

Q. Was that report ever released by the

HUD Inspector General?

A. I don't recall.

Q. Do you know if there ever was such a

report by the HUD Inspector General?

A. I believe there were.

Q. And what were the findings?

A. Idon'tknow.

Q. Were they explosive?

Page 205

J. ROSNER - CONFIDENTIAL A. I have no idea.

MR. TERRY: Here's Exhibit 25. It's

Bates-Stamped MGA 03647.




A. Yes. It appears to be a F a ~ i e Mae

report or a GSE update.

Q. Did you write this?

A. I probably did. I don't

specifically recall.

Q. Can you take a look at the top

paragraph?

A. Uh-huh.

Q. It says, "We are now hearing from

Several sources that another non-OFHEO and

non-SEC report on Fannie Mae's practices may soon

emerge. Our sources have characterized the

alleged reports as 'explosive.' These sources

have claimed that the HUD Inspector General's

office has recently completed an investigation,

though they did not say whether it was a formal

or informal investigation of Fannie Mae's

partnership offices."

52 (Pages 202 to 205)


Page 206


2 Is that referring to the information

3 that Mr. Imperatore provided you?

4 A. I assumed that that's part of it.

5 Q. And, in fact, your report uses the

6 very word "explosive" that Mr. Imperatore used.

7 A. Correct.

8 Q. Now, despite your skepticism about

9 Mr. Imperatore's source, you nevertheless

10 published his comments?


12 A. Well, let's -- Let's look at the

13 date of that. That's December 2nd, 2004.

14 Q. Uh-huh.

15 A. The call report was dated September

16 30th, 2004. If you look at the end of that

17 September - - of Exhibit 24, it comments that

18 unless we can get confirmation from other

19 sources, we cannot even begin to consider doing

20 anything with this.

2 1 And I would assume, although I don't

22 specifically recollect, that during those three

23 months I probably got confirmation from other

24 sources.

2 5 Q. And so for at least - - for this

Page 207

J. ROSNER - CONFIDENTIAL report dealing with the administrative matters,

it turns out you viewed Mr. Brant as being a good

source?

A. No, it turned out that I viewed him,

his views in combination with triangulation of

information with other sources, as actually

forming the basis to believe to some degree what

I - - or to believe what I wrote, to believe to

some degree what he had stated.

Q. Could you take a look back at

Exhibit 23.

NOW, that's the contact call report

for your conversation with Mr. Imperatore.

Right?

A. Uh-huh.

Q. What's the date of that report?

A. That is dated 11-30.

Q. 2004?

A. Yes.

Q. And then the - - Exhibit 25 is dated December 2nd, 2004. Right?

A. The - - Correct. And Exhibit 24,

which is the one in which this HUD partnership

office is specifically raised, which suggested

Page 208

J. ROSNER - CONFIDENTIAL that there was a - - an investigation ongoing that was potentially explosive, is dated, as I said,

September 30th.

Q. Well, actually, could you take a

look at Exhibit 23 again?

A. Okay.

Q. This is a document, is it not, that

refers to the investigation as being, quote,

"explosive"?

A. Okay.

Q. And that's written just two days

before your December 2nd. 2004, report. Correct?

A. correct.

If you look at the ~eptember 30th

report, that's the one where they talk about

specifically the investigation of the partnership

offices, the fact that I don't think we can do

anything with any of this information until we

get other sourcing.

Q. Do you know if by November 30th,

2004, you had developed a view as to whether or

not the information Mr. Imperatore was providing

you with was reliable?

A. I believe that I had gathered a view

Page 209

J. ROSNER - CONFIDENTIAL that there were parts of his information that

were reliable. That which was was triangulated

with others; that which wasn't was discarded.

Q. Can you take a look at the last line

of Exhibit 23?

A. Uh-huh.

Q. It says, "Why is it that I'm a

soldier, and everyone else gets the glory? I

reply, No, Brant, you are the puppeteer's

puppeteer. "


A. That's referring to the fact that - -

I don't specifically recall. I assume that it's

referring to the fact that Brant was feeling as

though he was doing a lot of the education of

various parties as to the GSEs, various parties

in the administration, various parties in his

firm and elsewhere, and was feeling down about

the fact that he was essentially being treated as

a foot soldier, and I assume that my "you're the

puppeteer's puppeteer" was merely an attempt to

actually make him feel okay.

Q. That he was, in fact, being

effective in his assignment of pulling the

53 (Pages 206 to 209)



Page 210

J. ROSNER - CONFIDENTIAL strings?

A. No. That I was trying to make him

feel okay. You nurture sources.

Q. What did you do to nurture

Mr. Blumenthal?

A. I'm not sure. Could you be more

specific?

Q. Well, you just said, "you nurture

sources. 'I

A. Absolutely.

Q. Was Mr. Blumenthal one of your

sources?

A. Yes.

Q. What did you do to nurture him?

A. Actually, I helped to - - I helped him to understand that I actually represented a

unconflicted, unbiased policy analysis that

didn't exist elsewhere on the street, that unlike

most of those who actually wrote on the GSEs or

the OFHEO process. I had no investment banking.

I had absolutely zero financial investments in

any of these companies, and that I was free from

most of the pressures that most of sell-side

firms were burdened by.

Page 21 1

J. ROSNER - CONFIDENTIAL Q. Did you feel pressures to maintain

your sources?

A. NO.

Q. Did you feel you would be able to

perform your duties just as effectively if

Mr. Blumenthal stopped talking to you?

A. Absolutely.

Q. Do you feel you could have performed

your duties just as effectively if Mr. Brereton

stopped talking to you?

A. Absolutely.

Q. Was it your view that you didn't

need to talk to Mr. Blumenthal or Mr. Brereton in

order to reach conclusions about the likely

outcome of the OFHEO investigation?

A. Absolutely.

MR. KARAM: Objection, compound.

Q. I'll break it up.

Did you feel you needed to talk to

Mr. Blumenthal in order to know what the likely

result of the OFHEO investigation of Fannie Mae

would be?

A. NO. AS I said, I actually got to my

conclusions through publicly available

Page 212


information and made sure that Mr. Blumenthal

actually understood that I did not want any

information that was nonpublic, and I don't

believe he ever gave me any that was nonpublic.

Q. And the same goes for Mr. Brereton?

A. Absolutely.

Q. What about Mr. Imperatore?

A. I don't think Mr. Imperatore had any

information that was privileged, confidential. I

don't think he was a government official, and so

I treated his information as suspect because, to

my understanding, he wasn't a direct party to any

information that was proprietary.

Q. Do you know where Mr. Imperatore

works today?

A. I assume he's still with Barbour

Griffith.

Q. When was the last time you spoke

with him?

A. I had sort of a touch-base hello

conversation with him probably a month, two

months ago. Not talking about anything

specifically, just I haven't seen you in forever,

you've got a baby now, how are you. And prior to

Page 2 13

J. ROSNER - CONFIDENTIAL probably it had been almost a year.

Q. Was he still at Hailey Barbour's

firm?

A. At that point he was.


document and move on. It's Bates-stamped on the

bottom MGA - - A. Actually, I should correct that,

because I think I spoke to him on his cell phone,

SO I assumed that he was.

Q. YOU assume that he was what?

A. Still at Barbour Griffith when we

last spoke.

Q. But you didn't discuss it?

A. We didn't discuss it.

MR. TERRY: This is Rosner Exhibit

26. It's Bates-stamped MGA 03414.



Q. Have you ever seen this document

before?

A. I believe I have.

Q. What is it?

A. It's an inbound call report.


54 (Pages 21 0 to 21 3)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 214

1 J. ROSNER - CONFIDENTIAL 2 Q. Who's it from?

3 A. Fin man.

4 Q. Sounds like a mystery novel, but who

5 is the Fin man?

6 A. I have no idea.

7 Q. It says at the bottom, "Author

8 Regina Schleiger"?

9 A. Correct.

10 Q. Who is Regina Schleiger?

11 A. She at that time was in the contact

12 area at Medley, really focused on central bank,

13 fed, and G-7 G-10 central bank issues.

14 Q. Based on that, do you believe the

15 Fin man was somebody with the fed?

16 A. You know, I honestly don't know.

17 Q. Is Regina still at Medley?

18 A. I believe so.

19 Q. Did you ever ask her who the Fin man

20 was?

2 1 A. No. To be honest, this was - - I

22 didn't, and we tended to actually try and keep

23 our sources where we put a pseudonym on them

24 confidential.

2 5 Q. Why?

Page 215

J. ROSNER - CONFIDENTIAL A. She obviously didn't feel

comfortable sharing the source name.

Q. If you take a look at the summary.

Well, first of all, is this

something that you - - you read during the time you were working at Medley?

A. I remember reading the beginning of

it and actually deciding that, given the fact

that Regina had little, if any, involvement or

understanding of GSE-related issues, I don't

remember making it to the end of it, sort of

remember actually finding it useless.

Q. Let me show you the next document,

which will be Rosner-27, which is Bates-stamped

MGA 03409.



Q. What is this document?

A. It appears to be a call report on a

call between Josh Rosner and Bob H. of the Wall

Street Journal.

Q. Is it authored by you?

A. Appears to be.

Q. Bob H. is the Wall Street


Page 216

1 J. ROSNER - CONFIDENTIAL 2 Journalist. Is that Bob Haggerty?

3 A. I would guess so.

4 Q. Does he write under the name James

5 Haggerty?

6 A. yes.

7 Q. If you could take a look under

8 Comments it says, "Bob (James) tells me that he,

9 too, is hearing that Frank Raines is gone by

10 January. He also tells me that OFHEO will make

11 an FMN announcement in the next week or so, and

12 one of his sources is saying that Fannie was

13 using earnings management (manipulation,

14 smoothing) to protect the executive compensation

15 pool. Explosive if true, and puts together my

16 assumptions from my last two reports on earnings

17 management from what Regina's source was saying

18 on going after Raines on executive compensation."

19 Is that something that you wrote?

20 A. Probably. I mean, it says it. I

21 have no reason to believe no.

2 2 Q. And your report, your call report,

23 ties what you were hearing from Bob Haggerty with

24 what Regina was saying about her source going

25 after Mr. Raines?

Page 217


Q. And is that what Regina was saying

in the inbound call report from Fin man?


A. Yeah, again, I mean, I didn't author

the report.

Q. Well, you did author Exhibit 27.

Correct?

A. Apparently.

Q. And in your report you reference

what Regina's source was saying and Armando going

after Raines on executive compensation?

A. Correct.

Q. And that's what Regina wrote in

Exhibit 26?

A. That is what Regina wrote in Exhibit

26, as I said at the beginning of the report.

I don't think I read to the rest - - to the end of the report, but as I said, I didn't

really credit the - - the Regina call note.

Q. And that's because you did not

believe she had good sources?

A. Well, because when you have a source

who you don't even know the name or where they

55 (Pages 214 to 217)


Page 2 18

J. ROSNER - CONFIDENTIAL are, you have no reason or comfort with relying

on that source.

MR. TERRY: Next document is Rosner

Exhibit 28, which is Bates-stamped MGA 03410.



Q. And if you could identify this

document for me?

A. It is a Medley report, background

report, so I don't believe that it was published,

apparently last -- last updated by me, dated September 17, 2004.

Q. Did you write a portion of this?

A. I believe so.

Q. I just noticed, a lot of Medley

reports seem to use baseball analogies.

A. I know. And I'm not even a baseball

fan.

Q. So is there someone who did the

narrative-type editing, just to add in the punchy

metaphors?

A. You know, I don't specifically

remember. I certainly wasn't editing my own

pieces. And in terms of the punchy, yes. I

Page 219

J. ROSNER - CONFIDENTIAL certainly wasn't the guy who added the

punchiness.

Q. Who was the person who did the final

edit?

A. Well, the final edit was Bob Medley.

But that was really again more for a grammatical

and accuracy perspective. In terms of the more

literary edit, it depended. Sometimes it was

Kevin Muehring; sometimes it was Robert Johnston.

At the beginning it was the hyperbolic - - some of the hyperbolic comments were Richard Medley.

Q. Was there any process where

individuals who edited the reports before they

became final ever pushed back on you as to the

quality of your sources?

A. Absolutely.

Q. And was that sort of an iterative

process where they would ask if you were

confident in your source and - - A. Absolutely.

Q. And were you required to give them

some kind of comfort that you were comfortable

yourself with the source before being published?

A. Uh-huh.


Page 220

1 J. ROSNER - CONFIDENTIAL 2 MR. KARAM: We have to have a word

3 answer.

4 A. Oh. The word is "yes. "

5 Q. Okay. Now, what are these Medley

6 Global Advisory background documents? Are those

7 sent to investors or not?

8 A. No, to my understanding.

9 Q. Who are they distributed to?

10 A. Well, the background - - And again, I

11 haven't been there in almost three years, so. Is

12 that right? A little over two.

13 The background report, as I remember

14 the systems there, were reports in process. So

15 they would sit in the background. Other people

16 could actually step in to the document and make

17 changes, make edits, during that process. They

18 didn't go out until - - to clients until sometime

19 later. It wouldn't say "backgroundn on it if it

20 went out in this form.


22 third paragraph on this Fannie Mae document, it

23 says, "Several sources in Washington have

24 recently been suggesting that if OFHEO finds

25 Fannie Mae has been improperly managing earnings,

Page 221


2 they may have done so in a manner that protected

3 executive bonus pools. "

4 Did you write that?

5 A. I don't recall specifically.

6 Q. Do you know, is that referring to - - 7 The several sources, is that referring to Bob

8 Haggerty and the source quoted by Regina?

9 A. I would assume so, but I would also

10 guess not exclusively.

11 Q. Were there any other sources that

12 were telling you that at the time?

13 A. I don't recall.

14 . Q. IS this before OFHEO had actually

15 issued its interim report of the special

16 examination of Fannie Mae?

17 A. Don't recall.

18 Q. Could you take a look at the first

19 paragraph. It says, "As we have said previously,

20 we expect that sometime in next few weeks OFHEO

21 will likely make an announcement in regard to

22 their ongoing investigation of Fannie Mae's

23 accounting and governance practices."

24 Does that indicate to you this was

25 before the OFHEO report was released?

56 (Pages 218 to 221)

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Page 222

1 J. ROSNER - CONFIDENTIAL 2 A. yes.

3 Q. And before the OFHEO report was

4 released, you were being informed by a number of

5 sources in Washington that OFHEO may find that

6 F a ~ i e Mae had been improperly managing earnings

7 to protect executive bonus pools?

8 A. Actually, I had, again from public

9 information in reports that Fannie had put out

10 there, reports that had been put out there by the

11 regulator as per Freddie, ascertained largely

12 those findings myself and corroborated the view

13 with others.

14 Q. So prior to the release of the OFHEO

15 report, you were able to determine, based upon

16 what was in the public arena, that the OFHEO

17 report would likely conclude that F a ~ i e Mae had

18 managed earnings in order to protect executive

19 bonuses?

2 0 A. Yes. Well, hold on. Not

21 specifically to particularly protect bonuses.

22 That basis of it or that assertion or that

23 assumption of it was something that had been

24 floating around. and it didn't seem very

25 farfetched to me.

Page 223

J. ROSNER - CONFIDENTIAL Q. That was - - The part tying it to

executive bonuses, that was something that was

being told to you by sources in Washington prior

to the release of the OFHEO report?

A. Well, Bob Haggerty is not in

Washington. That was something that was being

mentioned by I think various sources. And as I

remember - - And I really don't recall, so I'm not trying to be cagey. But as I remember, there had

been a prior issue in terms of the executive

compensation issues at one of the companies. And

so it certainly wasn't farfetched. And,

actually, in the Freddie report they raised

questions about executive compensation as a

driver.

Q. So is it your testimony that prior

to the release of the OFHEO report, from public

sources you were able to at least determine that

the OFHEO report would likely find that F a ~ i e

Mae had engaged in earnings management?

A. Yes.

Q. And is it also your testimony that

based on public sources you were able to predict

that very well may be tied to earnings management

Page 224

J. ROSNER - CONFIDENTIAL in order to maximize compensation?

A. Not predict but to believe that

there was a strong possibility Chat earnings --

that executive compensation would have been one

of the motivations.

Q. Based on public information, were

you able to learn that that was a risk that the

OFHEO report Could find, that earnings management

had been done to maximize bonuses?

A. Could you restate the question?

Q. Sure. Based on your review of

public information prior to the release of OFHEO

report, was it your view that there was a risk

that the OFHEO could find that earnings

management was done in order to maximize - - A. Yes.

Q. And is it your view that was readily

apparent in the public record?


A. In the public record? Again - -

Q. Tn the public domain?

A. In the public domain, yes. Was it a

contrarian view juxtaposed with the majority of

sell-side financial analysts? It was, but I also

Page 222


2 recognized the conflicts of interest that most of

3 them were subject to.

4 Q. And is it your testimony that you

5 did not need confidential sources to reach that

6 conclusion?

7 A. Absolutely.

8 MR. TERRY: Okay. The next document

9 is dated Septemher 28th. 2004. It's a Medley

10 Global Advisors report. Its Bates stamp is MGA

11 03587.



14 Q. If you want to take a break at some

15 point, just let me know.

16 MR. CAHILL: How are you doing on

17 time, counsel?

18 MR. TERRY: Getting towards the end.


20 me?

21 A. It says "G-7 special report, GSEs:

22 Where Fannie sits."

2 3 It does not look like it went out,

24 because it has Kevin Muehringls name on it.

2 5 Q. Does this appear to be a draft - -

57 (Pages 222 to 225)



Page 226

J. ROSNER - CONFIDENTIAL A. Itdoes.

Q. - - of a report? Do you know if you drafted it?

A. The fact that it's a G-7 special

report, if you let me look.

Yeah. I don't specifically recall,

but I would - - I don't see what - - why it wouldn't have been in part written by me.

Although G-7 special report was typically the

core area, which is Kevin's group. So I would - - I would guess that this may have been

collaborative or something of that nature.

Q. Take a look at the first sentence.

It says, "The long saga of successive government

efforts by the Clinton Administration and then

the Bush Administration - - both quietly supported by the Federal Reserve - - to reign in the

frenetic, low-capitalized balance sheet growth

and market assumptions of government backing for

Freddie Mac and Fannie Mae seems to be finally

coming to a final showdown."

Did you write that?

A. Actually, I don't think I did.

Q. Do you know what it is referring to?

Page 227

J. ROSNER - CONFIDENTIAL A. I don't. Well, let's continue on.

Q. Why don't we look at the next

paragraph. It says, "Fannie Mae, of course,

remains an extremely powerful corporation, but it

has suffered its biggest setback since the early

1990s. The damning interim report a few days ago

by OFHEO sharply criticizing Fannie Mae's

accounting practices and corporate governance,

internal controls, and senior executive

compensation, has significant implications. The

OFHEO report is only one in what may be viewed as

an ongoing series of such releases by OFHEO."

I'll stop there.

Does that give you some context as

to what it's referring to?

A. Uh-huh.

Q. What is it referring to?

A. The interim report of OFHEO on the

Fannie Mae investigation.

Q. And was Medley expressing the view

in this report that the OFHEO report would

somehow affect the legislative fight over Fannie

Mae?



Page 228

1 J. ROSNER - CONFIDENTIAL 2 A. I think that it was a view that

3 legislators on both sides were going to be

4 polarized by the accounting problems now having

5 been shown at both Fannie and Freddie, and there

6 would be a recognition that the current regulator

7 was not strong enough to actually regulate.

8 Q. And is this report expressing the

9 view that the OFHEO report provided ammunition,

10 if you will, to combatants on the sides of the

11 legislative debate over Fannie Mae?

12 A. In part. It also, if you continue,

13 highlights Kip Bond's approach, which was to

14 battle back.

15 Q. Let's take a look at that paragraph.

16 It says, "Sources are now suggesting to us," and

17 it gross through a number of things.

18 Was that source Steve Blumenthal?

19 A. I don't believe so. Let me read

20 that.

2 1 MR. CAHILL: Let me caution you,

22 while you're reading, not to speculate. If you

23 know - - 2 4 THE WITNESS: Absolutely.

2 5 A. I don't really know, and I don't

Page 229


2 specifically recall.

3 Q. Okay. Let me show you something.

4 Keep Exhibit 29 in front of you, and take a look

5 at 30, which is Bates-stamped at the top MGA

6 09762.



9 Q. Can you identify Exhibit 30 for me?

10 A. Uh-huh.

11 Q. What is it?

12 A. An outbound call report.

13 Q. Between you and Mr. Blumenthal?

14 - A. correct.

15 Q. And drafted by you?

16 A. Apparently.

17 Q. If you take a look at the call

18 notes, it says, "Steve indicates several

19 important issues mostly around the belief that

20 Fannie Mae is not going willingly. These are his

21 personal views. Fannie appears to be up to their

22 old lobbying tricks, though it was unclear

23 whether the independent board members know this,"

24 and then it makes a number of points.

2 5 Do you see that?

58 (Pages 226 to 229)

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Page 230

J. ROSNER - CONFIDENTIAL A. Uh-hum.

Q. And does that reflect comments that

Mr. Blumenthal made to you?

A. I would gather.

Q. Could you compare that to the third

paragraph of the G-7 special report, which is

Exhibit 29?

A. Uh-huh.

Q. And does that paragraph appear to be

encapsulating a number of the points made to you

by Mr. Blumenthal on this call?

A. Yes, although most of those points

were actually available in Beltway circles and

were reiterations of conversations I had with

lobbyists on both sides, with Senate and

legislative staff.

Q. And what's the date of your call

report with Mr. Blumenthal?

A. September28th.

Q. And the date of the G-7 special

report is also September 28th, 2004?

A. Correct.

Q. So it appears the G-7, at least this

draft report, was written the same day you had

Page 231


your call with Mr. Blumenthal.

A. It appears so. Which actually makes

me even - - And again, I don't recall specifically, but makes me even more of the

belief that the report would not have been

written on that call report but that call report

would have actually been to try and triangulate

and confirm information that I already heard.

Q. Who else did you hear that

information from?

A. All over the place. The Kip Bond

thing you would hear from people on both sides of

the aisle in the Senate Banking Committee.

Q. Why did you feel it necessary to

triangulate this information?

A. Because that's actually what my

responsibility was, was not to put out

information from a single source.

Q. Well, why didn't you feel you

couldn't just trust a single source?

A. Because that would be, frankly,

irresponsible and derelict of my

responsibilities.

Q. So are you saying that for anything


Page 232


2 that would appear on a G-7 special report or any

3 other document that was distributed to investors,

4 anything that refers to sources would be

5 multisourced?

6 A. Unless it was sourced from an

7 official document that was public record, yes.

8 MR. TERRY: Why don't we take a

9 quick break.

10 A. Can I correct that?

11 Q. yes.

12 A. Unless it was sourced from a public

13 document. Not related to; sourced from.

14 MR. TERRY: We'll take a quick break

15 to change the tape.

16 THE VIDEOGRAPHER: The time is 2:43.

17 We're going off the tape. This is the end of

18 Tape 3.

19 (Whereupon, a recess is taken.)

20 THE VIDEOGRAPHER: We are going back

21 on the record. The time is 2:51. This marks the

22 begi~ing of Tape Number 4 in the deposition of

23 Mr. Joshua Rosner, being held at OIMelveny &

24 Myers in New York City. The videographer is

25 Terry Carruthers, here on behalf of Esquire

Page 233


Deposition Services at 1020 19th Street,

Washington, D.C.

Counsel may proceed.

Q. Mr. Rosner, you understand you're

still under oath?

A. I do.



Q. I'm going to hand you what's been

marked as Rosner Exhibit 31. Bates stamp at the

top is MGA 09772.

Can you identify this document for

me, please?

A. Appears to be a call report to Steve

Blumenthal.

Q. Is it a report of a call you had

with Mr. Blumenthal?

A. It appears so.

Q. And is it authored by you?

A. Appears so.


first paragraph, it says, "Steve views the cut in

dividend as a positive indication that Famie

Mae's management and board are trying to make

59 (Pages 230 to 233)


Page 234

J. ROSNER - CONFIDENTIAL good-faith efforts toward the regulator. He is,

however, surprised that investors have no issue

with the uncertainty this presents on an ongoing

hasis, as the dividend payment will have to be

approved each quarter, and it is conceivable that

it could be cut fully at some point (though he's

not implying that OFHEO will have say or ability

to require such action, it would be the company's

choice). If they cut it, at some point there

will be lots of dividend growth share holders who

will be forced to sell the stock."

Do you know what event this

paragraph is referring to?

A. I assume that it was the first

aM0unCed cut in Fannie's dividend, but I don't

specifically recall the dates.

Q. Sometime around January, 2005, did

Famie Mae announce it was going to cut its

dividend?

A. Again, I don't remember specific

dates.

Q. Was it generally in that time

period?

A. I believe so.

Page 235

J. ROSNER - CONFIDENTIAL Q. Was it some period after the OFHEO

report had been released?

A. I believe so.

Q. Do you know what Mr. Blumenthal is

referring to in the second paragraph, where he

expresses surprise that investors have no issue

with the uncertainty this presents?

MR. CAHILL: YOU mean the second

sentence?

MR. TERRY: I'm sorry. The second

sentence.

A. Yeah, again, I'm not sure that - - I'm not sure whether that came out of something

that he put out there or whether I had first

commented on my surprise with the uncertainty and

he actually agreed.

Q. What was your surprise?

A. The fact that you actually have a

situation where the regulator would ultimately

have to approve the changes to the dividend and

investors didn't seem to appreciate or care that

you had two companies who - - or you had a company who was increasingly at the exposure of the

regulator.

Page 236

J. ROSNER - CONFIDENTIAL Q. Were you surprised that cutting the

dividend didn't do more to negatively affect

Fannie Mae's share price?

A. I didn't have a view in terms of its

share price.

Q. Well, what do you mean by "affect

shareholders"?

A. Where do you - - Where is affect shareholders?

Q. Well, when it says, "he is, however,

surprised that the investors have no issue with

the uncertainty this presents," what is that

referring to?

A. I would assume that refers to his

personal view that you haven't heard investors

expressing outrage. I'm not sure that it relates

in any way to share price as much as it relates

to surprise that investors didn't seem to

highlight, to talk about. There was quite a lot

of news reports at the time, and you really

hadn't heard much by way of outrage. Everyone

was continuing to try to spin everything as good

news.

Q. And Mr. Blumenthal was expressing

Page 237


surprise that he hadn't heard outrage from Famie

Mae's investors.

A. Well, again, I can't characterize.

Outrage would be his view. Surprise. It sounds

like he was - - Again, I don't specifically recall it, but it sounds like he was surprised that

investors weren't recognizing that there had been

a change.

You have to remember, these

companies had been - - this company specifically

had been telling everyone that everything was all

right for a very long time.

Q. Would you take-a look-at the fourth

paragraph, which begins with, "With Huron"? It

says, "With Huron Doing the internal accounting

review for the Board's examination, (two former

Anderson partners firm) at a time when the new

audit firm, Deloitte, will being a serious

reaudit it becomes harder for Huron to give a

puff report to the Board. So they may have to

not only come close to concurring with OFHEO's

findings, but will have to probably highlight any

other internal control and operational problems

they find."


60 (Pages 234 to 237)

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Page 239

1 J. ROSNER - CONFIDENTIAL 2 A. I don't think - - Again, I think that 3 the context, as I remember it, was that he was

4 commenting not specifically on findings but on

5 the fact that I had cynical view on the work that

6 someone hired by the company would be able to

7 provide, given my view on the company's

8 strong-arm tactics in some areas. And I think

9 that his comment, as I understand it, and I

10 believe I understood it at the time, was that

11 they actually would be doing credible work.

12 MR. TERRY: The next document will

13 be marked as Exhibit 32, Bates-stamped MGA 03779.

14 (Whereupon, Exhibit ~osner-32 is


16 Q. And first, can you identify this for

17 me?

18 A. Again, appears to be a background

19 report; in other words, not a report in this form

20 it was sent out, but a report in process.

21 Q. Is it a report drafted by you?

2 2 A. At least in part it appears so.

2 3 Q. And there's a date both at the top

24 and the bottom. It's January 19th, 2005, 10:32

25 a.m.?

Page 238


Is that paragraph expressing in sum

or substance what Mr. Blumenthal said to you?

A. Again, I don't specifically recall,

but perhaps, in all likelihood.

Q. And based on where that language

appears in the report, is that language coming

from something you were saying or something that

Mr. Blumenthal was saying?

A. I don't know. I do remember

actually having skepticism that a reaudit that

was done at the request of the board would

actually be honest in its findings. And so,

actually, I think Steve's comments were actually

supportive of the company and its board in the

sense that he was - - seems to have been suggesting that the - - given that OFHEO felt they had done an exhaustive and credible job in their

work, that Huron would also be doing an

exhaustive and credible job in their review.

Q. And did Mr. Blumenthal express the

view to you that Huron's findings would have to

not only come close to concurring with OFHEO's

but would have to highlight anything else

additional?


Page 240


Q. Do you see that?

A. Uh-huh.

Q. Does that reflect the date when the

last edits were made to this document?

A. That would reflect - - Trying to remember how the systems worked. That should

reflect the date that the last edits were made.

Yes.

Q. Okay. And that's the same date of

the last exhibit we just looked at, which was

your call with Mr. Blumenthal?

A. Correct.

Q. And if you take a look back at

Exhibit 31, there's a date of an E mail on the

top. It says 10:21. First, is that E mail

automatically generated when you put the contact

call report into the system, or did you have to

actually send it to people?

A. You know, I don't remember.

Q. The date of that, is January 19th

also correct?

A. Uh-huh.

Q. And is it 10:21?

Page 241


Q. And this draft report is about ten

minutes later?

A. Uh-huh.


paragraph of this report, it says, "The

announcement last evening that Fannie Mae will

cut its current dividend by 50 percent comes as

some surprise to us because it does not

materially address their capital shortfall and,

while debt-holder friendly, is shareholder

unfriendly."

A. Uh-huh.

Q. Is that the same topic you discussed

that same day with Mr. Blumenthal?

A. ~t appears so.

Q. what does that sentence means?

A. Could you be more - - Q. Did you write that sentence?

A. YOU know, I don't recall. I may

well have.

Q. Sitting here today, do you have any

understanding as what it means by "the

announcement, while debt-holder friendly, is

6 1 (Pages 238 to 241)


Page 242


shareholder unfriendly"?

A. Yeah. In other words, it actually

strengthens the claim on assets that debt-holders

would ultimately have by retaining capital as

opposed to paying it out to the benefit of the

shareholders.

Q. So is it your view that the dividend

cut was a negative for shareholders?

A. Well, I don't think that even in and

of itself it necessarily was. I think in

conjunction with other things on which I wasn't

commenting it may or may not have been.

Q. If you look the next sentence, it

says, "While it does send a signal that the new

management team is interested in demonstrating

their seriousness in addressing regulatory

concerns' - - Let's pause on that for a second. Is that something that

Mr. Blumenthal had said to you on the call on

that same day?

A. I don't - - I assume so. You know, I

don't remember - - recall specifically that call report, so I would have to read it and tell you,

which isn't recollection. It's reading it.

Page 243


2 Q. Okay. Take a look back, why don't

3 you, at Exhibit 31.

4 A. Uh-huh.

5 Q. At the top it says, "Steve views the

6 cut in dividend as a positive indication that

7 Fannie's management and board are trying to make

8 good-faith efforts toward the regulator."

9 DO you see that?

10 A. Right.

11 Q. Is that the - - Is that the same

12 comment that appears in your report as, "While it

13 does send a signal that the new management team

14 is interested in demonstrating their seriousness

15 in addressing regulatory concerns"?

16 A. Yeah, although I don't think that

17 there's anything particularly insightful or

18 unique from Steve's view. I think there are a

19 lot of people who actually were of that view at

20 the moment.

21 Q. That is what Mr. Blumenthal said to

22 you.

2 3 A. Yeah. That is also what

24 Mr. Blumenthal seems to have said.

2 5 Q. And it's what you wrote ten minutes


Page 244


2 later in this background section, is it not?

3 A. Well, it seems to be. I'm not sure

4 that it was based on, again, a triangulation of

5 views rather than a singular view. I happen to

6 think that it was probably informed by other

7 conversations.

8 Q. You think you had those

9 conversations in the ten minutes between the

10 E mail and - - 11 A. NO.


13 A. No. I think I probably would have

14 had those conversations in the hours before I

15 spoke to Steve, because it also strikes me as

16 fairly strange to have that much completed within

17 ten minutes of a call.

18 Q. Whoelse --Whoelsewouldyouspeak

19 with besides Mr. Blumenthal about what the

20 regulator felt about Fannie Mae's action?

21 A. But I don't think that I actually

22 comment in that background report on the

23 regulator's opinion in that. Right? While it

24 does - - If you go back to 32 at the top? It does

25 not materially address capital shortfall, and

Page 245

1 J. ROSNER - CONFIDENTIAL 2 while debt-holder friendly, shareholder

3 unfriendly, while it does send a signal new

4 management team is interested, I don't think in

5 there you - - you hear me mention OFHEO as the 6 basis or it as being a sign that OFHEO approved

7 or disapproved or had an opinion on as opposed to

8 it being a broader opinion that may actually have

9 been nothing but my opinion.

10 Q. Could you take a look at the bottom

11 of this page?

12 MR. CAHILL: Which page?

13 Q. I'm sorry. Of Exhibit 31?

14 . A. 31?

15 Q. The background. It says, "The

16 engagement of Deloitte to do a complete reaudit

17 may also increase the" - - 18 A. Thirty-two.

19 Q. I1msorry, 32.

20 "The engagement of Deloitte to do a

21 complete reaudit may also increase the pressure

22 on Huron, hired to do the board investigation of

23 the interim OFHEO allegations, to be particularly

24 conservative in their approach and presentation

25 of findings. "

62 (Pages 242 to 245)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 246


Q. "The result may drive them to not

only come close to concurring with OFHEOPs

findings, but, should they find any, expose any

other internal control and operational issues."

A. Uh-huh.


A. Again, I don't particularly

recollect that. I have no reason to believe that

I didn't.

Q. And that very opinion was something

that was expressed to you by Mr. Blumenthal on

that same day, was it not?

A. Uh-huh. Again, I don't think that

that's a particularly unique or - - unique view or proprietary view of OFHEO. I think there were

others who were probably of that view as well.

By way of context, Huron came out of

the Enron scandal and the breakup of an

accounting firm, and as I recall speaking to many

clients about my concern about the integrity of a

reaudit and, you know, investors and reporters

and others, there were a lot of people who were

saying, Don't be so cynical about the quality of

Page 247


an audit firm to actually have to do the right

thing in this day and age.

Q. Can you take a look back at Exhibit

31 at the third paragraph?

A. Thirty-one. Uh-huh.

Q. It says, "OFHEO will now focus the

exam on who was responsible for the problems

uncovered in the interim investigation and what

they kneww?

A. Uh-huh.

Q. And that appears, does it not, in

the background in Paragraph 3 of the background

in the middle, where it says, "Instead, OFHEO

will probably focus the examination on who was

responsible for the problems uncovered in the

interim investigation" - - A. Uh-huh.

Q. - - "what they knew, didn't know, or

should have known"?

That is based, is it not, on what

Mr. Blumenthal told you?

A. NO.


Sorry.


Page 249

J. ROSNER - CONFIDENTIAL A. Appears to be a call report.

Q. Is it a call report between you and

Mr. James Moynihan, III?


Q. And he worked for Evergreen

Investments Equity?

A. Uh-huh.

Q. They were a client of yours?

A. I don't think they actually ever

were. I think they were a prospect.

Q. Is this a report that you drafted?

A. I would assume so.

Q. The summary says, "Want to be on

FASB call. Great meeting that ended with 'as I

find places to put money to work I am getting out

of Fannie ' " ?

A. Uh-huh.


A. I don't recall, but possible.

Probably.

Q. Any reason to doubt that - - A. NO.

Q. - - since your name appears to the author?

Page 248 1 J. ROSNER - CONFIDENTIAL 2 Q. It's not based on what

3 Mr. Blumenthal told you?

4 A. It's based, again, on a guideline

5 and a guide map of information that was put in

6 place as a contextual approach used in the

7 Freddie examination, in other public comments

8 that were made and, you know, resupported and

9 informed.

10 Q. Was that information that you were

11 aware of in advance of the release of the OFHEO

12 report on Pannie Mae?

13 A. Absolutely. We saw the same process

14 occur in Freddie, except it didn't happen as part

15 of an interim process. It was a one-step

16 process, the back half of the paper, the Baker

17 Botts or the Freddie exam was where that

18 information showed up.


20 document, which will be Exhibit be 33, which is

21 an ~ugust 17th. 2004, contact call report

22 Bates-stamped MGA 09745.

2 3 (Whereupon, Exhibit Rosner-33 is


2 5 Q. Can you identify that for me?

63 (Pages 246 to 249)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 250


Q. Did you have calls periodically with

Mr. Moynihan?

A. I probably did.

Q. Why on a two-line contact call

report did you put, "as I find places to put

money to work I am getting out of Fannie"?

A. I don't remember the broader

context. I don't specifically recall.

I remember there being an issue with

a number of Boston institutional investors where

one of the analysts who had covered Fannie had

actually done a group lunch for some of the large

institutional investors in Boston, and the

analyst expressed that, although he had a

positive rating on it, he was increasingly

concerned and wary. And one of the large

shareholders called the company and, essentially,

the analyst was strong-armed is at least what I

was told by other Boston accounts, into changing

his view or having his coverage of F a ~ i e and

Freddie taken away, which I think was seen as

distasteful by many of the institutional

investors in Boston, who increasingly came to

Page 25 1

J. ROSNER - CONFIDENTIAL have concerns about Fannie and Freddie.

Q. Were you happy that Evergreen was

taking its money out of Fannie May?

A. I didn't care. I have no conflict.

Q. But you saw fit to include it in

your call report.

A. I saw fit to include in the call

report. Yeah.

Q. Why was that relevant?

A. I have no idea.

Q. Aside from this E mail, did you ever

come to learn the stockholdings of your clients?

A. NO. Not typically.

Q. On some events did you?

A. Well, I mean in the sense that you

knew who the largest shareholders were by the

fact that they were the ones who were essentially

calling and trying to encourage you to change

your views, sometimes w'th the threat of - - of either not becoming clients, if they were

prospects, or reducing the amount of business

that they would pay.

MR. CAHILL: I'm sorry. Please note

my objection to the form of that last question,


Page 252


2 because I think there was testimony that

3 Mr. Moynihan was not a client.

4 THE WITNESS : Correct.

5 Q. Did you ever find out if any of your

6 clients were short F a ~ i e Mae shares?

7 A. Notparticularly. Notby fact.

8 Perhaps by circumstance, but not specifically.

9 Q. Sitting here today, can you tell me

10 if any of your clients had a short position of

11 Fannie Mae in 2003, 2004?

12 A. From recollection, not specifically.

13 Q. Generally do you recall that some of

14 your clients had short positions in Fannie Mae?

15 A. I'm sure there were some clients who

16 were short, as I'm sure there were some clients

17 who were long or prospects.

18 Q. Do you know which were greater,

19 whether there were more short clients or long

20 clients?

21 MR. CAHILL: I caution you not to

22 speculate. If you know you - -

2 3 A. Yeah, I don't know.

24 Q. Do you know which clients were short

25 F a ~ i e Mae in 2003 and 2004? - ,, Page 253


2 A. Not off the top of my head. I don't

3 recollect.

4 Q. Did Medley itself own any shares in

5 Fannie Mae?

6 A. The firm?

7 Q. Yeah.

8 A. Not to my knowledge. To my

9 knowledge we don't own any shares in any

10 securities.

11 Q. Did you own any shares in

12 securities?

13 A. Not of Fannie or Freddie or any

14 related issues.

15 Q. Did you ever have any position,

16 whether long or short, in Fannie Mae during that

17 time period?

18 A. Never.

19 Q. Did you ever hold any Fannie Mae

20 debt?

21 A. Never. You know, not unless it's

22 through a mutual fund or something I'm unaware

23 of.

2 4 Q. I won't ask about your house.

2 5 A. Yeah, exactly.

64 (Pages 250 to 253)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 254

J. ROSNER - CONFIDENTIAL Actually, it's on the record

already. I'm a renter.

Q. Do you still speak to

Mr. Blumenthal?

A. I haven't spoken to him in a very

long time. I think the last time I spoke - - I don't remember whether it was phone or

E mail. - - he informed me that he was going to

work for - - I'm trying to remember, a buy-side

firm. I don't remember doing what.

Q. Have you ever, personally, met with

Mr. Raines?

A. On one occasion.

Q. Was that on a train?

A. NO.

Q. Tell me about the occasion when you

met Mr. Raines.

A. It was at American Enterprise

Institute.

Q. And tell me a little bit about the

event.

A. What would you like to know?

Q. Who was speaking?

A. Frank Raines was speaking.


Page 256

Page 252

J. ROSNER - CONFIDENTIAL Q. He was giving a speech at the

American Enterprise Institute?

A. Correct.

Q. Brave man.

A. It was sort of entering the enemy

camp, and he presented, made a presentation. I

asked a question, because I had real concerns

that they were understating their delinquency and

default numbers. I asked him a specific question

about their application of loss mitigation and

what those numbers would look like had they

reported without the loss mitigation, because I

felt that they were, if not intentionally,

functionally deceptive, and he refused to answer

the question. Frankly, several people at that

meeting noted to me that it was interesting how

cagey he became.

And after his official speech and

Q&A, I approached him to try and again get an

answer to the question.


which is Bates-stamped MGA 04202, which is dated

March 11, 2005.


65 (Pages 254 to 257)



4 me?

5 A. yes.

6 Q. What is it?

7 A. It is an E mail from Anne Canfield

8 to me, from Jason Thomas to Anne Canfield.

9 Q. Do you know who Jason Thomas was?

10 A. Yeah. I'm trying to remember

11 whether it was the RSC, republican study

12 committee or republican policy committee. He was

13 involved in that.

14 Q. It says RPC on it. Do you know - -

15 A. Oh. There you go. Republican

16 policy committee.

17 Q. What was the republican policy

18 committee?

19 A. Just that. That policy committee.

20 They - - They developed positions for the -

21 for - - for the republican members. 22 Q. Of the US Senate?

2 3 A. correct.

2 4 Q. So Mr. Thomas was affiliated in some

25 way with the US Senate as an aid?

Page 257


A. Correct,

Q. If you take a look at his E mail, it

says, "Please give this as wide a circulation as

possible" - - A. Absolutely.

Q. - - "please do not attribute it to

me. The word is that the use of the q-spes to

move MBS off balance is going to blow a $20

billion hole in Fannie Mae's capital. This is

already bigger than Enron."

A. Yeah. I remember this fairly

specifically.

Q. Did you ever report that, publish it

in your reports?

A. No. Actually, I don't believe I

did. I remember getting a phone call shortly

after I received this from a reporter who, you

know, essentially said, Did you see this? And

it's funny. I had actually thought - - Oh, yeah, it does. It was bullshit, the second that I

received it.

I'm sorry for that being on the

record. But I didn't give it much credit when I

saw it, dismissed it out of hand. I know a



Page 258

J. ROSNER - CONFIDENTIAL reporter actually called me, thinking that it was

credible, and I said to her - - to that reporter that I didn't find it credible.

Q. Was that reporter Donna Kapeki?

A. ~ t w a s .

Q. Do you know if she reported on it?

A. I believe she did.

Q. Did you ever learn why Jason Thomas

was forwarding this to Anne Canfield?

A. No. I mean, I assumed that Jason

was a - - you know, had some other motivations. I

didn't really give it much credit. And, frankly,

I think other than meeting him at a - - a

public - - I don't remember whether it was AYAI or Hudson, at a public event after this, I don't

think I had ever met him or spoken to him, so I

didn't really give it much merit.

Q. Was this E mail forwarded to you by

Anne Canfield?

A. ~t appears so.

Q. At the time was Ms. Canfield working

for FM Watch?

A. Again, I don't know. I believe so.

I think it's interesting, actually,

Page 259


that Jason Thomas in his E mail to Anne Canfield

says, "Please give this as wide a circulation as

possible," and in Anne's E mail to me she said,

"Please do not forward this or say where you

received this information."

So it seems that Anne was actually

also somewhat dubious of the information.

Q. Well, if you had forwarded the

E mail, it would make apparent who the source of

the E mail was, would it not?

A. Uh-huh.

Q. And that would countermand his

request, "do not attribute it to me"?

A. Absolutely.

Q. And she also asks you not to source

Jason on anything. Correct?

A. Uh-huh.

Q. Ms. Canfield wasn't asking you to

not to share this information with anyone, was

she?

A. Well, she is.

Q. HOW?

A. "Please do not forward this."

Q. Well, forwarding it would reveal not

Page 260


only the information but the source of the

information, would it not?

MR. CAHILL: Objection. Form.

Q . Would forwarding this information

reveal details as to the source of the

information?


YOU can answer.

A. Yes.

Q. And that would have contradicted his

request not to be sourced. Correct?


Q. You can answer.

A. Yes.

Q. And when Ms. Canfield provided this

information to you, was she aware that you were

an analyst covering Fannie Mae?

MR. CAHILL: Objection. Foundation.

A. I actually have issues with the

"analyst covering Fannie Mae. "

Q. During the period that Ms. Canfield

forwarded this to you, you were working at

Medley. correct?

A. correct.

Page 261


Q . And did you periodically publish

reports talking about Famie Mae?

A. Talking about regulatory,

legislative, and policy issues regarding Fannie

Mae. Yes.

Q. One more document.



MR. TERRY: Actually - - Yeah. We'll

do this.


me?

A. I'm sorry?

Q. Can you identify this for me?

A. Appears to be an E mail - - I don't know whether it's a series of -- back-and-forth E mail between Andrew Heiskell and Josh Rosner.

Q. Who is Mr. Heiskell?

A. At Wellington. Analyst or portfolio

manager at Wellington.

Q , Is that a buy-side analyst?

A. It is.

Q. So Mr. Heiskell is someone who made

recommendations as to what Wellington should

66 (Pages 258 to 261)



Page 262

J. ROSNER - CONFIDENTIAL purchase?

A. I don't know if he made

recommendations or he had the authority to make

the decision.

Q. Your E mail references a report.

What report is that referring to?

A. Where are you talking about?

Q. The first line, "Good. I do have

some interesting tidbits on what could be in the

report of a salacious naturen?

What report is that referring to?

A. I don't know. I don't recall.

Q. If you take a look at the second

part of the first page of the E mail from you to

Mr. Heiskell, the original one? It says, "We

continue to believe that the OFHEO special

examination of Fannie Mae report will be released

by the end of May"?

A. Uh-huh.

Q. Does that refresh your recollection

that the E mail at the top is referring to the

OFHEO special report of Fannie Mae?


A. I don't know, because - - I really

Page 263

J. ROSNER - CONFIDENTIAL don't know. Because you've got a - - You've got a report that was actually attached that was

already out and available and, yet, I'm referring

to "interesting tidbits." So I would suspect

that it was not related to that. I'm not sure

what it was related to.

Q. How many special reports of Fannie

Mae did OFHEO release?

A. But where does it say special report

at the top? You just asked me if that report at

the top refers to the special report, and I'm not

sure if it reports - - reflects the special report or a different report.

Q. Does it refer to a report by OFHEO?

A. I assume so, but it could also be

Hun.

Q. Okay. And looking at the second

E mail, dated April 26, 2006, where it says, "We

continue to believe that the OFHEO special

examination of Fannie Mae reports will be

released before the end of May."

A. Uh-hum.

Q. Doyouseethat?

A. Uh-huh.

67 (Pages 262 to 265)

Page 264

1 J. ROSNER - CONFIDENTIAL 2 Q. Does that give you any indication as

3 to whether the top E mail is referring to the

4 OFHEO special examination report?

5 A. No. That's my point. The fact that

6 actually that was the 26th and that report went

7 out to clients on the 26th leads me to believe

8 that there would not necessarily be anything

9 particularly new to report to him on the 27th.

10 Q. Okay. How about the subject line

11 which says, "Re GSE update: Announcement of a

12 new OFHEO director and juicy OFHEO reports."

13 Reading that, combined with your

14 language saying, "I have some interesting tidbits

15 on what could be in the report of a salacious

16 nature," does that suggest to you whether the

17 report you're discussing is the OFHEO report?

18 A. As I said, I don't really remember,

19 and the timing may have been related to one of

20 the internal inspector general reports at Hun.

21 I'm not sure, and I don't remember the timing.

2 2 Q. Do you recall what tidbits this is

23 referring to?

2 4 A. No. If I remembered what tidbits

25 it's referring to I would probably remember what

Page 265

J. ROSNER - CONFIDENTIAL report it is.

Q. Were you aware of any nonpublic

tidbits of a salacious nature as to what would be

in the OFHEO report release May, 2006?

A. Not to my knowledge.

MR. TERRY: This is actually the

final document.



MR. TERRY: This document is

Bates-stamped MGA 03735. At the top it's dated

December 22nd, 2004.

Q. Could you take a look at the top

E mail there?

A. Uh-huh.

Q. Is that an E mail from Mr. Medley to

YOU?

A. Uh-huh.

Q. And some others at Medley?

A. Uh-huh.

Q. Could you read that, read the text

of Mr. Medley's E mail, into the record?

If you could just read aloud that - - A. You could read it.



Page 266 1 J. ROSNER - CONFIDENTIAL 2 Q. Well, I'm asking you to.

3 MR. CAHILL: YOU can go ahead. I'm

4 not sure what the point is, but.

5 A. Ityeah, yeah, you could never resist

6 dancing on Raines' grave. We've all come to love

7 and respect you for the very scary focus. ~ n d

8 who would have thought three years ago Josh

9 Rosner would be supervising and choreographing

10 the rise of Freddie and the humbling of Fannie?

11 Oh. That's right. We did."

12 Q. And that was something that

13 Mr. Medley had written to you on December 22nd,

14 2004?

15 A. I guess so.

16 Q. And was it your understanding he was

17 referring to the fact that you had previously

18 written, substantially prior to this, that Fannie

19 Mae would have some significant accounting

20 errors?

21 A. I can't really speak to the basis of

22 Richard Medley's view. I think I would

23 characterize my relationship with Richard Medley

24 this entire - - that entire period as - - How would

25 I put it? - - peculiar, to say the least, and

Page 267

1 J. ROSNER - CONFIDENTIAL 2 would point out that I walked in the door at

3 Medley without many of the sources that you're

4 asking about and had substantially the same views

5 as early as mid-2001.

6 And so for Richard, who had been

7 a - - a strong democratic operative before 8 actually entering into private enterprise, having

9 been chief economist to House - - I think House 10 Financial Services and a major democratic

11 fundraiser, I think he had reasons to question

12 whether there was anything ever wrong with Fannie

13 and Freddie.

14 MR. TERRY: T don't have any more

15 questions. Thanks.


17 We're going off the record.



20 We're back on the record.

21 EXAMINATION BY COUNSEL FOR LEANNE SPENCER

22 MS. RANDELL:

2 3 Q. Good afternoon, Mr. Rosner. My name

24 is Lauren Randall, and I represent Leanne Spencer

25 in this matter, and I have just a few very brief

Page 268

J. ROSNER - CONFIDENTIAL questions.

Have you ever had any communications

with Leanne Spencer?

A. Off the top of my head I don't

recall. I don't recall.

Q. Do you recall ever attending any

presentations that she spoke at?

A. I don't recall. I don't believe so,

but I don't recall.

Q. Did you ever listen in on analyst

earning calls?

A. Idid.

Q. How frequently?

A. AS often as I could. Time

constraints.

Q. Do you recall ever hearing

Ms. Spencer speak on any of those calls?

A. Yes. Not - - Again, not specific in

terms of - - in terms of statements or substance.

Q. So you don't remember anything she

specifically said.

A. Not specifically.

MS. RANDELL: That's all I have.

EXAMINATION BY COUNSEL FOR TIM HOWARD

Page 269

J. ROSNER - CONFIDENTIAL BY MS. NEISH:

Q. Good afternoon, Mr. Rosner.

A. Good afternoon.

Q. I'm Laura Neish, and I represent Tim

Howard. I'll start off by asking you a very

similar question to what Ms. Spencer's counsel

just asked you.

Did you have any interactions with

Tim Howard?

A. Not that I recall directly.

Q. Any conversations with him?

A. Not directly.

Q. Do you recall hearing any statements

by Mr. Howard on analyst calls?

A. Of course. Not specifically, but

yes.

Q. You don't reoall any specific

statements by Mr. Howard.

A. NO.

Q. I would like to follow up a little

bit about testimony you gave earlier today about

your contacts at OFHEO.

You mentioned that you spoke with

Steve Blumenthal?

68 (Pages 266 to 269)



Page 270

1 J. ROSNER - CONFIDENTIAL 2 A. Uh-huh.

3 Q. And could you just reiterate about

4 how often you speak with him?

5 A. Again, different - - At different

6 times it would differ in amounts, from

7 frequently, you know, I don't know, once or twice

8 a week to, you know, not for a month or two at a

9 time.

10 Q. And in the 2003/2004 period?

11 A. I don't specifically recall. I

12 would guess that it was once every three, four

13 weeks.

14 Q. And I think you also testified that

15 you met with him for drinks on occasion?

16 A. I met with him for drinks on one or

17 two occasions.

18 Q. And what about Mr. Brereton?

19 A. Same.

2 0 Q. The frequency would be about the

21 same with Mr. - - 2 2 A. No, the frequency was somewhat more,

23 because as the information officer at OFHEO he

24 was really the person who was able to tell me

25 what - - or answer questions about things that

Page 27 1

1 J. ROSNER - CONFIDENTIAL 2 OFHEO had said - - or publicly.

3 Q. How often did you speak with

4 Mr. Brereton?

5 A. The same. Usually when I had a

6 question regarding interpretation of something

7 that OFHEO had done or said, or rumors that were

8 running around the market.

9 Q. So once every few weeks?

10 A. Yeah.

11 Q. And did you ever meet with him

12 personally?

13 A. same.

14 Personally? You mean

15 face-to-face - - 16 Q. Yes.

17 A. - - you don't mean - - Yeah. Had

18 drinks with him a few times or lunch or drinks

19 with him a couple times.

20 Q. And when you had drinks with him,

21 how long were these interactions?

2 2 A. Oh. Half-hour, hour.

2 3 Q. Did you speak with anyone else at

24 OFHEO?

25 A. Yeah, of course. I spoke with their


Page 272

J. ROSNER - CONFIDENTIAL chief economist at times. I spoke to Stephanie

Mullin at times. I think I spoke to Forest

Pfaffenburg once or twice. I think that's about

it.

Q. Who was the chief economist?

A. Hold on. I had spoken to their

chief counsel, but that was back in 2001, I

guess.

Q. That would have been when you

were - - before you were employed at Medley.

A. correct.

Q. And the chief economist, who was

that?

A. I don't know why I'm drawing a blank

on his name. He's still the chief economist. I

just don't remember his name.

Q. Do you recall the frequency of your

interactions with him?

A. No. It was really related to

macroeconomic issues, not company-specific. My

concerns about the housing market.

Q. And what about Stephanie Mullin?

A. Same clarification of press

releases. Infrequent.

Page 273

J. ROSNER - CONFIDENTIAL Q. Did you ever speak with Mr. Falcone?

A. Not - - I don't believe other than a

hello during his time at OFHEO. I did meet him

for - - I don't remember whether it was lunch or a snack after he left, to find out what he was

planning on doing.

Q. You never spoke with him during his

term at -- A. I don't believe so. Certainly not

of substance.

MS. NEISH: Okay. Thanks. That's

all I have.

THE VIDEOGRAPHER: The time is 3:46.

We're going off the record.



We're back on the record.

EXAMINATION BY COUNSEL FOR FANNIE MAE

BY MR. WALSH:

Q. Good afternoon, Mr. Rosner. My name

is Michael Walsh. I represent Fannie Mae in this

matter.

You understand that you are still

under oath. Is that correct?

69 (Pages 270 to 273)


Page 274

1 J. ROSNER - CONFIDENTIAL 2 A. yes.

3 Q. You previously testify that you and

4 Mr. Medley had a peculiar relationship, and you

5 mentioned that Mr. Medley was a democrat, and

6 that you also had your views when you joined

7 Medley's group.

8 Can you elaborate on that, please?

9 A. On which specific part?

10 Q. On the fact that you had one set of

11 views and Mr. Medley had another?

12 A. Yeah. I mean, the set of views was

13 not from - - was not - - that I referred to is not

14 a partisan set of views. It was rather that

15 Richard was uninformed about housing and mortgage

16 markets and GSE-related matters and, yet, had a

17 somewhat hyperbolic view of the Washington

18 landscape for the enterprises. And so when I had

19 first arrived at Medley there was this clear

20 difference. I think my views were much more

21 reasoned, and his were much more off the cuff.

2 2 Q. To be clear, what were your views?

2 3 A. My views was that the companies had

24 significant issues, that they - - there was a - - a

25 real discussion worth having in Washington

Page 275


2 circles on the political and economic issues

3 surrounding the enterprises. Richard's was much

4 more focused on hyperbole and - - Excuse me for 5 the choice or use of the term. - - I think making 6 a sexy story as opposed to a necessarily reasoned

7 and fully informed view.

8 Q , And who shared your views generally?

9 A. Who shared my views. Could you be

10 more specific?

11 Q. Did the GSE have any typical folks

12 who believed that the story was not sexy and

13 needed further examination, besides yourself?

14 A. I think there's across the board any

15 number of people, from conservative and liberal

16 regulators and policymakers in central banking

17 communities domestically and overseas, to sort of

18 ideologically driven partisan politicians who

19 believed either in the government support of the

20 enterprises or, conversely, that they should be

21 privatized. I think there was a myriad of people

22 who shared some of my views, but not necessarily

23 with the same motivations or reasoning.

2 4 Q. And you previously testified that

25 when Frank Raines spoke at an AEI dinner that he


Page 276


was going into enemy territory?

A. Absolutely.

Q. What did you mean by that?

A. I meant that AEI had historically

taken a view in favor of the privatization of the

enterprises.

Q. Would you categorize the diverging

views as an ideological divide?


A. For some I would view it as such.

You know, I, personally, have - - It's not terribly different than my views on

another current controversial issue, which just

to use as an example, which are issues

surrounding the rating agencies, where there are

those who actually would have agreed with me on

my views on the GSEs, but their view were - - their views were very strongly that the

government should actually not be involved, we

don't need regulation, we need them privatized.

On the rating agencies I published

an editorial in the Times in which I called for

greater regulation, and I got calls from many of

those same folks who had previously seen me as

Page 277

1 J. ROSNER - CONFIDENTIAL 2 their ally and friend and, yet, my view again was

3 distinct. My attitude is I'm agnostic as to

4 whether the enterprises should be public or

5 private, whether the rating agencies should be

6 given governmental powers or not. If there is a

7 government involvement, you just need to make

8 sure that there's safe and sound oversight.

9 And so that was the basis of my view

10 on the enterprises. There were those who had an

11 ideological view; mine was not ideological.

12 Q. What was the basis for on your view

13 Fannie Mae prior to joining Medley?

14 A. Work I had done over the prior 12

15 years, including work that my partners and I had

16 done at Graham Fisher originally, really in two

17 large pieces, and analysis and recognition that

18 the - - many of the housing market risks, lower 19 underwriting standards, reduced down payment

20 requirements, obliteration of appraisal

21 standards, move to automated underwriting and

22 automated appraisal would lead to significant

23 problems, and that those changes were driven

24 first and foremost by the enterprises.

2 5 Q. Speaking of your time at Graham

70 (Pages 274 to 277)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 278


2 Fisher, I think you previously testified in the

3 2001/2002 time frame that you and some of your

4 partners created one large research report?

5 IS that correct?

6 A. On Fannie and Freddie.

7 Q. On Fannie and Freddie. Yes. What

8 specifically was the subject of the research?

9 A. It was - - I'm trying to remember. 10 It was fairly comprehensive in its view, but it

11 was really addressing some of the regulatory,

12 legislative, and policy issues coupled with the

13 fact that, you know, many seem to ignore the

14 off-balance-sheet liabilities of the enterprises.

15 Q. And - - So there are political and 16 regulatory issues that surround Fannie May.

17 Is that safe to say generally?

18 MR. CAHILL: Objection. There are?

19 What time frame are you talking about and what - - 20 MR. WALSH: I'll clean it up.

21 Q. So before you joined Medley Global

22 Advisors, you believed that there were a variety

23 of political issues that surrounded Fannie May

24 generally. Is that correct?

25 A. It wasn't my belief. Those were

Page 279

J. ROSNER - CONFIDENTIAL actually reported on in the press upon a

continual basis.

Q. And the same with regulatory issues.

IS that correct?

A. correct.

Q. Did those issues - - Start with the political. Did the political issues surrounding

Fannie Mae ever move Fannie Mae stock price, to

your knowledge?

A. You know, I don't really know. I

would assume so, but I don't really know.

Q. And the regulatory issues

surrounding Fannie Mae, to your knowledge did

they move F a ~ i e Mae's stock price?

A. well, the regulatory issues prior

to - - really prior to Freddie's mea culpa on

their accounting, the regulatory issues were just

issues of oversight. There weren't any specific

regulatory issues that came out that I think were

dramatic.

Q. What about after Freddie's mea

culpa?

A. Whataboutit?

Q. Did the regulatory issues

Page 280

J. ROSNER - CONFIDENTIAL surrounding Fannie Mae then move Fannie Mae

stock, to the best of your knowledge?

A. You know, to my knowledge I would

think that it was largely the accounting issues

of F a ~ i e Mae that moved the stock price.

Q. Largely but not - - A. Not in its entirety.

Q. You previously testified, I believe

in response to Exhibit Number 2, which referenced

OFHEO becoming proctologically inclined? I think

you previously testified that was a somewhat

common phrase and that you used it with respect

to the FHA and the Northern Rock issue?

A. Yes.

Q. And I believe you stated it was

often used when a regulator had not been as

aggressive as it could have been. Is that - - A. Or not - - I wouldn't characterize it

as it could have been. And if I said, used that

phrase before, let me correct it. As it's

regulatorily mandated to be.

Q. As it's regulatorily mandated to be.

Was it your view that in 2003 OFHEO

had not been as aggressive as it was regulatorily

Page 281

J. ROSNER - CONFIDENTIAL mandated to be?

A. You have to pick a point in 2003.

Q. Letts start at the beginning.

January, 2003, prior to Freddie's mea culpa.

A. Yeah. I think by and large, again

if you go back to work that I had done in 2001, I

had significant concerns about failings of the

regulator.

Q. And would you say that OFHEO did

become aggressive as it was regulatorily mandated

to be at the time it became proctologically

inclined, as referenced in Exhibit 2?

A. I think it was actually a process of

actually essentially corrective action and a

change of - - change of culture at the regulator and a recognition that the regulator needed to

become a more credible regulator.

So to that end, I think that they - -

They became increasingly concerned that they had

perhaps become somewhat of a captive regulator in

the past and wanted to correct that.

Q. In your view has that process played

itself out?


71 (Pages 278 to 281)



Page 282

J. ROSNER - CONFIDENTIAL A. Which process?

Q. The process of becoming - - I apologize.

In your view, is OFHEO now as

aggressive a regulator as it is mandated to be?

A. Diligent. I'm going to use the word

"diligent" as opposed to the word "aggressive."

And I think that - - Remember, I'm not inside OFHEO. To my understanding, OFHEO is actually

executing its legal authority as required.

Q. In Exhibit 2, Number 4, it says,

"OFHEO officials hope they will now get to take

the gloves off and show they're able to reign in

those forces of nature."

Is that - - Would you characterize that as being a diligent regulator?


A. I would characterize that as being

the words of Richard Medley and not of me.

Q. And how did you interpret the words

of Richard Medley at the time?

A. You know, frankly, as I said a few

moments ago, you asked about my relationship with

Richard, and I thought that his view was quite

Page 283

J. ROSNER - CONFIDENTIAL often not an informed view.

Q. So you did not share this view at

the time, to the best of your knowledge?

A. I don't recall. I don't recall. I

think that there was a view, a fairly broad view,

that the regulator was seen as weak and derelict

in its responsibilities at that time.

Q. I believe that you previously

testified this morning - - and I'll quote it. "I

think it's typically a term that would be used

when a regulator has not actually been as

aggressive in its execution of its authority as

it probably or regulatorily is expected to."

MR. CAHILL: Talking again about

proctologically inclined?

MR. WALSH: Talking about

proctologically.

Q. And this is in your testimony about

proctologically inclined.

So is it your testimony right now

that OFHEO had not been as aggressive in its

execution as it was - - A. AS I said, if I used the word

"aggressive," I think the more appropriate word


Page 284


2 is - - I think "aggressive" is not really the 3 appropriate word. I think they probably had not

4 been fully carrying out their responsibilities as

5 mandated by congress.

6 Q. And I believe you previously

7 testified that Mr. Blumenthal was a good source

8 on some matters but not other. What matters was

9 he not a good source?

10 A. Matters surrounding OFHEO and what

11 it was intending to do and thinking of doing, and

12 he wasn't a good source because they didn't seek

13 him out as a source, and I get the sense that he

14 never would have actually offered me information

15 in that regard. In fact, I would suspect - - And 16 it's interesting that none of those documents

17 have been brought forward, but Steve repeatedly,

18 as I told you, I often started conversations with

19 "I don't want to know anything I can't or

20 shouldn't know.' Steve often actually would

21 comment on my reports being great and highlight

22 the fact that he was concerned that if there was

23 a quote, "fucking leak" in OFHEO, he was going to

24 have to chase it down and execute someone.

2 5 So for the most part, the value I

Page 285

J. ROSNER - CONFIDENTIAL had in Steve was, again, was triangulating

information. And, frankly, the greater value

that he provided to me was his experience as a

former hill staffer in the way legislative

process and vote counts were likely to fall - - fall away.

Q. I believe you previously testified

that your job at Medley was to assess and advise

clients on political and regulatory risk.

Is that correct?

A. Political, regulatory, and

legislative risk.

Q. Political, regulatory, and

legislative.

Did you analyze financial statements

while you were at Medley?

A. Did I analyze them as part of the

official duty? No.

Q. Did you analyze them unofficially?

A. Did I analyze them for my own

personal use? Yes.

Q . Did you perform any balance-sheet

analyses during your time at Medley?

A. Again, for my personal use to inform

72 (Pages 282 to 285)


Page 286


my view of the credibility of information that

was being given to me by various sides of - - of issues? Yes.

Q. Did you analyze price targets during

your time - -

A. NO.

Q. - - at Medley? Did you take any steps to or - - I'm

sorry. Withdraw that.

Are you familiar with FAS 133

generally?

A. Uh-huh.

MR. KARAM: Remember to answer

audibly.

A. Oh. Yes.

Q. Did you take any steps to

familiarize yourself with FAS 133 prior to its

implementation?

A. Yes.

Q. What steps did you take?

A. I spent quite a good deal reading

the accounting literature, working with FASB

staff on understanding the implications, working

with FASB staff on potential implementation

Page 287

J. ROSNER - CONFIDENTIAL issues, reading prior accounting pronouncements

and the effective changes as discussed in

academic literature.

Q. What was your understanding of FAS

133 up to its time of implementation. So we'll

say immediately prior to its time of

implementation.

A. Can you be more specific?

Q. YOU just described the steps that

you took prior to FAS 133 implementation to

familiarize yourself with FAS 133.

A. Uh-huh.

Q. What was the end result of those

steps?

A. An understanding of FAS 133. I'm

not - -

Q. That's fine. And what was that

understanding?

MR. CAHILL: Generally?

Q. Generally. At the time.

A. That it would have differing impacts

on different institutions and -- You know, I'm

not sure I really - -

Q. Thatusfine.

73 (Pages 286 to 289)

Page 288

J. ROSNER - CONFIDENTIAL Did you have a view as to the impact

it would have on Fannie Mae?

A. Not specifically.

Q. Did you take any additional steps to

familiarize yourself with FAS 133 after its

implementation?

A. Not that I recall.

Q. Did you read analyst reports

relating to Fannie Mae's implementation of FAS

133?

A. Relating to Fannie Mae? Yes. So

where it specifically went into it, at times.

Q. Did you attend any specific

presentations about Fannie Mae's implementation

of FAS 133?

A. Just their - - They had - - As I

remember, I think they had a specific investor

call that I was on. I'm trying to remember

whether that was - - who was running IR at that point, but yes.

Q. That was my next question. Do you

remember who was hosting that call?

A. I don't. I remember having

significant follow-up questions. I believe it

Page 289 1 J. ROSNER - CONFIDENTIAL 2 was Jane Shontell, who I had had prior less than

3 productive conversations with.

4 Q. What were your significant follow-up

5 questions, if you remember?

6 A. I don't specifically remember.

7 Q. Why were the conversations less than

8 productive, as you testified?

9 A. When we put out that first report in

10 2001, within probably 15 or 20 minutes of the

11 report going out we got a phone call, my partners

12 and I. We listened to it on speaker phone, from

13 Jane Shontell, who asked why we hadn't sent her a

14 copy of it before it went out. We highlighted

15 the fact that we left the traditional street

16 because we were tired of being pressured by

17 investment banking clients and felt no obligation

18 to offer it up to anyone, and highlighted and

19 specifically said to her that we found it

20 inappropriate that she would even ask to have an

21 advance copy of an analyst report, to which she

22 responded, Well, I could have prevented you from

23 having mistakes in the report, to which my

24 partners and I laughed and said, We appreciate

25 your concern for our reputation, but if there's



Page 290


any mistakes we would be happy to correct them.

She responded that that would be

very embarrassing to us. We responded that we

found that - - We found her concern for us to

be - - to be, you know, thoughtful, but we were not above issuing a correction, so if she had

specific issues or there were mistakes we would

like to hear them.

She responded - - And we asked her whether there were specific issues and mistakes,

to which she started in with "I disagree," and I

said, "Of course you disagree." And she said,

Well, we think that - - I said - - my partner

actually I remember saying, We understand that

you're going to disagree with a lot of the

report. Are there mistakes.

It was - - it was, frankly, a fairly hostile conversation where she was obviously

trying to get information out of us in advance of

a report going out, as she had said, actually,

You know, you guys have been on the street long

enough. You know the way it works. Which we all

considered to be more than offensive, and perhaps

not only demonstrating impropriety on her part

Page 291

J. ROSNER - CONFIDENTIAL but a corporate cultural problem at Fannie.

Q. Just to be clear, this was a report

in 2001. Is this the same report that we talked

about earlier from your Graham Fisher days?

A. Yeah. Yes. So she was reluctant to

ever take my phone calls when I was at Medley,

though I tried repeatedly to speak to her.

Q. She never took them?

A. Once or twice. And that's why I was

trying to remember, going back to the 133

conference call. I don't remember whether it was

Jane or who it was after that call, but I spoke

to someone because I had significant follow-up

concerns - - And I don't remember specifically what they were. - - and got off of the follow-up

call feeling, once again I had been sort of spun

and not really given answers.

Q. Is FAS 133 an easy rule to apply, to

your knowledge?

MR. CAHILL: Objection. Counsel,

This is way - - easy? He's told you he's not a

CPA. He's not here to testify as an expert.

MR. WALSH: I'm not asking for his

expert opinion. He also testified that he took

Page 292

J. ROSNER - CONFIDENTIAL substantial steps to familiarize - -

MR. CAHILL: I object to the form.

A. Repeat the question?

Q. Is FAS 133 an easy rule to apply, to

the best of your knowledge?

A. Is it an easy rule to apply. It

depends on whether your intent is to actually

apply it with any degree of credibility, in which

case it's complex; and if you're seeking to

circumvent it, it's easy.

In other words, if you go back and

look at the comment letters that were sent to

FASB as they were considering changes to FAS 133,

the most notable comment letters are coming from

two companies who objected strongly to the

changes that were proposed by FASB for clearly

self-interested purposes, and one of those

companies was Fannie Mae.

Q. I'm going to hand you what we marked

as Exhibit 37.



Q. Do you recognize this document?

A. Need to look at it.

Page 293


Q. Sure. Take whatever time you need.

A. Uh-huh. I don't recognize it, but.

Q. First, going back to your last

answer, you testified notable comment letters

coming from two companies who objected strongly

to the changes. Can you just - - A. AS I recall, it was F a ~ i e and

Freddie.

Q. Okay. You don't - - You say you don't recognize - -

A. I don't recognize it but ... Q. But does this appear to be an E mail

from -- an E-mail exchange between you and Kevin Muehring?

A. Uh-huh.

Q. Dated 10-30, 2003?

A. Uh-huh.

Q. The bottom E mail, does that appear

to be an E mail from you?

A. The bottom E mail - - Q. The 12:03 a.m.?

A. NO. That appears to be forwarded - -

24 It's definitely not from me.

2 5 Q. That's definitely not from you.


74 (Pages 290 to 293)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 294

J. ROSNER - CONFIDENTIAL A. Yes.

Q. Can you tell who it might be from?

A. I can't, actually.

Q. It references - - Kevin in his middle E mail, the 6:38 a.m. chain, references a Burt P.

Do you recognize the name Burt?

A. Where are you?

Q. This is the middle chain. "Burt

suspects it is no big deal other than looking

bad. "

It's right above the globe, the

globe icon?

A. Right above the globe icon.

Oh. I would guess, therefore, that

that must be Burt that authored the bottom.

Q. Do you know who Burt - - A. I would gather one of Kevin's

sources.

Q. The second sentence of the E mail

from one of Kevin's sources says, "People I know

who know about FASB 133 say it is the most

complicated and confusing ruling in the whole

canon. 133 itself is about 200 pages of very

dense reading (the Bible) and even worse is

Page 295

J. ROSNER - CONFIDENTIAL another several hundred pages of interpretation

(the Talmud). Very few people are experts on

this, and mistakes are made all the time."

When you received this E mail from

Kevin, did you have any opinion on its content?


Foundation.

MR. WALSH: I'll withdraw the

question.

Q. Do you agree with that?

A. That it is certainly one of the two

or three most complicated I'll agree with.

Q . And your E mail at the top and sent

at 8:31 a.m. said, "Is right, even FASB itself

has acknowledged the need to ultimately change

133. "


A. That it is way too complex and, as

we're seeing in the current macroeconomic

environment, has created other problems in terms

of valuation of instruments in terms of

illiquidity and subjectivity to the

implementation and assumptions.

Q. The next sentence says, "The real


issue, however, is that FNM has been suspected of

smoothing earnings (actually a few years ago they

would brag about the number of pockets that they

had) and OFHEO will correctly ask how good their

systems and controls are if this could happen."


A. I'm sorry. Maybe I - -

MR. CAHILL: Which part?

Q. You could start with the suspicion

of smoothing earnings.

A. That the company has been suspected

of smoothing earnings. It's self-evident, isn't

it?

Q. By whom?

A. Generally.

Q. Generally by - - A. By all of its critics, by anyone who

actually had any questions about their

accounting, by obviously folks within the

academic world, within the fed policy world,

within other circles.

Q. And was this suspicion that they

were smoothing earnings inappropriately?

A. The suspicion was that they were

Page 297

J. ROSNER - CONFIDENTIAL smoothing earnings inappropriately. But, you

know, this is sort of a fumy line of

questioning, because we're talking about an

ambiguous and amorphous "they," which I'm not

very comfortable with.

Q. Well, let's explore that. Who to

you is "they"?

A. Well, anyone who disagreed with

Fanniels assertion that they were fully in

compliance is "they."

Q. Is all earnings - - Is all smoothing of earnings inappropriate to you?

MR. CAHILL: Objection. Form,

foundation.

A. Is all smoothing of earnings

inappropriate.

MR. WALSH: Let me withdraw the

question.

A. The answer is no.

Q. Do you believe that there are proper

ways to smooth earnings?

A. Do I believe that there are proper

ways to smooth earnings?



75 (Pages 294 to 297)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 298


question one more time.

Q. Do you believe that all earnings

smoothing is inappropriate?

MR. CAHILL: Objection. Form and

foundation.

You can answer.

A. The smoothing of earnings for

nonbusiness purposes are more a concern than

economic business decisions to manage earnings.

Q. Do you know if FAS 133 adjustments

reflect the underlying economics of a company?

MR. CAHILL: Objection. Form,

foundation, and possibly broad. Beyond the

scope.

I mean, come on, counsel. What is

that supposed to mean, that question?

Q. You can answer it if you understand

it.

A. Restate it and I'll - - Q. Do FAS 133 adjustments - - Do

earnings - -


question.

Q. Do earnings reported under FAS 133

Page 299

J. ROSNER - CONFIDENTIAL reflect the underlying economics of a company?


Foundation. No context.

A. Arguably no and arguably yes. And I

don't mean to be pedantic with that, but

certainly the companies would argue that they

don't . Q. What would the other side argue?

A. There are those that would argue

that they do.

Q. Why?


speculation. Lacks foundation.

MR. WALSH: I'll withdraw it.

Q. Did Fannie Mae's ultimately

incorrect application of FAS 133 affect your

analysis of Fannie Mae?

MS. OSORIO: Objection.

A. Repeat the question?

MR. CAHILL: Could you read it back,

Madam Court Reporter.

(Whereupon, the following was read

back by the reporter:

QUESTION: Did Fannie Mae's

Page 30C

J. ROSNER - CONFIDENTIAL ultimately incorrect application of") - -

THE COURT REPORTER: And there was

the objection. I'm not sure I caught the end of

your question.

Q. Famie Mae?

A. Well, remember my analysis was

regulatory, legislative, and policy driven. So

it affected my analysis in the sense that they

were apparently not off by a little bit or

arguably in - - in line with the SEC guidance but

apparently were a mile apart from the correct

application.

MR. WALSH: The videographer needs

to change the tape.


We're going off the record. End of Tape 4.


THE VIDEOGRAPHER: We're going back

on the record. The time is 4:26.

This marks the beginning of Tape

Number 5 in the deposition of Mr. Joshua Rosner

being held at OrMelveny & Myers, New York City.

The videographer is Terry Carruthers, here on

behalf of Esquire Deposition Services, located

Page 301


2 1020 19th Street, Washington, D.C.

3 Counsel may proceed.

4 Q . Mr. Rosner, you're aware you're

5 still under oath? Correct?

6 A. I am.

7 Q. Are you aware that - - Are you aware

8 that at all points - - Are you aware that KPMG - -

9 You just testified that your analysis - - You were 10 a mile apart on the correct application - - 11 A. NO.

12 Q. -- of FASB 133. Is that correct?

13 A. NO.

14 MS. OSORIO: Objection.


16 Q. You just testified that Famie Mae

17 and the SEC were a mile apart on the correct

18 application of PAS 133.


20 Mischaracterizes his testimony.

21 A. Would I be able to ask the court

22 reporter to read back the question that led to

23 that answer?

2 4 Q. Absolutely.

2 5 (Whereupon, the requested portion of

76 (Pages 298 to 301)



Page 302


2 the record is read back by the reporter.)

3 A. So your question following is -- 4 MR. CAHILL: I don't think there was

5 a question. I think he was trying to remind you

6 what you said, which you now just heard.

7 So now, counsel, I assume you have a

8 question?

9 Q. Are you aware that KPMG at all times

10 signed off on Fannie Mae's interpretation of FAS

11 133?

12 MR. CAHILL: Objection. Form and

13 foundation.


15 A. It's my understanding they did.

16 Q. And is it also your understanding

17 that OFHEO looked into Fannie Mae's application

18 of FAS 133?

19 A. That's not my understanding. I

20 would have no reason to know that.

21 Q. You never came across that during

22 your research - -

2 3 A. That OFHEO had blessed the

24 accounting? No.

25 Q. Did you read - - I'm going to pass

Page 303

1 J. ROSNER - CONFIDENTIAL 2 you a document that is marked as Rosner Exhibit

3 38.

4 MR. WALSH: For those in the room,

5 this one was predesignated, and the Bates number

6 is MGA 09054.

7 (Whereupon, Exhibit ~osner-38 is


9 Q. I'm going to ask you, after you've

10 had a chance to read it, if you recognize the

11 document.

12 A. Not with specificity, but I recall

13 it.

14 Q. This appears to be an E mail dated

15 12-12, 2003, to TT. Do you know who is on the

16 distribution list that is called TT?

17 A. Idon't.

18 Q. So you weren't responsible for the

19 distribution - - Is it - - Would it be fair to say 20 that you believe this to be an E mail to Medley's

21 clients?

2 2 MR. CAHILL: Objection.

23 I caution you not to speculate,

24 Mr. Rosner.

25 A. Yeah. That would be speculation. I


Page 304

J. ROSNER - CONFIDENTIAL don't know.

Q. So you don't know who this E mail - -

A. Well, in other words, it may be

clients. It may be clients and sources. It may

be - - It may be any number of groups of people, and I'm not really sure of specifically who.

Q. Can you take a quick look at the

bottom of the E mail. It says, "Warning,

significant personal liability, up to $250,000

per work infringed plus other possible damages,

and criminal prosecution can result from any

copying or unauthorized disclosure of these

materials."

In light of that, is it safe to say

that this E mail would not have gone to people

that someone at Medley did not want it to go to?


speculation.

A. Although I can, within a range,

address that. If - - I know that the firm had had

significant problems, certainly after this

towards the end of my tenure at the firm,

where - - and actually before this, which is why this ended up on there, where people were without

Page 305


authorization forwarding it, and we couldn't

figure out who or where or what. Not this

specific reports, but reports broadly,

essentially stealing Medley's intellectual value.

Q. So TT is some distribution list, to

your knowledge.

A. To my speculation.

Q. Can you look at the last sentence of

the first paragraph, which reads, "As we explain

in the report, OFHEO has also created a roadmap

for their investigation into Fannie Mae

especially in light of conversations between two

Freddie board members who specifically discuss

earnings management at Fannie Mae."

A. Uh-huh.

Q. The report referenced is the report

that is attached, dated December 12, 2003?

A. Uh-huh.

Q. Did you write that report?

A. I believe I did.

Q. Do you know - - Did you write the cover E mail?

A. That I don't remember. It may have

been me. It may have actually been one of the

77 (Pages 302 to 305)


Page 306


2 editors.

3 Q. Is it customary for you to have some

4 input into the cover E mails for reports that

5 you've authored?

6 A. I don't know if I would actually be

7 able to characterize anything as customary over a

8 three-year period.

9 Q. Do you have any reason to believe

10 that you did not have any input into this cover

11 E mail for the report that you authored?

12 A. "Enough of the games camp" doesn't

13 sound like my language, but at the same time - -

14 So I don't think it would actually have been my

15 writing. I think that whoever wrote it obviously

16 had wrote it in - - essentially informed by the 17 context of the report.

18 Q. DO you know what the last sentence

19 meant?

2 0 A. Absolutely.

21 Q. What did it mean?

2 2 A. That the OFHEO report on - - on

23 Freddie, the Baker Botts report as well, created

24 a fairly clear roadmap that investors should be

25 using to get a sense of how OFHEO was likely to

Page 307

1 J. ROSNER - CONFIDENTIAL 2 choose to investigate Fannie and the process by

3 which they would do so.

4 As a matter of fact - - 5 Q. What was the process?

6 A. I think if you read this and if you

7 read other reports that Medley had put out, we

8 specifically actually I believe in other reports

9 referred to it as the road map, the Freddie

10 report as the road map for a Fannie

11 investigation.



14 Q. I'm going to hand you what's been

15 marked as Exhibit 39.

16 MR. WALSH: This one has been

17 predesignated. It's Bates Number MGA 09062.

18 Q. And after you've had a chance to

19 read it, I'm going to ask if you've recognized

20 the document.

21 A. I don't specifically, but I, you

22 know, generally in looking at it, recall it. I

23 don't remember it.

2 4 Q. Let's start with the attachment this

25 time, the equity brief, "Medley Global Advisors


Page 308

J. ROSNER - CONFIDENTIAL equity brief, GSEs: New corporate governance

regulations near, February 2nd. 2004."

Did you author this brief?

A. Again, I don't specifically

remember. I don't see a reason to believe that

it was not me.

Q. And did you author the cover E mail

dated February 2nd, 2004?

A. Again, you know, that's - - That would even be less likely that I would

specifically recall.

Q. Do you have any reason to believe

that you did not have input into the cover - -

A. No. I don't have any reason to

believe that.

Q. Again, this goes to TT. Is that a

distribution list?


A. As I said, I would assume so.

Q. The second paragraph of the cover

E mail says, "While Freddie has already agreed to

institute several of the changes proposed, Fannie

Mae has not. If Fannie is required to make

similar changes to those by Freddie, we could see

Page 309

J. ROSNER - CONFIDENTIAL a change of auditor, separation of the chairman

and CEO positions and, if applicable, changes in

executive compensation structures to support

long-term corporate goals and not short-term

earnings goals."

A. Uh-huh.

Q. DO you know what that means?

A. Yeah. It means that that analysis

was ultimately proved correct.

Q. How SO?

A. It means that ultimately you ended

up with a similar set of agreements made between

Fannie and the regulator as. you had between

Freddie and the regulator.



Q. I'm going to hand you what's been

marked as Exhibit 40.

MR. WALSH: It's also been

predesignated, Bates Number MGA 03131.

Q. And when you've had a chance to read

it I'm going to ask if you recognize it.

MS. KERN: Sorry to interrupt, but

did somebody say in the cover letter that there

78 (Pages 306 to 309)


Page 310

J. ROSNER - CONFIDENTIAL were going to be enough documents even for

provided, even for the predesignated one?

MR. WALSH: I believe so.

MS. KERN: Sorry to interrupt.

A. Okay.

Q. Do you recognize this document?

A. I recognize it. I don't

specifically remember it.

Q. Does it appear to be an E mail that

you authored?

A. It does.

Q. The "to" line is blank here. Does

that have any significance to you?

A. Not particularly.

Q. Did you have any practice of bcc'ing

a distribution list?

A. No. This, as you see down in the

subject line, this looks like it was a

confirmation of a report sent. So, therefore,

the "to" line might well be a default blank on a

report that was already sent out. As you see, it

says "sent flag group including equity financial

services, equity general, excluding" blah blah

blah. So I assume this is just a report that had

Page 3 1 1


already gone out.

Q. And subject lines that are similar

to that sent flag are confirmations, you said?

A. I believe so.

Q. An automatic response that something

went out?

A. I believe so. I believe so.

Q. If you look at the first paragraph,

it says, "While investors are increasingly

convinced that Fannie Mae will not be found to

have significant operational or financial control

issues during the remainder of OFHEO's

investigation, these views may not fully account

for the way a safety and soundness regulator

executes an examination process."




Q. How does a safety and soundness

regulator execute an examination process?

A. Depending on which one. They don't

particularly care about accounting, and they

don't particularly care about reported earnings

in terms of compliance with SEC requirements or


Page 3 12

J. ROSNER - CONFIDENTIAL accounting requirements. FASB direction.

A safety and soundness regulator's

sole mission is to make sure that a company that

it regulates operates in a safe and sound

condition, including reputational risk, market

risk, credit risk, liquidity risk, and as a

result that its capital assets management

earnings liquidity and sensitivity are all

managed appropriately. That's the CAMELS

process.

Prior to the changes at OFHEO, OFHEO

did not have a CAMELS process. They brought in

new heads of examination for both companies,

whose job was to make sure that they were

operating in a safe and sound condition, manner.

SO that's actually - - I don't know

if that's your answer or answers your question,

but I guess what we specifically mean is that the

market view was that there weren't issues in

terms of - - or that OFHEO's bottom line was a

restatement, and OFHEOts bottom line isn't a

restatement of safety and soundness.

And I think there's a broad

misunderstanding in New York Wall Street

Page 313

J. ROSNER - CONFIDENTIAL investment investor minds as to what a regulator

does, which is part of the reason that I think

there was a very strange misunderstanding that

regulators can ever be out to get a company that

they regulate.

By definition, a safety and

soundness regulator actually, by seeing the

failure of one of its institutions, actually sees

its own authorities diminished. So I've never

heard of a financial regulator actually seeking

the destruction or a safety and soundness control

issue at a company it actually regulates.

Q. As of May 26, 2004, when you sent

this, you believed that the investment community,

or at least your specific clients, did not

understand this. Is that correct?


A. I wouldn't say my specific clients.

I would say that if you opened up the papers and

you heard this, the company actually claim that

it was in full compliance with all applicable

accounting guidelines, given the fact that, as I

remember, there were 22 analysts at the time, all

of whom had buy ratings on the stock, yet, none

79 (Pages 3 10 to 3 13)


Page 3 14 J. ROSNER - CONFIDENTIAL

of whom understood how regulatory, legislative,

and policy issues in Washington worked, yes, it

was the general view that there were not these

issues out there.

Q. Skipping down on the fourth

paragraph, third sentence. "We expect that OFHEO

must still review issues such as Fannie's

application of FASB Statements 91 and 133,

accounting for derivatives generally, their

contingency and reserve accounting, their

executive compensation and incentive structures,

the allocation of capital to G&A relative to the

growth of the portfolio, their accounting for

beneficial interest in securitized financial

assets, board independence, and management lines

of reporting."

To your knowledge did OFHEO

ultimately opine on all of those issues?

A. To my recollection they didn't on

all of those issues.

Q. They did not on - - A. On all of those issues.

Q. Do you know which ones that they did

not opine on?

Page 3 15

J. ROSNER - CONFIDENTIAL A. I don't recall off the top of my

head. I could probably guess.

Q. NO need.

What was your source for this

information?

A. The Freddie Mac investigation

report.

Q. So based on the Freddie

investigation report?

A. That was largely actually spelled

out in the Freddie report and in the consent

decree.

Q. It was spelled out in the Freddie

report and the consent decree that that's what

OFHEO would look at the Fannie Mae?

A. No. That it created - - My analysis, remember my job is to analyze, to triangulate

information and risk manage and assess priorities

of risk. And if you read the Baker Botts report

and OFHEO's responses to the report and the

follow-up agreements that they had, those were

the key issues. Many of which actually also

existed within Fannie.

I remember quite specifically


Page 3 16


2 looking at the - - the SG&A relative to the growth 3 of Fannie's portfolio after the Freddie report

4 came out and recognizing and realizing that

5 Fannie had underspent on G&A in a very similar

6 manner to Freddie.

7 Well, again, a safety and soundness

8 regulator, that's a critical issue. And so I

9 found it peculiar that I would - - I should say I

10 would find it impossible to believe that they

11 wouldn't look at those same issues, as well as

12 many of the other issues that I have.

13 MR. WALSH: Can we go off the record

14 for about five minutes.


16 We're going off the record.



19 We're back on the record.

20 Q. Mr. Rosner, you previously testified

21 that you were a consultant to the plaintiffs.

22 Did you have an agreement with the plaintiffs, a

23 written agreement?

24 MR. CAHILL: Asked and answered.

2 5 A. I think we - -

Page 317

1 J. ROSNER - CONFIDENTIAL 2 Q. So the answer is yes, you did have a

3 written agreement?

4 A. yes.

5 Q. Can you please provide copies of

6 that written agreement?

7 MR. KARAM: I will object to that,

8 and I will take it under advisement whether we'll

9 waive privilege on that issue.

10 Q. Did you create billing records in

11 your capacity as a consultant?

12 MR. KARAM: I object, but I will not

13 request the witness not answer.

14 A. .I believe so.

15 Q. Would you please provide copies of

16 that those - -

17 A. If I still have them.

18 MR. KARAM: I will make the same

19 objection and state the same provision.

20 MR. WALSH: Okay. That's all I

21 have.

22 EXAMINATION BY COUNSEL FOR KPMG

23 BY MS. OSORIO:

24 Q. Hi, Mr. Rosner. My name is Claudio

25 Osorio, and I represent KPMG.

80 (Pages 314 to 317)

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Page 318

J. ROSNER - CONFIDENTIAL And I guess first I want to start,

earlier today several times you explained how

your work revolves around looking at regulatory,

legislative, and policy issues and analyzing risk

in relation to those three areas.

IS that correct?

A. Broadly.

Q. And as part of your work did you

ever have occasion to learn about Fannie Mae's

lobbying activities?

A. Yes.

Q. And who did you discuss - - Did you discuss Fannie Mae's efforts, lobbying efforts,

with anybody that you could recall?

A. That's a broad question. Yes.

Q. Was that something that you

discussed with Mr. Blumenthal?

A. I don't - - I don't specifically - - I

mean, not in substance, perhaps in passing, that

I recall.

Q. If I could refer you to Exhibit l?

A. Uh-huh.

Q. If you look, I think it's the middle

of the paragraph. It's a long sentence, but the

Page 3 19

J. ROSNER - CONFIDENTIAL middle of the paragraph refers to a concrete wall

of F a ~ i e political clout. DO you see that?

Do you have any recollection what

that refers to?

A. If you remember, I'm not sure that I

was even at the firm at the time that document

was authored.

Q. I understand. But do you have any

memory or any knowledge of what that might refer

to?

A. I would be speculating to actually

answer specifically to that document.

Q. Okay. Based on your knowledge of

Fannie Mae's lobbying efforts, do you believe

that Fannie Mae was active in its lobbying

efforts?

MR. WALSH: Objection.

MR. CAHILL: Objection to form.

Q. You can answer.

A. Well, by definition they were active

in their lobbying efforts. Were they aggressive

in their lobbying efforts? Yes.

Q. What do you mean by "aggressive"?

A. It was my understanding that they

81 (Pages 318 to 321)

Page 320


2 had essentially conflicted out all but a handful

3 of lobbying firms in Washington.

4 Q. Do you have an understanding as to

5 why they had done that?

6 MR. KARAM: Objection.

7 A. I have a belief as to why they may

8 have done that.

9 Q. And what was that belief?

10 A. So they would be continue to be able

11 to advance their - - their political goals on 12 Capital Hill against the regulator and -- in 13 regard to policy issues.

14 Q. And do you believe that they had

15 conflicted out firms in order to not have

16 opposition to their efforts?

1 7 MR. WALSH: Objection. Calls for

18 speculation.

19 Q. Your belief

2 0 A. My belief is absolutely.

21 Q. I f 1 c o u l d r e f e r y o u t o E x h i b i t 1 7 ,

22 please?

2 3 A. Okay.

2 4 Q. If you look at the second paragraph

25 it says, "Look. I told you legislation would

Page 321

J. ROSNER - CONFIDENTIAL die, and once again, Fannie and Freddie are the

last standing. They made a mockery and beat the

Senate, the House, and the White House."

Do you have any recollection of the

context in which Mr. Blumenthal might have

communicated the substance of this paragraph to

you?

MR. WALSH: Objection. Calls for

speculation.

A. Can you clarify the question?

Q. From earlier testimony - - And correct me if I'm wrong. - - I understood that when you have a call report and you have quotes

in the call report that that means that it's not

necessarily a direct quote but the sum and

substance of what he communicated to you.

A. Correct.

Q. So I'm asking if in Paragraph 2 if

you have a recollection of what context

Mr. Blumenthal might have communicated the

substance of this sentence.

MR. WALSH: Same objection.

A. I think that my understanding was

that Mr. Blumenthal was of the view that Fannie



Page 322


and Freddie could move or stall any legislation

that they so desired.

Q. And why did you believe - - Did you ever get an understanding from Mr. Blumenthal as

to why he might have thought that?


A. I think that was not just

Mr. Blumenthalls view. I think that was a fairly

broad bipartisan view in Washington at the time.

Certainly that was the view that

investors relied upon.

Q. I'm sorry? The view - - A. That seems to be a view that Fannie

investors relied on.

Q. That Fannie could stall - - A. Absolutely.

Q. - - any legislation it wanted to? A. Or, as a result, policy.

Q. If you would look at Exhibit 7,

please.

A. Okay.

Q. On the first page if you look, maybe

almost halfway but not quite, it starts, "Steve

goes on to say that FNM's/FRE's power increases

Page 323

J. ROSNER - CONFIDENTIAL at the end of a session, so I rush to get

something done when their power is at its peak.

I would expect that this will continue to be

worked on but that the original push has

subsided. Come January we may see a new bill or

a reintroduction of the Treasure/Baker bill, but

we will have the same issue. Fannie has been

fighting every issue."

Do you have a recollection of this

part of the conversation with Mr. Blumenthal?

A. Generally.

Q. What do you recall about that part

of the conversation?

A. Well, as I said before, the value

that I saw in Steve was for his legislative

understanding, and this was largely personal

opinion. It was understood, and so I think that

he was actually pointing not to either an OFHEO

involved or understood position but that Fannie

does have the ability to actually stand up and

move legislation, and while Treasury and Richard

Baker wanted to move tougher legislation, they

wouldn't have the ability to do so unless they

waited a bit.

Page 324


2 Q. Because Fannie Mae would have

3 stalled the legislation due to their power.

4 A. Correct.

5 Q. If you could look at Exhibit 6,

6 please?

7 If you look at the paragraph that

8 starts with 3 at the bottom. It says,

9 Legislation and Treasury. It says, "This whole

10 thing stinks. All three of the existing bills

11 have FNM fingerprints all over them."

12 Does this again - - To your

13 understanding, does this again refer to the

14 legislation that was trying to get passed with

15 regards to moving Fannie Mae to treasury?

16 A. Not moving Fannie Mae to treasury

17 but to - - 18 Q. I'm sorry. OFHEO to treasury?

19 A. Not moving OFHEO to treasury, to

20 come up with a solution, a new regulator,

21 regardless of where it was. There were competing

22 bills out there. It reflects a view that - - And

23 again, it wasn't really his view. It reflects a

24 view that all three of the proposals out there

25 were crafted in some sense with Fannie and

Page 325

J. ROSNER - CONFIDENTIAL Freddie's involvement. Really more Fannie

because they were more aggressive in their

lobbying efforts.

Q. So when it says "all three of the

existing bills have FNM fingerprints all over

them," that means they basically had input into

the writing of the bills?

A. That's the suggestion.

Q. If you look a little bit further

down, about seven lines down it says, "As we

speak, FNM is working with Treasury to draft the

administration's bill. There will be a five-year

moratorium preventing Treasury from increasing

capital requirements of the agency as part of the

trade with FNM. That's like a

get-out-of-jail-free card."

Do you have any understanding as to

what the get-out-of-jail-free-card statement

meant here?


A. What do you mean?

Q. Do you have any -- Well, let me back

UP.

IS this - - the statement, "That's


82 (Pages 322 to 325)

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Page 326

J. ROSNER - CONFIDENTIAL like a get-out-of-jail-free card,' do you know

whether those are your words or Mr. Blumenthalls

words?

A. I don't specifically remember. And,

you know, I don't think it - - it is really material, because I think there are a lot of

people who were uttering similar words at that

time . There were, you know, the position

on the enterprises is, A, that their capital

requirements are significantly lower than a

similar bank institutions and, therefore, the

regulators should have the ability to increase

capital requirements as necessary, and what was

being discussed in that sentence was the

suggestion that there would be an agreement cut

by which the new regulator wouldn't have the

authorities to change the capital requirements

for five years.

Q. Right, but the agreement - -

A. This is legislative proposal.

MR. CAHILL: Wait for the question.

Q. The agreement that is being

discussed here appears, at least from this

Page 327

J. ROSNER - CONFIDENTIAL statement, from this document, to say that Fannie

Mae was the one making this proposal to not have

to increase their capital requirements.


MR. CAHILL: IS that a question?

MS. OSORIO: I thought it was.

MR. CAHILL: I don't think so.

Q. I think you answered the question I

was trying to ask. Okay.

MS. OSORIO: I would like to - - Can I have an exhibit sticker?



Q. Mr. Rosner, this is Exhibit 41. Do

you recognize this document?

A. I think I've got - - Not specifically.

Q. If you look at Page 2 where it says

author, it says Josh Rosner?

A. Uh-huh.

Q. Do you have any reason to believe

that you did not author this document?

A. Let me actually read the document,

if I could.


Page 328


Q. Okay.

A. I don't recall it specifically. I

don't have reason to believe that it wasn't mine.

Q. Okay. We have several copies of

this in the production from Medley, but they're

all redacted. Just looking at this now, do you

have any idea who this call might have been from,

this inbound call from - - and then blank? A. I don't recall.

Q. Okay.

A. There's actually nothing in here

that would lead me to an understanding.

Q. If you look about two-thirds of the

way down on the first page, it says, "I called

one of my sources who called me back and said

that Fannie has been spreading these rumors" - - Let me back up a little bit.

At the top where it says Call Notes,

it says, "She said that she is hearing" - - she being the unnamed source - - "that she is hearing

that Shelby may have to postpone the vote as he

may lose a member. When she called Shelby's

staff, their silence made her think there was

some truth to it. I did not know there was such

Page 329


a meeting so I made a couple of calls to a few

good sources (but did not tell this to' - - blank - - "other than to say she is being spun ... period. )

"I called one of my sources who

called me back and said that Fannie has been

spreading these rumors out of desperation trying

to create chaos (as usual FNM lobbying tactic) . I 1

Do you have any recollection what

this refers to?

A. Idon't.

Q. The sentence that talks about Fannie

spreading rumors out of desperation, trying to

create chaos, are you familiar with Fannie May

trying to creat chaos in the past with lobbying

efforts?

MR. WALSH: Objection to form.

MR. '%ARAM: Objection to form.

A. It has been my personal view that

they at times have done - - sought to actually do that.

Q. In what way?

A. Disinformation campaigns.

Q. What kind of disinformation

83 (Pages 326 to 329)


Page 330

J. ROSNER - CONFIDENTIAL campaigns?

A. Well, trying to change the subject

matter, trying to actually assassinate

characters, trying to actually make sure that

certain members of the house or senate remember

that they are - - their constituents are obligated to, using the groups, some of the public interest

groups that - - and line-standers to fill the committee hearings.

They're fairly aggressive in

stacking the deck such that when I would go to

committee hearings, quite frequently - - actually,

usually you couldn't get in. It was among the

only hearings in Washington that you couldn't get

actually into the hearing rooms because Fannie

and Freddie would pay line-standers to take up

all of the room seats so that they could actually

have their nonprofit groups and lobbying

interests show up and be represented, you know,

Lorraza, ACOR, some of the alliances, and often

actually sought to lobby through some of the

public interest groups, coordinating them

aggressively.

Q. By lobbying through some of these

Page 33 1 1 J. ROSNER - CONFIDENTIAL

2 public interest groups, do you have any specific

3 examples of which groups they might have used?

4 A. I think if you take a look at

5 comment letters on any piece of potential

6 regulation or legislation affecting - - 7 potentially affecting either Famie or Freddie

8 you'll see any number of - - of shell nonprofits

9 that were used and shell lobbying groups or shell

10 groups that were used to lobby of their behalf.

11 Q. And do you think that Famie Mae

12 used these tactics when there were bills being

13 worked on that related to creating a stronger

14 regulator?

15 A. Absolutely. And you have to

16 remember, there were also relationships that

17 existed with certain members. So family members

18 of certain senators and congressmen who happened

19 to have worked for Famie's partnership offices,

20 et cetera, they - - They really aligned various

21 interests with their own.

2 2 Q. Who would that have been? Do you

23 know who - -

2 4 A. Off the top of my head, I think it

25 was Bennett. And I think Burning had a similar


Page 332

J. ROSNER - CONFIDENTIAL relationship somewhere.

Q. From your conversations with

Mr. Blumenthal or Mr. - - From your conversations with anyone at OFHEO, did you have any

understanding about OFHEO's reactions to Famie

Mae's legislative efforts?

A. I1msorry?

MR. CAHILL: Other than as

previously described?

MS. OSORIO: I'm sorry?

MR. CAHILL: Other than he's

.previously testified? This is a very broad

question.

Q. OFHEO's reaction. I'm interested in

knowing if you had any understanding as to what

OFHEO's position was to Fannie Mae's lobbying

efforts.

A. Well, not to Fannie Mae's lobbying

efforts. Remember, the interactions I had on

these subjects were largely personal, not

professional views of the people I was talking to

and understood as such. OFHEO had a public view

on legislation, which has been out there visible

and consistent, which is they support the move to . ..

Page 333

J. ROSNER - CONFIDENTIAL create a stronger, more well-empowered regulator.

Q. Did you have any understanding,

though, of an opinion held by OFHEO with regard

to specifically F a ~ i e Mae's effort to stop a

stronger regulator from being created?

MR. WALSH: Objection to form.

A. Yeah, I mean, I'm not sure I really

understand - - Could you flesh that out a little

bit?

Q. Well, what I'm trying to find out

is, we've talked about Fannie Mae's lobbying

efforts, and you told me about some of the

tactics..theylve employed, and I'm trying to

understand if you have any knowledge of OFHEO or

Mr. Blumenthal or anybody that you spoke to at

OFHEO having any reaction to those tactics used

by F a ~ i e Mae.

A. Any reaction. Again, on a personal

level I think that - - I think that most people would have personal views that would find, you

know, sort of aggressive interference with the

public - - the public work of elected officials to

be somewhat distasteful. But I should clarify,

that is not an institutional view, as I

84 (Pages 330 to 333)


Page 334


understood it, at OFHEO.

Q. So did you have any idea whether

there was any antagonism between OFHEO and Fannie

Mae because of Fannie Mae's legislative efforts?


A. Lobbying efforts, yes. Not

necessarily legislative issues.

Q. So you believe there was antagonism

between OFHEO and Fannie Mae because of Fannie's

lobbying efforts.

A. In certain specific areas, yes.

Q. What would those areas be?

A. Well, I mean, as example, as I

discussed earlier, you know, one significant

example is, it's a matter of public record that

Fannie Mae's top lobbyist, Dwayne Duncan,

approached Kip Bond and asked him to send a

letter to HUD demanding an inspector general

investigation of OFHEO. a d , in fact, HUD

actually responded to that pressure from Senator

Kip Bond and came up with an investigation report

that really I think people viewed as an attempt

to stifle the regulator from doing its job.

Similarly, there was language put in

Page 335

J. ROSNER - CONFIDENTIAL in appropriations bill that sought to actually

reduce the budget of OFHEO unless Armando Falcone

was let go. So there was some pretty significant

attempts by Fannie to interfere with the

legislative process and, as a result, stifle the

ability or hobble the ability of OFHEO to carry

out its work.

Q. Do you believe that Fannie Mae's

efforts to stifle OFHEO1s ability to carry out

its work had an impact on OFHEO's special

examination of Fannie Mae?

A. Idon't.

Q. You don't think - -

A. Well, I mean, I think it probably

was undercapitalized.

Q. Okay.

A. I think they had been a - - you know,

unlike most regulators in Washington, they have

been subject to an appropriations process. And

so, frankly, if congress wants to make them

operate on a shoestring budget, that's what

happens, unlike the FDIC or the fed who has the

ability to charge those institutions that it

regulates for its overhead, being subject to


Page 336


the - - the appropriations process definitionally impacted OFHEO, because they were woefully

undercapitalized as a regulator.

Q. Have you ever heard Fannie Mae

described as arrogant?

A. Quite frequently.

Q. And do you share that view?

A. Current or past?

Q. Let's start with past. Did you

share that - -

A. Not across all issues, but I

certainly did share that view in many instances.

Q. And why is that?

A. I found it, you know, such

behaviors, as I talked about before, of an IR

person calling and demanding a research report

before it's published, to be an arrogant move. I

find it to be wholly inappropriate, arrogant, and

verging on unethical, if not illegal.

Q. And what about now?

A. It seems to be a somewhat changed

culture.

Q. You don't think Fannie Mae is

arrogant anymore?

Page 337 1 J. ROSNER - CONFIDENTIAL 2 A. Well, I think in their lobbying

3 efforts they can still be aggressive, and I think

4 in terms of their lack of transparency and

5 disclosure I've got concerns. I wouldn't - - I 6 wouldn't really characterize them as arrogant in

7 the same way today.

8 Q. Okay. Just one more.

9 Would you say that if Fannie Mae had

10 behaved differently with OFHEO that there might

11 have been a different outcome to the special

12 examination?

13 MR. CAHILL: Objection. Form,

14 foundation. Calls for speculation. You name it.

15 Q. TO the best of your knowledge.

16 A. well--

17 MR. WALSH: Same objection.

18 A. To the best of my knowledge? It is

19 speculation.

20 Q. I'm asking for your opinion. Yes.


2 2 MR. WALSH: Objection.

23 MR. CABILL: YOU can answer.

24 A. Yeah, I mean, it's my opinion that

25 Fannie actually, just as Freddie, got in trouble

85 (Pages 334 to 337)

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Page 338

J. ROSNER - CONFIDENTIAL for their actions. And I think that the

regulator woke up a little too late and,

therefore, the actions were of a much larger

scale by the time they were found.

And so, no, I actually - - it's my opinion that Fannie's misbehaviors were what

ended up in Fannie's problems.

Q. Okay.

MS. OSORIO: I have no more - - Oh.

I'm sorry.

Q. Just to confirm, I think you - - Just

want to confirm, you said you were not an

accountant?

A. Correct.

Q. And you were not a CPA.

A. correct.

MS. OSORIO: Okay. That's it. No

more questions. Thank you very much.

MR. CAHILL: Anybody else?

We want to note for the record that

we intend to designate portions, probably

significant portions, of this transcript as

confidential or highly confidential pursuant to

the PO in your case. We'll do that within the

Page 339


2 designated time frame, which I understand is 21

3 days from today, unless I've got a different

4 version of the protective order, but please be on

5 notice.

6 We're concluded.

7 THE VIDEOGRAPHER: This concludes

8 today's proceeding in the deposition of Joshua

9 Rosner. The total number of videotapes used is

10 five. We're going off the record. The time is

11 5:21.

12 (The exhibits are retained by the

13 court reporter.)

14 (Whereupon, signature not having

15 been waived, the deposition concluded at 5:21

16 p.m.)

17

18

19

20

21

2 2

23

2 4

2 5


Page 340

* * * ACKNOWLEDGEMENT OF DEPONENT

I, JOSHUA ROSNER, do hereby acknowledge I have

read and examined the foregoing pages of

testimony, and the same is a true, correct, and

complete testimony given by me, and any changes

or corrections, if any, appear in the attached

errata sheet signed by me.

Joshua Rosner Date

Page 341

C E R T I F I C A T I O N

I, PATRICIA MULLIGAN CARRUTHERS, a Certified

Shorthand Reporter and Notary Public of the State

of New Jersey and a Notary Public of the State of

New York, do hereby certify that prior to the

commencement of the examination the witness was

sworn by me to testify as to the truth, the whole

truth, and nothing but the truth.

I do further certify that the foregoing is a

true and accurate transcript of the testimony as

taken stenographically by and before me at the

time, place, and on the date hereinbefore set

forth.

I.do further certify that I am neither of

counsel nor attorney for any party in this action

and that I am not interested in the event nor

outcome of this litigation.

Patricia Mulligan Carruthers, CSR

Certificate No. XI00780

Notary Public of the State of New York

Notary Public of the State of New Jersey

Dated:

My commission expires October 23, 2010 (N.J.)

86 (Pages 338 to 341)

MD - 1-800-539-6398 VA - 1-800-752-8979


Page 342

May 7, 2007 JOSHUA ROSNER C/O MARK D. CAHILL, ESQUIRE CHOATE HALL & STEWART, LLP Two International Place Boston. Massachusetts 02110

Re: FANNIE MAE SECURITIES LITIGATION Witness: JOSHUA ROSNER Date taken: May 6, 2008

Dear Mr. Rosner,

We enclose for your review and signature a copy of the above-referenced transcript. We ask that you read the transcript carefully. If it is necessary to make any corrections, please do so on the enclosed errata sheet, and reason for such correction. The errata sheet must be signed and dated. Also, you must sign the certificate of deponent enclosed in the transcript. If you do not complete the reading and signing within 30 days, you will be deemed to have waived your right to make corrections. Please return the certificate of deponent and errata sheet to Esquire Deposition Services, 1020 19th Street, N.W., Suite 620, Washington, D.C. 20036. Very truly yours, Esquire Deposition Services

2 5

Page 343

1

2 ESQUIRE DEPOSITION SERVICES 1020 19TH STREET, N.W., SUITE 620

3 WASHINGTON, D.C. 20006

(202) 429-0014

4

5 ERRATA SHEET

6 Case: IN RE FANNIE MAE SECURITIES LITIGATION Witness: JOSHUA ROSNER

7 Date Taken: May 6, 2008

Job No.: 186576

8

Page No. Line No. Change

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13

14

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25 Joshua Rosner . Date

A

Esquire Deposition Services 1.C. - 1-800-441-3376

87 (Pages 342 to 343)

MD - 1-800-539-6398 VA - 1-800-752-8979

Joshua Rosner - Confidential Paee 344

A ability 184: 19

234:8 323:21,24 326: 14 335:7,7,10 335:24

able 16:18 42:8 139:3,7 211:5 222: 15 223: l9,24 224:8 239:6 270:24 282: 14 301:21 306:7 320: 10

above-referenced 342: 10

abroad 32:8 absolutely 2 1 : 13

59:5 60:lO 89:15 90:20 139:6,13 140:23 147:20 154:21 160:5 168:6 169:4 175:9 210: 11,22 21 l:8 21 1: l2,l7 212:7 219:17,21 225:7 228:24 248: 13 257:6 259: 15 276:3 301:24 306:20 320:20 322:17 331:15

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296:21 accent 7 1:22 92: 15 accept 135: 13 acceptable 158:9 accepting 138:8 access 65: 8 109: 1 1

171:5 180:25 accessed 1 l2:6 accessible l53:2 1

153:23 154:2 accommodate

16:24 account 3ll : l4

accountant 126: 8 338: 14

accountants 123 : 6 accounting 8: 17

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accounts 250:2 1 accuracy 176:9

203:23 219:8 accurate 66:21

67:24 72:25 167:19 191:22 192:6 341:ll

accurately 67: 18,2 1 71:16

ace 133:5 acknowledge 33:22

340:4 acknowledged

169:18 295:16 ACKNOWLED...

340:3 ACOR 330:21 acronym 39: 13 Act 148:25

acting 22:8 78:7 85: 19

action21:16 51:14 234:9 244:20 281:15 341:16

actionable 33 :25 actions 338:2,4 active 3 19: l6,2l activities 32: 13

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adjustments 298: 1 1,21

admin 191:5 administration

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. 226:16,17 administration's

83:lO 133:24 137:18 203:13,19 203:21 325:13

administrative 32: 19 200:9 201:23 203:24 207:2

admission 178: 13

admitted 105: 18 advance 172:25

248: 11 289:21 290:20 320: 1 1

advancement 126:12

advancing 170:9 adverse 5 1 : 14 advice 22: 1 l,25

29: 14 33: l2,19,23 33:24 115:8

advise 34: 3 40: 10 48:22 285:9

advisement 3 17: 8 advisors 7: 12,14,17

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advisory 30:3 32:6 32: 12 220:6

AEI 275:25 276:5 affect 94: 14 227:23

236:3,7,9 299: 17 affiliated 256:24 affirm 93: l8,24 affirmation 153:22

153:22 affirmative 1 3 1 : 3 affordable 204:7 afternoon 16 1 :9

267:23 269:3,4 273:21

age 247: 3 agencies 83: 12

86: 17 87:21 89: 14 89:24 93: 16 276: 16,22 277:5

agency 325: 15 aggressive 60: 17

126:13 167:3 280:18,25 281:ll 282:6,8 283: l3,22

283:25 284:2 319:22,24 325:3 330: 11 333:22 337:3

aggressively 330: 24 agnostic 277:3 ago 69: 18 122:23

212:23 227:7 266:8 282:24 296: 3

agree 22: 10 66:23 73:11,13 191:lO 295:11,13

agreed 173:9,12 235: 17 276: 17 308:22

agreeing 13 1 :6 agreement 22: 18

23:4,7 24: 16,19 3 l6:22,23 317:3,6 326: l7,21,24

agreements 309: 13 315:22

ahead 266:3 ahold 172: 13 aid 256:25 aisle 23 1 : 14 Alan 38: 15 aligned 33 1 :20 allegations 170: 22

172:5,20 173: 10 173:21,24 174:4 174: 15 193: 16 204:3,15 245:23

alleged 205:20 alliances 33O:2 1 allocation 3 14: 13 allow 21 :4 22: 17

27:4 allowing 173: 12 ally 277:2 aloud 265:24 alter 9 1 : 1 8 94:25 ambiguous 297:5


rosner, joshua 5-6-08

Documents

esquire page

n c e s c o n t i n

state of new york

rosner deposition exhibit

floor new york

new york job

esquire john

esquire omelveny myers