China Development Industrial Bank v. Morgan Stanley, Affirmation of Jason C. Davis

61.4 MB·English

FILED: NEW YORK COUNTY CLERK 01/16/2013 INDEX NO. 650957/2010
NYSCEF DOC. NO. 206 RECEIVED NYSCEF: 01/16/2013

SUPREME COURT OF THE STATE OF NEW YORK
COUNTY OF NEW YORK
X
CHINA DEVELOPMENT INDUSTRIAL :
BANK, : Index No. 650957/2010
:
Plaintiff, : The Honorable Melvin L. Schweitzer
:
vs. Mot. Seq. No. ____
:
:
MORGAN STANLEY & CO. Individual Assignment Part 45
:
INCORPORATED, et al.,
:
AFFIRMATION OF JASON C. DAVIS IN
:
Defendants. SUPPORT OF PLAINTIFF’S MOTION TO
:
COMPEL PRODUCTION OF DOCUMENTS
X
FROM MORGAN STANLEY

745397_1
I, JASON C. DAVIS, an attorney admitted to practice before the courts of the State of New
York, affirm the following to be true under penalty or perjury, pursuant to Rule 2106 of the New
York Civil Practice Law and Rules:
1. I am a member of the law firm Robbins Geller Rudman & Dowd LLP, attorneys for
plaintiff China Development Industrial Bank (“CDIB”).
2. I submit this Affirmation in support of CDIB’s Motion to Compel Production of
Documents from Morgan Stanley.
3. CDIB has met and conferred in good faith with counsel for Morgan Stanley & Co.
Incorporated and Morgan Stanley & Co. International plc (collectively, “Morgan Stanley”) in an
effort to resolve the issues that are the subject of this motion. See Dkt. No. 151. CDIB’s good-faith
efforts included telephonic meet-and-confer discussions, written correspondence and, on July 31,
2012, an in-person disclosure conference with counsel for Morgan Stanley, and the Court’s law
clerk, Mr. Jay Wilker. The in-person disclosure conference occurred with the benefit of letter
briefing in advance of the conference. Id.
4. On July 31, 2012 at the Court-ordered disclosure conference, counsel for Morgan
Stanley, James P. Rouhandeh, stated that the reason why he did not produce the Morgan Stanley
document attached to the Froeba Report as Exhibit B was because it was “totally irrelevant.”
5. On July 27, 2012, CDIB’s investigator had a telephone conversation with Mr. Eric
Kaplan, who used to work at Morgan Stanley and whose name appears on Exhibit B to the Froeba
Report. That exhibit is an e-mail that United States District Court Judge Scheindlin ordered to be
filed publicly in a different case. Mr. Kaplan told CDIB’s investigator that Morgan Stanley
employee Howard Hubler was the head of the group in which Morgan Stanley employees Steven
Shapiro and Frank Telesca worked, and that Hubler was their ultimate boss, though there may have
been other managers between Hubler and Shapiro and Telesca. On July 31, 2012 at the Court-
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ordered disclosure conference, counsel for Morgan Stanley confirmed that Shapiro and Telesca did
work in Hubler’s group. See Exhibit 33 hereto. All of this information is consistent with other facts
summarized in CDIB’s motion to compel, filed herewith.
6. Except as excerpted or highlighted, attached are true and correct copies of the
following documents:
Exhibit 1: FILED UNDER SEAL. Morgan Stanley Securitized Products Group
Organizational Chart.
Exhibit 2: FILED UNDER SEAL. E-mail thread including Morgan Stanley executives
Geoffrey Kott, Jonathan Horowitz, Graham Jones, Angela Liu and Philip
Blumberg re: STACK – CCB, dated March 16, 2007.
Exhibit 3: FILED UNDER SEAL. Morgan Stanley STACK 2006-1 CDO Trading
Committee Presentation, dated February 16, 2006.
Exhibit 4: Plaintiff’s Second Request for Production of Documents to Morgan Stanley
& Co. Incorporated and Morgan Stanley & Co. International plc, dated
July 18, 2012.
Exhibit 5: FILED UNDER SEAL. Letter from Jason C. Davis to James P. Rouhandeh,
dated June 8, 2012.
Exhibit 6: Renee Schultes and Jonathan Sibun, Morgan Stanley creates new trading
group, Financial News, April 17, 2006.
Exhibit 7: Excerpts from Michael Lewis, The Big Short: Inside the Doomsday Machine
(2010).
Exhibit 8: FILED UNDER SEAL. E-mail or electronic meeting note to Morgan
Stanley executives Howard Hubler, John Pearce, Jonathan Horowitz, Joseph
Naggar, Philip Blumberg, Graham Jones and others from Lucy Chang, dated
February 15, 2006.
Exhibit 9: Trader Axed, Others Next at Morgan Stanley, Asset Backed Alert, Harrison
Scott Publications Inc., November 9, 2007.
Exhibit 10: FILED UNDER SEAL. SPG CDO Warehouse Committee Minutes, dated
February 17, 2006.
Exhibit 11: FILED UNDER SEAL. Excerpts from Preference Share Purchase
Agreement between STACK 2006-1 LTD and Morgan Stanley Asset
Funding Inc.
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Exhibit 12: Michael Corkery, Morgan Stanley, Not Goldman, Was the Real CDO Hitter,
The Wall Street Journal, May 13, 2010.
Exhibit 13: People Briefs; Former Morgan Exec Joins Highland, HedgeWorld.com,
April 3, 2008.
Exhibit 14: FILED UNDER SEAL. E-mail from Erik Siegel to Jonathan Horowitz re:
Three Items, dated August 8, 2006.
Exhibit 15: FILED UNDER SEAL. Originator Distribution – STACK MS Counterparty
Chart.
Exhibit 16: FILED UNDER SEAL. E-mail from Jonathon Horowitz to Howard Hubler,
Joseph Naggar, John Pearce, Benjamin Friedland, Graham Jones, Elena
Miteva and others re: TCW Closing Event, dated February 27, 2006.
Exhibit 17: FILED UNDER SEAL. E-mail from Jonathan Horowitz to Angela Liu and
Erik Siegel re: Stack 06-1, dated March 22, 2007.
Exhibit 18: FILED UNDER SEAL. E-mail thread from Judy Lim to Lydia Lu, dated
March 22, 2007.
Exhibit 19: Greg Smith, Why I Am Leaving Goldman Sachs, The New York Times,
March 14, 2012.
Exhibit 20: Excerpts from Registration Statements on Form S-3 Under the Securities Act
of 1933, signed March 25, 2003, March 10, 2004, January 5, 2005,
December 23, 2005, February 15, 2006, March 9, 2006 and March 10, 2006.
Exhibit 21: FILED UNDER SEAL. Originator Distribution – STACK 2006-1 Chart.
Exhibit 22: Letter from Jason C. Davis to Daniel Schwartz, dated March 19, 2012.
Exhibit 23: Letter from Stephen D’Antonio, Managing Director of Morgan Stanley, to
the U.S. Securities and Exchange Commission re: General Comments on
ABS-Related Provisions of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, dated November 18, 2010.
Exhibit 24: Excerpts from the Deposition of Morgan Stanley executive Anton Peterson,
taken November 22, 2011, ordered to be filed publicly in Abu Dhabi
Commercial Bank v. Morgan Stanley & Co. Inc., No. 1:08-cv-07508-SAS-
DCF (S.D.N.Y.).
Exhibit 25: Excerpts from Official Transcript, Interview of Tony Peterson by the United
States of America Financial Crisis Inquiry Commission, dated October 14,
2010.
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Exhibit 26: Excerpts from Official Transcript, “The Financial Crisis at the Community
Level – Sacramento, Ca” Hearing by the United States of America Financial
Crisis Inquiry Commission, dated September 23, 2010; Excerpts from
Official Transcript, Interview of D. Keith Johnson by the United States of
America Financial Crisis Inquiry Commission, dated September 2, 2010; All
Clayton Trending Reports, 1st Quarter 2006 – 2nd Quarter 2007.
Exhibit 27: Letter from Paul T. Bossidy, Clayton Holdings CEO, to the Honorable Phil
Angelides, Financial Crisis Inquiry Commission, dated September 30, 2010.
Exhibit 28: Excerpts from Morgan Stanley 4th Quarter Earnings Conference Call, dated
December 19, 2007.
Exhibit 29: FILED UNDER SEAL. Stack CDO Collateral Chart.
Exhibit 30: Letter from Jason C. Davis to James P. Rouhandeh, dated August 2, 2011.
Exhibit 31: Abu Dhabi Commercial Bank v. Morgan Stanley & Co. Inc., No. 1:08-cv-
07508-SAS-DCF (S.D.N.Y.), Defendants’ Joint Memorandum of Law in
Support of Their Motion for Summary Judgment Pursuant to Federal Rule of
Civil Procedure 56(c), filed July 2, 2012.
Exhibit 32: FILED UNDER SEAL. E-mails related to grandfathering, and Morgan
Stanley and the credit rating agencies’ course of conduct in rating products
while worrying about “going to jail” in rating such products. Morgan Stanley
has stated it would produce documents such as these but Morgan Stanley has
yet to complete its production; therefore, it is unclear what, if any, disputes
remain about whether Morgan Stanley will comply with its obligations to
produce more documents that are similar to these documents.
Exhibit 33: Letter from Jason C. Davis to James P. Rouhandeh and Daniel J. Schwartz,
dated August 2, 2012.

I declare under penalty of perjury under the laws of the State of New York that the foregoing
is true and correct. Executed this 24th day of August 2012 at San Francisco.

JASON C. DAVIS

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EXHIBIT 1
""l
Morgan Stanley
-_ .. _.'1
Securitized Products Group
Signs $50 billion RMBS registration statement
with Hubler and Shapiro. Ex. 20.
[
TUfari~O J ~=
Tony __________ __. _. ____________ )
Shorts $2 billion of
subprime RMBS.
Ex. 28.
Hubler's "Right-Hand Man." COOs
Global Proprietary Ex. 9.
Credit Group l (
,--H_o_r_o_w_it_z. .. Ka h d j a i vi
1) Invites Hubler Indy Car racing in Las
Vegas. Ex. 16. 1
Blumberg
2) Says "I like" the idea of calling AAA
~
STACK COO the "Hitman." Ex. 2.
Jokes to Horowitz
and Jones that AAA
STACK COO should
Shorted subprime RMBS for
Miteva be named "Shitbag"
Morgan Stanley in 2006.
Telesca Pearce ) or "Nuclear
Ex. 12.
Holocaust. "
( Shapiro ) Mendelsohn Others Ex. 2
Headed near-prime
Others )
Work in "Hubler's Group" and residential mortgage
backed securities business
(1) Receive Clayton reports in Global Proprietary
showing massive "waiver" scam, Trading Group.
e.g., 91% of loans with bad Ex. 13.
appraisals "waived" into RMBS.
Froeba Report, Exs. O,E.
(2) Receive emails showing "very
flagrant" appraisal violations by
"all sellers" of subprime loans to
Morgan Stanley's RMBS team.
Froeba Report, Ex. B.
Invited to Stack COO approval committee meeting
Ex. 8.
EXHIBIT 2
From: Blumberg, Philip (FlO) [[email protected]
Sent: Friday, March 16, 20071:44 PM
To: Jones, Graham (FlO); Kott, Geoffrey (FlO)
Cc: Weisberg, Dana (FlO)
Subject: RE: STACK -CGB
or ... Subpr1me Meltdown 2007
Philip Blumberg - Vice President
Morgan Stanley I Fixed Income
1585 Broadway I Floor 02
New York, NY 10036
Phone: [phone]
Fax; [phone]
[email protected]
From: Blumberg, Philip (FID)
Sent: Friday, March 16, 2007 9:42 AM
To: Jones, Graham (FlD); Kott, Geoffrey (FID)
Cc: Weisberg, Dana (FID)
Subject: HE: STACK - ceB
How about
* Nuclear Holocaust 2007-1
*
ShitBag 2007-1
Mike Tyson's Punchout 2007-1
Fludderfish 2007-1
Just kidding (in case you couldn't tell) --- I like Chalfont 2007-1 --
i t's a pain to say, but it's a very special place
Philip Blumberg - Vice President
Morgan Stanley I Fixed Income
1585 Broadway I Floor 02
New York, NY 10036
Phone: [phone]
Fax: [phone]
[email protected]
From: Jones, Graham (FlO)
Highly Confidential Investor Materials
Sent: Friday, Harch 16, 2007 9:37 AM
To: Kott, Geoffrey (FlO); Blumberg, Philip (FlO)
Cc: Weisberg, Dana (FlO)
Subject: RE: STACK - CCB
OK, here are some name suggestions:
* MSCDOREPACK
* Burbage (Shakespeare's principal actor)
*
Sarabi (just to annoy Cee - but also a name of a Disney
character which might make it copyrighted)
* Chalfont (first part of the name of the village that I ~las
brought up in)
Graham Jones - Vice President
Morgan Stanley I Fixed Income
1585 Broadway I Floor 02
New York, NY 10036
Phone: [phone]
Fax; [phone]
[email protected]
l"lVW: Horowitz, ,JUll Lhdll (fID)
Sene Friday. Narch 16, 2007 8;57 AM
To: Kott, Geoffrey (FlO); Jones, Graham (FID); Liu, Angela (FID)
Cc: Weisberg, Dana (FlO); Blumberg, Philip (FID)
Subject: RS; STACK - CCB
1 lik.e it
Jonathan Horowitz - Managing Director
Morgan Stanley I Fixed Income
1585 Broadway I Floor 02
New York, NY 10036
Phone; [phone]
Fax: [phone]
[email protected]
2
Highly Confidential Investor Materials