Clarkson Deposition 052611

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1 UNITED STATES DISTRICT COURT
2 SOUTHERN DISTRICT OF NEW YORK
3 CIVIL ACTION NO.: 1:08-CV-07508
4 ------------------------------------------
5 ABU DHABI COMMERCIAL BANK, et al., )
6 Individually and On Behalf of All )
7 Others Similarly Situated, )
8 Plaintiffs, ) VOLUME II
9 -against- )
10 MORGAN STANLEY & CO. INCORPORATED, ET AL.,)
11 Defendants. )
12 ------------------------------------------
13
14 HIGHLY CONFIDENTIAL
15
16 CONTINUED VIDEOTAPED DEPOSITION of BRIAN CLARKSON,
17 on behalf of Defendant, taken by Plaintiffs, held
18 at the offices of Satterlee Stephens Burke & Burke,
19 230 Park Avenue, New York, New York, Thursday,
20 May 26, 2011, commencing at 9:06 a.m., before Eileen
21 Mulvenna, CSR/RMR, Certified Shorthand Reporter,
22 Registered Merit Reporter and Notary Public of the
23 State of New York.
24
25 PAGES 445 - 619
Case 1:09-cv-08387-SAS Document 316-4 Filed 10/10/12 Page 2 of 87
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37 (Pages 586 to 589)
Page 586
1 CLARKSON - H!GHLY CONF!DENT!AL
2 NR. L!NKEN: Object to form. 13:10:00
3 Foundation. vague and ambiguous. 13:10:00
+ A. No, ! don't. 13:10:01
5 Q. Did you ever know how S!vs were 13:10:02
6 rated? 13:10:0+
7 NR. COSTER: Object to form. 13:10:05
8 NR. L!NKEN: Same objection. 13:10:06
9 NR. COSTER: No foundation. 13:10:07
10 A. ! don't believe so, no. 13:10:07
11 Q. Let's look at the fourth bullet 13:10:08
12 point down. 13:10:10
13 "Nodel-driven perspective on the 13:10:12
1+ meaning of AAA and P1 deterred a more subjective 13:10:1+
15 fundamental approach, which may have been more 13:10:19
16 appropriate given the uncertainty surrounding 13:10:21
17 model parameters and the valuations." 13:10:23
18 Do you understand what that sentence 13:10:26
19 means? 13:10:29
20 NR. COSTER: Object to form. No 13:10:29
21 foundation. Calls for speculation. 13:10:30
23 NR. COSTER: !gnores the earlier 13:10:32
2+ testimony. 13:10:3+
25 NR. L!NKEN: Object to form. Also 13:10:3+
Page 587
2 misread the sentence. 13:10:35
3 A. No, ! don't. 13:10:37
+ NR. COSTER: !'ll add that. Thank 13:10:39
5 you. 13:10:+0
6 Q. Let's look at page ending 950. You 13:10:++
7 see the heading on this page says, 13:10:+8
8 "Recommendation: !mprove and implement new 13:10:50
9 methodologies for Nv transactions"? 13:10:55
10 Do you see that? 13:10:57
11 A. ! do. 13:10:58
12 Q. You understand "Nv" there refers to 13:10:58
13 market value; is that correct? 13:11:01
1+ NR. COSTER: Object to form. 13:11:0+
15 Foundation. !gnores the earlier testimony. 13:11:0+
16 A. !t could, but ! don't know this 13:11:06
17 document. 13:11:08
18 Q. You've seen the abbreviation Nv 13:11:09
19 during the course -- during your work at Noody's; 13:11:12
20 correct? 13:11:15
22 A. ! have. 13:11:16
23 Q. When you saw it, what did it refer 13:11:16
2+ to? What did that abbreviation refer to? 13:11:18
Page 588
3 Foundation. vague and ambiguous. 13:11:21
+ A. !t usually meant market value. 13:11:22
5 Q. Let's look at the first bullet 13:11:26
6 point. 13:11:27
7 "Nore conservative parameter 13:11:28
8 assumptions with less reliance on ratings." 13:11:30
10 A. ! do. 13:11:33
11 Q. Do you understand that sentence? 13:11:33
13 foundation. Calls for speculation. 13:11:36
1+ NR. L!NKEN: Object to form. 13:11:38
15 A. No, ! don't. 13:11:38
16 NR. L!NKEN: Same objections. vague 13:11:+0
17 and ambiguous. 13:11:+1
18 Q. Second bullet point is, "Nore 13:11:+1
19 portfolio transparency and more robust asset 13:11:+3
20 pricing information." 13:11:+7
21 Do you see that? 13:11:+8
22 A. ! do. 13:11:+8
23 Q. Do you understand that sentence? 13:11:+9
2+ NR. COSTER: !'ll object to form. 13:11:51
25 Foundation. Calls for speculation. 13:11:53
Page 589
2 !gnores the earlier testimony. 13:11:5+
3 NR. L!NKEN: Same objection. 13:11:58
+ NR. PEREZ-NARQUES: Same objections. 13:11:59
5 A. No. 13:12:00
6 Q. !'ll show you what we'll mark as 13:12:12
7 Plaintiffs' Exhibit 600 for identification. 13:12:1+
8 (Exhibit 600, Bates Nos. NDYS-ADCB 13:12:15
9 3052+0 through 360, Netrus Group Data 13:12:15
10 Report for AFG, marked for identification.) 13:12:15
11 NR. DROSNAN: Let the record reflect 13:12:36
12 that Plaintiffs' Exhibit 600 consists of a 13:12:37
13 document entitled, "Noody's !nvestors 13:12:+1
1+ Service 2006 Business Effectiveness 13:12:+2
15 Survey." And bears Bates Nos. -- 13:12:+7
16 BY NR. DROSNAN: And again !'m going to refer to 13:12:50
17 the bottom Bates numbers, Nr. Clarkson. 13:12:51
18 A. Okay. 13:12:5+
19 Q. There's two sets. !'ll refer to the 13:12:5+
20 bottom. 13:12:56
21 NR. DROSNAN: NDYS-ADCB 3052+0 to 13:12:56
22 NDYS-ADCB 305353 -- !'m sorry. ! 13:13:02
23 apologize. That was not the last page. 13:13:09
2+ The last page is in fact NDYS-ADCB 305360. 13:13:10
25
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Page 590
2 BY NR. DROSNAN: 13:13:16
3 Q. And you should spend, as always, as 13:13:19
+ much time as necessary to familiarize yourself 13:13:21
5 with the documents until you're comfortable 13:13:2+
6 answering questions. !'m going to ask you 13:13:26
7 questions -- if you turn to page ending 350. 13:13:28
8 There's a -- the text on that page is "voice of 13:13:36
9 the company." 13:13:+2
10 Do you see it? 13:13:+3
11 A. Yes. 13:13:+6
12 Q. !'m going to ask you about the 13:13:+7
13 information that follows that page. 13:13:+8
1+ A. Okay. 13:13:52
15 (Witness peruses the exhibit.) 13:13:53
16 A. ! finished reviewing 350 through 13:26:+7
17 360. 13:26:+8
18 Q. Okay. Are you prepared to answer 13:26:52
19 questions about the document? 13:26:53
20 A. Yes. 13:26:5+
21 Q. You're familiar with the business 13:26:55
22 effectiveness survey at Noody's; correct? 13:27:07
2+ foundation. 13:27:10
25 A. No. 13:27:10
Page 591
2 Q. !n fact, you testified about the 13:27:11
3 business effectiveness survey to the FC!C; 13:27:12
+ correct? 13:27:16
5 NR. COSTER: Object to the form. 13:27:16
6 A. ! believe so, yes. 13:27:17
7 Q. You were involved in the business 13:27:18
8 effectiveness survey at Noody's; correct? 13:27:20
9 NR. COSTER: Object to form. 13:27:2+
10 Which business effectiveness survey 13:27:2+
11 are you referring to? 13:27:26
12 A. Sorry, which survey are you 13:27:28
13 referring to? 13:27:31
1+ Q. While you were at Noody's, you 13:27:31
15 participated in one or more business 13:27:33
16 effectiveness surveys; correct? 13:27:3+
18 A. Yes. 13:27:36
19 Q. And in particular, you participated 13:27:38
20 in the 2006 business effectiveness survey while 13:27:+0
21 you were co-chief operating officer at Noody's; 13:27:+3
22 correct? 13:27:+5
23 NR. COSTER: Object to form. No 13:27:+6
2+ foundation. 13:27:+7
25 A. Yes, ! did. 13:27:+8
Page 592
2 Q. What was your role with respect to 13:27:+9
3 the business effectiveness survey? 13:27:51
+ A. Ny role was to review the results 13:27:55
5 and discuss them with my direct reports so they 13:27:58
6 could address or talk to their direct reports 13:28:03
7 about it. 13:28:06
8 Q. What was the purpose of the business 13:28:08
9 effectiveness survey? 13:28:09
11 foundation. 13:28:12
12 A. The basic purpose was to understand 13:28:1+
13 how the employees of Noody's, you know, viewed 13:28:17
1+ the company. 13:28:22
15 Q. Why was that information sought? 13:28:26
17 A. Well, to the extent that there were 13:28:28
18 good practices, you'd want to promote those; and 13:28:30
19 to the extent there were areas that you believed 13:28:33
20 needed attention, you'd be aware of those. 13:28:35
21 Q. And you said you reviewed the 13:28:38
22 results for the 2006 business effectiveness 13:28:+0
23 survey? 13:28:+3
2+ NR. COSTER: Object to form. 13:28:+3
25 A. ! believe ! did, yes. 13:28:++
Page 593
2 Q. Did you take any action with respect 13:28:+5
3 to -- after reviewing the results, did you take 13:28:+7
+ any action -- 13:28:50
6 Q. -- as a result of what you reviewed? 13:28:52
8 Foundation. 13:28:57
9 A. ! believe so, yes. 13:28:58
10 Q. What did you do after you reviewed 13:28:59
11 the Noody's !nvestors Service 2006 business 13:29:00
12 effectiveness survey? 13:29:0+
13 A. ! may be speaking to other business 13:29:06
1+ effectiveness surveys, because there were a 13:29:09
15 number of them. So it's difficult to say exactly 13:29:11
16 with respect to 2006. 13:29:13
17 Generally what we would do is, we 13:29:15
18 would talk amongst the managers and sort through 13:29:16
19 the results to see what were the -- what were the 13:29:20
20 areas of sort of best practices, what are the 13:29:23
21 areas that needed attention and, to the extent 13:29:26
22 possible, we would address those. 13:29:30
23 And the managers presumably -- ! 13:29:3+
2+ think it was of the teams would actually have -- 13:29:36
25 and sometimes there would be more senior people 13:29:38
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Page 59+
2 there -- would have meetings where you would 13:29:+0
3 review the results with -- with the individual 13:29:+2
+ teams. 13:29:+8
5 Q. To whom was the 2006 business 13:29:50
6 effectiveness survey circulated to or provided 13:29:52
7 to? 13:29:58
10 A. ! believe -- 13:30:00
11 THE W!TNESS: Sorry. 13:30:00
12 A. ! believe it was provided to all 13:30:01
13 Noody's employees. 13:30:02
1+ Q. Not just the Analytics staff; is 13:30:05
15 that correct? 13:30:08
16 NR. COSTER: Object to form. Asked 13:30:09
17 and answered. 13:30:11
18 A. ! believe that is accurate, yes. 13:30:13
19 Q. And what role did the Netrus Group 13:30:15
20 have with respect to the 2006 business 13:30:19
21 effectiveness survey? 13:30:21
23 A. ! believe they were the group that 13:30:2+
2+ was hired by Noody's to conduct the survey. 13:30:26
25 Q. And to provide a report to Noody's 13:30:30
Page 595
2 with the survey results; is that correct? 13:30:31
+ A. That's correct. 13:30:3+
5 Q. And this particular survey indicates 13:30:35
6 data report for AFG. 13:30:38
7 Do you see that? 13:30:+0
8 A. Yes. 13:30:+1
9 Q. And you're familiar with the 13:30:+1
10 abbreviation AFG; correct? 13:30:+3
11 A. Stands for asset finance group. 13:30:+5
12 Q. And Nr. Kanef led that group, is 13:30:+8
13 that correct, at this time? 13:30:55
1+ NR. COSTER: Object to form. 13:30:56
15 A. Again, !'m not good with dates, but 13:30:57
16 ! believe so, yes. 13:30:59
17 Q. What was encompassed by the asset 13:31:00
18 finance group? 13:31:02
19 NR. COSTER: Object to form. Asked 13:31:03
20 and answered. 13:31:06
21 A. ! believe that the asset finance 13:31:10
22 group was made up of the mortgage -- the 13:31:12
23 residential mortgage group, the commercial 13:31:15
2+ mortgage group and the asset-backed group. And 13:31:18
25 it may have included commercial mortgages, but 13:31:20
Page 596
2 !'m not sure. Actually, ! don't think it did. 13:31:23
3 Sorry. 13:31:27
+ Q. And it looks like there's numerical 13:31:31
5 survey results in the first part of the report; 13:31:33
6 correct? 13:31:38
7 NR. COSTER: Object to form. !f you 13:31:39
8 want him to look at that. 13:31:+1
9 Q. You can answer the question, sir. 13:31:++
10 A. ! didn't review it, but there are 13:31:+5
11 numerical results. 13:31:+6
12 Q. And then there are some comments set 13:31:+8
13 forth in the portion that follows "voice of the 13:31:50
1+ company" on page ending 350; correct? 13:31:53
15 A. Yes. 13:31:56
16 Q. And in fact, people were asked 13:31:58
17 various questions and asked to insert additional 13:32:03
18 comments; correct? 13:32:06
21 A. That's correct. 13:32:10
22 Q. On page ending 352, the question 13:32:11
23 was, "!f you have any additional comments 13:32:1+
2+ regarding the items in this section (management), 13:32:16
25 please insert them here"; right? 13:32:21
Page 597
2 A. Yes. 13:32:23
3 Q. Then you received -- the comments 13:32:23
+ are bullet pointed that follow; correct? 13:32:2+
5 NR. COSTER: Object to form. What 13:32:31
6 page are you on? 13:32:32
7 NR. DROSNAN: 352. 13:32:33
8 A. That's correct. 13:32:3+
9 Q. Let's look at the sixth bullet from 13:32:3+
10 the bottom of that page, page ending 352. And 13:32:38
11 that comments reads -- do you see it? !t begins, 13:32:++
12 "Nanager focuses." 13:32:+6
13 A. Yes. 13:32:+8
1+ Q. !t reads, "Nanager focuses on making 13:32:+8
15 bankers happy instead of focusing on the issues 13:32:51
16 involved with respect to the transactions. 13:32:5+
17 !ndividuals are being promotedfrewarded who do 13:32:57
18 not read the documents and do not truly analyze 13:33:00
19 the documents. They simply convey what the 13:33:03
20 bankers tell them. There's a check-the-box 13:33:05
21 mentality." 13:33:08
23 NR. COSTER: Object to form. You 13:33:10
2+ misread it, but subject to the objection. 13:33:12
25 A. !t doesn't say "box," but ! think 13:33:15
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+0 (Pages 598 to 601)
Page 598
2 that's what they mean. 13:33:16
3 Q. You think that's a typo? !t should 13:33:17
+ be "box"; right? 13:33:19
5 NR. COSTER: Object to form. Calls 13:33:20
6 for speculation. 13:33:20
7 Q. That's your understanding; is that 13:33:21
8 correct, sir? 13:33:22
9 NR. COSTER: Calls for speculation. 13:33:23
10 A. Yes. 13:33:25
11 Q. Were you aware of that comment, sir, 13:33:31
12 in 2006? 13:33:33
13 A. ! don't recall. 13:33:3+
1+ NR. L!NKEN: Object to form. Lack 13:33:35
15 of foundation. vague and ambiguous. 13:33:36
16 Q. Did you take any action as a result 13:33:38
17 of that comment? 13:33:39
18 NR. COSTER: Object to form. 13:33:+0
19 NR. L!NKEN: Same objection. 13:33:+0
20 NR. COSTER: To that specific 13:33:+1
21 comment as opposed to the others on the 13:33:+3
22 page? 13:33:+5
23 Q. You can answer my question. Your 13:33:+6
2+ attorney can ask you questions later. 13:33:+7
25 NR. COSTER: Object to form. 13:33:+9
Page 599
3 Q. Did you take any action after 13:33:51
+ reviewing that comment? 13:33:53
5 NR. COSTER: !gnores the earlier 13:33:5+
6 testimony. 13:33:55
7 A. ! don't recall the specific comment. 13:33:58
8 Q. So it's fair to say you didn't take 13:3+:00
9 any action as a result of it; correct? 13:3+:02
10 NR. COSTER: Object to form. 13:3+:0+
11 A. Well, in fact, we took lots of 13:3+:05
12 action with respect to the survey itself. 13:3+:07
13 Q. !'m just asking you about the 13:3+:09
1+ comment that ! read to you. !'m asking you 13:3+:11
15 whether you took any action as a result of this 13:3+:13
16 particular comment. 13:3+:15
17 NR. COSTER: Object to form. 13:3+:15
18 A. Ny response to you is we actually 13:3+:16
19 did take a lot of action with respect to the 13:3+:18
20 survey. 13:3+:20
21 Q. Did you take any action as a result 13:3+:21
22 of the comment ! just read to you, sir? 13:3+:21
23 NR. COSTER: Object to form. The 13:3+:2+
2+ comments that's part of that survey? ! 13:3+:25
25 object to form. 13:3+:26
Page 600
2 You can answer the question. 13:3+:27
3 A. And my response is that with respect 13:3+:28
+ to the comments in the survey, we took action. 13:3+:29
5 Q. And then !'m referring you to that 13:3+:32
6 particular bullet point that ! read. And !'m 13:3+:3+
7 just asking you whether you took any action with 13:3+:36
8 respect to that particular comment. 13:3+:39
9 NR. COSTER: Object to form. Asked 13:3+:+1
10 and answered. 13:3+:+2
11 You can answer it again. 13:3+:+2
12 A. ! don't recall that specific 13:3+:+3
13 comment. 13:3+:++
1+ Q. Let's look at the next page, page 13:3+:+5
15 ending 353. 13:3+:+7
16 A. Okay. 13:3+:+9
17 Q. There the question at the top of the 13:3+:51
18 page is, "!f you have any additional comments 13:3+:53
19 regarding the items in this section (strategic 13:3+:56
20 direction, communication, ethics, people 13:35:00
21 resources, technology, operating effectiveness, 13:35:03
22 innovationfadaptability, 13:35:06
23 empowermentfdecision-making) please insert them 13:35:10
2+ here." 13:35:15
Page 601
2 A. ! do. 13:35:17
3 Q. Let's look at the fourth bullet 13:35:17
+ point down. !t reads, "Competition between 13:35:19
5 rating agencies seems to impact the integrity of 13:35:22
6 senior management." 13:35:26
8 A. ! do. 13:35:27
9 Q. You reviewed -- you were aware of 13:35:29
10 that comment back in 2006, weren't you, sir? 13:35:30
12 Foundation. 13:35:3+
13 NR. L!NKEN: Object to form. 13:35:3+
1+ A. ! don't recall that specific 13:35:35
15 comment, no. 13:35:36
16 Q. Did you take any action as a result 13:35:36
17 of that comment? 13:35:38
20 A. Again, ! would -- 13:35:+0
21 NR. L!NKEN: Object to form. 13:35:+1
22 A. ! would again say that we took lots 13:35:++
23 of action with respect to the business 13:35:+6
2+ effectiveness surveys. 13:35:+8
25 Q. Did you take action as a result of 13:35:51

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