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IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF PUERTO RICO

In Re: )

)

) PROMESA

THE FINANCIAL OVERSIGHT AND ) Title III

MANAGEMENT BOARD FOR PUERTO RICO, )

)

as representative of )

) No. 17-BK-3283-LTS

THE COMMONWEALTH OF PUERTO RICO, )

et al, )

)

Debtors . )

MOTION HEARING

BEFORE THE HONORABLE JUDITH GAIL DEIN

UNITED STATES MAGISTRATE JUDGE

United States District Court

1 Courthouse Way, Courtroom 8

Boston, Massachusetts 02210

June 18, 2018

1:34 p.m.

Debra D. Lajoie, RMR, FCRR, CRI

United States District Court

1 Courthouse Way, Room 3-209

Boston, Massachusetts 02210

lajoiedebra@gmail.com

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A P P E A R A N C E S:

PETER FRIEDMAN, ESQ., and WILLIAM J. SUSHON,

ESQ., O'Melveny & Myers LLP, for Puerto Rico Fiscal

Agency and Financial Advisory Authority

MARGARET DALE, ESQ., and TIMOTHY MUNGOVAN, ESQ.,

Proskauer Rose LLP, for The Financial Oversight and

Management Board for Puerto Rico, as representative of

The Commonwealth of Puerto Rico

D. FARRINGTON YATES, ESQ., Kobre & Kim LLP,

Independent Investigator

LANDON RAIFORD, ESQ., and KERI L. HOLLEB

HOTALING, ESQ., Jenner & Block LLP, for The Official

Committee of Retired Employees of the Commonwealth of

Puerto Rico

LUC A. DESPINS, ESQ., and BRADLEY GRAY, ESQ.,

Paul Hastings LLP, for the Official Committee of

Unsecured Creditors

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18 JUNE 2018 -- 1:34 P.M.

THE CLERK: The United States District Court for

the District of Puerto Rico is now in session, the

Honorable Magistrate Judge Dein presiding, today is

June 18th, 2018. In the matter of The Financial

Oversight and Management Board of Puerto Rico, as

representative of The Commonwealth of Puerto Rico,

et al, Bankruptcy No. 17-BK-3283.

Will counsel please identify themselves for the

record.

MR. FRIEDMAN: Good morning, Your Honor.

Peter Friedman of O'Melveny & Myers on behalf of

AAFAF, as representative of GDB.

MR. SUSHON: Good afternoon, Your Honor.

Bill Sushon of O'Melveny & Myers.

MS. DALE: Good afternoon, Your Honor.

Margaret Dale from Proskauer Rose on behalf of

The Oversight Board, as the representative of the

Debtors.

MR. MUNGOVAN: Good afternoon, Your Honor.

Timothy Mungovan from Proskauer for The Oversight

Board.

MR. YATES: Good afternoon, Your Honor.

Farrington Yates with Kobre & Kim. We're the

Independent Investigator.

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MR. RAIFORD: Good afternoon, Your Honor.

Landon Raiford, Jenner & Block, for the Retiree

Committee.

MS. HOLLEB HOTALING: Good afternoon,

Your Honor. Kelly Holleb Hotaling, Jenner & Block, on

behalf of the Retiree Committee.

MR. GRAY: Good afternoon. Brad Gray, with

Paul Hastings, on behalf of the Committee.

MR. DESPINS: Good afternoon, Your Honor.

Luc Despins with Paul Hastings on behalf of the

Official Committee.

MR. D0RSEY: Good afternoon, Your Honor.

John Dorsey on behalf of Banco Popular.

THE COURT: All right. Welcome to everyone

here, long time no see, and welcome to everyone in

New York and Puerto Rico who are on the other end of

the phone.

I was pleased to see the status reports. Thank

you. Apparently everybody's taking this seriously. So

let's see how much progress we can make. Anything to

update?

MR. FRIEDMAN: Your Honor, Peter Friedman.

THE COURT: You know what? And I think it's

easiest if you talk from the podium.

MR. FRIEDMAN: Peter Friedman from O'Melveny &

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Myers on behalf of AAFAF, as representative of GDB.

Your Honor, as we said in our status report, we

have already now I think a week plus a few days ago

produced to the two Committees on behalf of GDB the

documents that the independent investigator has

identified to AAFAF and GDB that it relies on in

connection with its report.

We have agreed to produce a categorical

privilege log to both Committees. Our target to do

that is Wednesday of this week.

We've agreed to have further discussions if they

believe that, in this specific instance, a

document-by-document log is necessary. You know, in

many instances, we don't think it's necessary. We

think here, if it's useful, it's something we're

willing to discuss because it's not an enormous set of

documents. So we think, if that's a useful exercise,

it's something we're willing to engage with the two

Committees on.

There are a very few limited issues with respect

to a non-disclosure agreement between the Committees

and AAFAF on behalf of GDB. I think it's really down

to one very narrow issue. And, you know, in our view,

we have complied, AAFAF on behalf of GDB and GDB

working together with the AAFAF, have complied with the

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obligations set out by the Court.

You know, just this matter, this report, is of

great -- that the Independent Investigator will

eventually come out with, just to be clear, is of

extreme importance to AAFAF and GDB, and I just want

the Court to know that, that this was a report

originally in some ways that the Governor himself was

contemplating having Puerto Rico do on its own before

the Oversight Board announced that it would conduct

such an investigation under Rule 104 -- I'm sorry --

Section 104 of PROMESA.

The Governor and GDB and AAFAF are extremely

interested in the report, what the report will say

about historical practices, what the report will say

about issues which may have led to Puerto Rico's

financial crisis, what the report will say about future

recommendations as to how some issues that may have

contributed to Puerto Rico's financial crisis can be

avoided in the future. It's something that -- just to

be very clear, and I don't know if this come through in

the past, this report is extremely important.

GDB's President, Christian Sobrino, who's here

in the Courtroom with me today. Mr. Sobrino, right

there, who's also the Governor's ex officio

representative to the Oversight Board, is with me. You

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know, the Court required that a GDB person come here,

but Mr. Sobrino is happy to be here today, as he will

be happy to be interviewed by the Kobre & Kim special

investigative team. He's also joined by GDB's General

Counsel, Belen Fornaris Alfaro, both of whom came up

today.

And so, you know, as I said, this report is

extremely important. We look forward to reading it, we

look forward to continuing to cooperate with the

Special Investigator from Kobre & Kim. You know, GDB

is not a Title III Debtor. Hopefully it never will be.

As the Court has heard from previous issues, GDB

will be actually trying to do something that no other

Commonwealth territorial instrumentality has done to

this point, which is it has successfully entered into a

restructuring agreement with its creditors voluntarily,

has reached consensus, is going to ask for this --

for the District Court to hear a Title VI proceeding,

which I think is actually a pretty remarkable step in

Puerto Rico's restructuring and one that deserves a

tremendous amount of credit and praise for GDB having

reached out to its bondholders and come to an agreement

and is prepared to submit that to an appropriate level

of scrutiny, you know, in procedures that I know have

been discussed already with this Court that will be the

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subject of informational motions, will be the subject

of a proceeding to be commenced sometime in July and

will seek approval of in the fall.

And I think it would be remiss not to note how

important that is and what an important step that is by

GDB. And, Your Honor, to the extent there have been

some hiccups or disconnects in the discovery process to

this point, we will do our best to avoid those in

connection with a Title III, where we think discovery

should be -- Title VI, where we think discovery should

be extremely limited. We will work our best to avoid

any hiccups in that discovery process.

That's all I have to say, Your Honor. I'm sure

others will have things to say or characterizations to

make that I will be back to rebut if I need to, unless

you have any questions.

THE COURT: Let me just ask you, on the NDA, is

it -- the remaining issue something you need me to be

involved in, or do you think it's going to get worked

out?

MR. FRIEDMAN: I'm not sure. It's on an

exceedingly narrow issue, Your Honor, and I'm hopeful,

since I believe what we have made is an eminently

reasonable proposal to the Committees as to how to

handle that issue, it can be worked out. If it can't,

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as I said, I'm happy to come back up and rebut anything

that's been said and explain why the approach we're

taking is the right one.

THE COURT: All right. So, before we end today,

we ought to have a schedule for that because I think it

ought to be resolved, and maybe we can do it on the

paper, maybe we can do it on phone. I don't know that

everybody needs to come back, but if we're that close,

it ought to get done.

MR. FRIEDMAN: We agree. We'd be happy to have

a telephonic conference, if necessary. Look, I'm sure,

Your Honor, that other people will have comments about,

you know, issues that they perceive. And, frankly, I

don't think any of the issues that you may hear about

are actually ripe for decision today, so we'll -- you

know, to the extent we need to come back or have a

hearing, we'll do what we need to do.

THE COURT: I'm here. You're always welcome.

MR. FRIEDMAN: Thank you, Your Honor.

THE COURT: All right.

Oversight Board? Anybody want to tell me what

the update is?

MR. YATES: Your Honor, it's Farrington Yates

with Kobre & Kim in New York. As a preliminary matter,

I'm not admitted in this District, so the Clerk asked

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that I make that -- make you aware of that and seek

admission pro hac for purposes of the hearing today.

THE COURT: Any objections?

We usually make you pay the fee before we allow

you to talk, but I think we'll allow you to talk today.

MR. YATES: Thank you. I appreciate the

courtesy, Your Honor. I swear we're good for it.

So, in response to the order that was issued by

the Court from the last hearing, the Independent

Investigator has filed a statement addressing the

concerns that were raised by the Court and also

addressing with detail some of the very specific

requests that were made with respect to search terms,

custodians and where we are with respect to ongoing

productions vis-a-vis third parties currently.

I wanted to caution the Court, Your Honor, that,

as we filed this, we were careful to keep the

witnesses -- to keep from contaminating the witnesses.

So, with respect to Popular, they only saw the exhibit

that was relevant to them. With respect to Santander,

they only saw the exhibit that was relevant to them,

Exhibit B. Same with GDB/AAFAF, which was Exhibit C.

And then the Committees have seen all of the exhibits,

A through E.

So, with respect to the report, we have shared

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with both Committees the search terms and custodians

that we have utilized when doing our document discovery

with respect to Santander, Popular and GDB. So, we had

the opportunity to speak with counsel for both on

Friday after our filing to solicit any additional input

or further guidance in light of the filings as far as

what else they would suggest as far as what we need to

do going forward.

We also made clear that, even though we are

starting the process to file and prepare a final

report, there is time, where we are continuing to

receive documents from various witnesses. We can go

back. We intend to go back and interview some

witnesses again as the process has continued, and so we

do actively solicit their input with respect to any

remaining matters. So, with respect to your order, I

believe that we have responded as you requested with

respect to Popular, Santander and GDB.

With respect to the fourth category, which is

productions that are coming from third parties, we are

subject to nondisclosure agreements with each. We have

asked that they allow us to disclose to the Committees

any materials produced to us that have been identified

or characterized as confidential. They have all

refused. And so, we have the documents, and our intent

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was -- you asked for our position -- we'll not disclose

the search terms or the custodians used in order to

generate that production absent their consent or absent

a Court order, and we may talk about that a little

later on when -- I know you asked specifically about an

exit plan.

Then, with respect to third parties that have

produced to us that have allowed us to produce to the

Committees, that is Exhibit E, and there is just a

handful, and it's mostly addressed towards documents

that have already been made public, so they're already

in the public domain.

So, with respect to the documents that are

housed with respect to the third parties, counsel for

the Oversight Board referenced at the last hearing an

exit plan, and the Court requested that we, the

Independent Investigator, comment on that, specifically

and particularly the timing. And so what we stated and

what we intend to do is something that is fairly

customary with respect to examiners and bankruptcy

cases, even though we are not in the Title III case;

we're operating in Title I, but we thought that the

procedures provided guidance on how to proceed.

And so what we intend to do, because we really

don't have any sort of an issue or an interest in

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keeping materials away from a particular party or

resolving any sorts of disputes about what needs to be

disclosed and what is not disclosed, and so our

intention was to file a procedure, motion, that would

authorize us to put these materials into a depository.

Subject to whatever NBAs or other agreements are in

place, they would be put there and preserved.

As part of that process, then any party or party

in interest, committees, creditors, et cetera, that

want access to those documents, they come to Court and

ask for them, and if there's any disputes about whether

they're entitled to them or not, then the Court can

address those issues then.

As part of the procedures as well, we talked

about confidentiality procedural process. Although we

have NDAs that -- with all of these parties that

provide for the Independent Investigator broad

disclosure rights, if there is a particular specific

attribution to a witness or something that a witness

has identified as being particularly critical or

confidential, we would give them notice and give them

an opportunity to come in and ask that, that statement

not be published.

And we of course would be taking a position

consistent with our mandate, which would be we need to

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publish a final report that talks about the issues that

have already been addressed here for the good of the

people of Puerto Rico so that they have the benefit of

our investigation of what may have happened in the past

and what sort of recommendations we will make for the

future.

THE COURT: So, do you anticipate filing on

July 3rd a proposal for the -- what the exit plan would

look like, and then we would have some time before the

report is issued to sort of finalize that process as

well, or do you expect to negotiate with the others

before you file on July 3rd?

MR. YATES: Sure. I think it's a bit of both,

to be honest with you. Our deadline for our purposes

is July 3rd so that we can have the relief granted and

procedures approved by the end of July. That

corresponds with our publishing the final report, which

we said would be happening at the end of summer.

I know that the Committees have asked that they

provide input into any motion that we file. Of course

we will be talking with them about the process. In

bankruptcy cases and others, they are actively

involved, so it was always our intention to bring them

into the discussion.

What I would expect is the plan will be -- the

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exit plan would be reflected in the motion, and from

the time it's filed until the time it's heard and

approved, there would be opportunity for parties to

come to us and ask for changes, modifications,

et cetera. As we've stated, what our intention is with

respect to documents, et cetera, to the extent that

parties want access or if parties want to prevent

access, I assume that they will step forward as well.

So, what we're trying to do is corral the

process and all of these competing interests into one

process that will be resolved in July so that, when the

report is published, and we said at the end of summer,

it will all be in place.

THE COURT: So, does it -- I guess one of the

things we'll talk about today is whether it makes sense

to aim for that final date at the omni, which is

July 24th, something like that?

MR. YATES: That's right, Your Honor. So, I

wanted -- that invites one issue. So, the question is:

Where does the special -- the Independent Investigator

file the motion; right?

As I indicated previously, we're operating

in Title I under PROMESA, and everybody's here in

Title III in the restructuring case, and so our client

has not decided affirmatively whether we should file

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here in the Title III proceeding or in the Title under

Title I. I don't think it matters either way,

Your Honor, and I don't think it impacts the timing at

all, and here's the reason why: So, if we file under

Title I, we would need to file the motion with the

District Court for Puerto Rico. We would certainly

advise them of the related proceedings with respect to

the Title III restructuring, and then the Court would

decide what to do with the motion next.

So, we expect that, whatever that decision is,

we will have a hearing to resolve any and all of these

issues prior to July, the end of July, because we'll be

giving notice to all of the affected parties one way or

the other, so we don't think this affects timing.

We've stated in our Statement of Position that we're

committed to filing this by the 3rd of July, and we

intend to have it heard either in the District Court of

Puerto Rico or at the omnibus, if that's where it

ultimately winds up, prior to the conclusion of July.

THE COURT: Okay. I guess my -- I haven't

really thought about where it's appropriately filed,

and you'll have to make that initial decision, but I

guess for our purposes, it's a process that we need to

finalize around the time of the omni. So, my guess is

it's going to be on the agenda one way or another.

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Whether it's actually formalizing the exit plan or

dealing it within the context of a 2004, I don't know,

but I think we need to aim for that date as the final

and comments -- the comment period being before then.

MR. YATES: Absolutely, Your Honor. We hear

your -- we'll be sure to follow that schedule.

THE COURT: Okay. I'm good. I'm waiting for

the Committee to tell me all the things that we've

missed.

MR. YATES: I'll sit down, then. Thank you.

THE COURT: Thank you.

MR. DESPINS: Good afternoon, Your Honor.

Luc Despins with Paul Hastings on behalf of the

Official Committee. First, thank you very much for

modifying the start time of the hearing. Much

appreciated.

THE COURT: Is that for travel purposes?

MR. DESPINS: Yes.

THE COURT: Just so I know. I mean, it doesn't

matter to me, so in the future we'll keep it at 1:30.

That works better for everybody?

Okay.

MR. DESPINS: Sure.

Your Honor, the first thing -- so, you read the

landscape correctly. There are some issues remaining.

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The entry of the order by Your Honor did facilitate the

process tremendously, and we appreciate that. But let

me hit them one by one.

So, the first thing is that GDB says we've -- or

sorry -- the Investigator tells us that we have

received, the Committees have received production of

everything that's been produced to them by GDB. And

that's not accurate technically, so let me explain why.

The way they proceeded is they -- GDB, or AAFAF,

gave access to their computer systems in a read-only

mode to the Investigator's lawyers. So they went down

there, and they had tons of search terms, they ran

searches, and when you look at the documents that these

searches produced, it's hundreds of thousands of

documents.

They then reviewed those documents and decided,

We only need paper -- a subset in paper form of 5,700.

We'll take their number for granted for now. But the

whole purpose of this is that the Committees could have

access to the same things that they had access to. So

we're only having access to what they determine is

relevant. So I'll give you -- to make this easy to

understand from a paper point of point of view, it's as

if there's a box with 100,000 pages of documents, they

selected what was of interest to them in that box, and

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we're only seeing that second box.

So, obviously -- you know more about document

production than I do, but you know, a document is

produced if it's made available. So, when they say

they've produced to us everything that has been

produced to them, that's not accurate because they saw

hundreds of thousands of documents more than what

they're giving us.

So, how do we fix that; right? So I think that,

you know, we need to -- we'll work with them again

but -- to try to get access to other documents, not

only the ones they determine to be relevant, but that

needs to be fixed somehow because, otherwise, we're not

seeing the universe of documents they had, that were

technically produced to them.

THE COURT: But what I don't want to have is a

total review of irrelevant materials. And so part of

the rationale in my mind for ordering the production of

the search terms was to see if there was an appropriate

limitation.

The Commonwealth -- we just simply can't afford

to have hundreds of thousands of documents reviewed

multiple times if most of them are not relevant. So

somehow we need to figure out the way that a review --

I understand what you're saying, that you don't want to

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be limited to just the ones that were identified as

hard copy, but I'm not -- it doesn't make sense for us

to be reviewing hundreds of thousands of documents

again.

MR. DESPINS: I understand that fully,

Your Honor. If they had searched -- if they had shared

the search terms, you know, three months ago, as we

asked them, we wouldn't be in this predicament now.

But we'll try to find a way. But it cannot be that

we're limited to the 5,700. Oh, by the way, 60 percent

of the 5,700 are what I call phone books, meaning deal

documents that are -- most of them public, so if you

look at emails and all that, it's a very small portion

of that. So, yes, we need to be cost-conscious. We

can't review -- do the same review twice.

On the other hand, we can't be limited to what

they found of interest because there may be other

documents that are of interest. So that's the first

issue, and I represent to the Court that we'll work on

that, but I think we need to continue the same concept

of the short leash that you've imposed, which is that

we need to be able to come back to Your Honor at some

point soon if we can't resolve that issue. But that's

the first issue.

The second point is the exit plan, and we're

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happy to see that they are on top of that issue, so it

is a kind of a TBD issue, but I need to address this

Title I versus Title III. I understand where they're

coming from, but if this is filed in a Title I

proceeding, first of all, they would have to -- there's

no Title I proceeding pending anywhere -- right? -- as

opposed to the Title III proceedings are pending.

There's no Title I proceeding pending anywhere, so they

would have to start some kind of litigation. We would

need to remove it to the Title III Court, and basically

we're setting up a morass of procedural motions that

will take forever.

I mean, I don't want to do what I am proposing

but there's a very easy way to do this, which is we

could serve a subpoena on the Investigator to say,

Produce everything you received, and of course he would

come back and say, No, I can't do that, I'm bound by

confidentiality, which is fine, and then the Title III

Court, which is you or Judge Swain, would resolve the

issue.

That's -- but to start some kind of proceeding

in another Puerto Rico District Court, because it

doesn't go to Judge Swain automatically or to you

automatically, will -- you know, in terms of fees,

that's going to create a lot of -- and I know what's

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going to happen, they'll say, The Committees have no

standing in the Title I proceeding, and that's going to

take a life of its own. So, I applaud the idea of an

exit plan, but to file this -- and I know they have not

made a final decision, I heard that, but to commence

this in a Title I fashion would be a procedural morass.

Next point, Your Honor: There's an issue

floating, not for today, but I want to make sure

Your Honor has it, which is the issue of privileged

documents produced by the GDB to the Investigator.

There is an issue, we don't need to debate it, I'll

stipulate that GDB forcefully disagrees, but there's an

issue as to whether they waived the privilege by

producing it to the entity investigating them. Not a

today issue, for later, but I want you to know that's

coming.

Now, let's talk about the NDA. Assuming that

the issue that Mr. Friedman was referring to is what I

think it is, which is the issue that they want to

create a special category of documents that would not

be produced, that special category, and I've been

criticized for describing it in the past as the highly

damaging document category, so I will not use that, but

I'll quote from their language, which is that they

don't want to produce documents that would -- "if

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necessary to prevent a risk of harm to the elected

Government of Puerto Rico in the exercise of its

political or governmental powers." That's made out of

whole cloth. There is no such privilege to withhold.

And what we've said about this is the following:

If you want to do that, which is a concept that does

not exist anywhere, we haven't heard of any case law to

that effect -- and by the way, you've been dealing for

the last four or five months with the other 2004

discovery; you remember that? There's never been, to

my knowledge, ever a mention of that category of

documents that could be withheld, never.

And they're telling us here that they have not

identified any such document, but there could be some.

This is, like, August 15th. I'll come back to it in a

second. My gut tells me the reason they're fighting

for this is because there are such documents that are

problematic. Do I know that? No. But the fact that

there has been no request for that special category in

the other 2004 tells me that there's something peculiar

about what we're going to find in this discovery.

So, that's the issue, Your Honor. And the

Committee's view is there's no basis in law to withhold

documents like this. We're sensitive to the issue, so

we're proposing that, in preliminary, they would have

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to produce them "attorneys' eyes only" so that there's

no risk of leaks in Puerto Rico if there's something

really damaging because that means we would get them,

all these things, or Jenner & Block, and we would be

under strict instructions not to share it with our

clients as a stop-gap measure.

But the concept that somehow they can just

withhold, prepare a log, and then we have to duke it

out as to whether they have a right to withhold that

is, frankly, a concept I've never heard of before, and

I don't understand what would be the basis for that

here. So that's the issue on the NDA.

THE COURT: Let me just ask on that while it's

fresh in my mind. Right now, there are no such

documents?

MR. FRIEDMAN: Your Honor, Upton Sinclair once

said that it's difficult to get someone to understand

something if their livelihood depends on them or their

fees depends on them not understanding them, which is

what I think you just heard.

THE COURT: No, no, no, no, I don't want that

kind of argument.

MR. FRIEDMAN: The issue is -- the speculation

we just you just heard, Your Honor, is made up. The

issue here, why there is a 2004 issue in this case, as

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opposed to the financial disclosure information in the

other Rule 2004, is just very simple. One conducts

an investigation -- one relates to an investigation of

past activity, which is going to -- potentially could

deal with claims against people, an investigation the

Puerto Rico Department of Justice was at one point

going to conduct. It's just an entirely different kind

of investigation.

So, to speculate that because, in one kind of

investigation, you ask for a provision which would

permit Puerto Rico, if it believes it's necessary, to

deal with some sensitive investigative topic with a

co-equal branch of the Puerto Rico Government, as the

Oversight Board is, to not have to produce it to -- of

course, let's just remember, this is not the GDB

Creditors' Committee; this is the Commonwealth

Creditors' Committee -- so to a complete stranger to

GDB is not at all inappropriate.

In fact, it's entirely appropriate, Your Honor,

and as we've said, we've identified, in the 5,700

documents to this point, nothing. There's a -- I don't

know how many more documents there are. It's not our

intention to put anything on this log, but if we do,

we'll identify what it is in a log, and we will carry

the burden, before it goes to anybody outside the

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Puerto Rico Government, of --

THE COURT: So, it seems to me -- I hate

fighting over nonexisting documents, I really do, and I

seem to spend a lot of time doing in a lot of my cases.

So, let me make it clear. You need to sign the NDA on

all the terms that you've agreed on. If this is the

one that you haven't agreed on, then there's a

provision that says they reserve the right to fight

this out later.

But this shouldn't stop the production of the

documents under an agreed-upon NDA; all right? I don't

want to make a ruling on the applicability of a

privilege that may or may not exist in an abstract. So

why don't you just add that final paragraph that says,

GDB reserves the right to claim whatever, at which

point, the Court will determine whether it's

appropriately included in the NDA.

MR. DESPINS: Well, it's their burden to come to

Court to seek a ruling from Your Honor that it is

privileged.

MR. FRIEDMAN: Well, we haven't said privileged,

Your Honor. We're not asserting necessarily a

privilege; we're asserting a condition we think is

appropriate under the circumstances, which, again, we

have not identified a document to which that would

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apply. But, yes, we would bear the burden of saying to

the Court, This is why the document should not go

outside the Government.

THE COURT: So, put it in terms of they'll seek

a protective order for producing the --

MR. DESPINS: For not producing.

THE COURT: -- for not producing the documents;

all right? But other than that, if you've agreed on

all the other terms of the NDA, it ought to be

signed --

MR. DESPINS: Okay. All right.

THE COURT: -- okay?

MR. DESPINS: We just don't want to create, you

know, categories that we don't believe exist under the

existing law, but okay.

THE COURT: You may be right or not, I don't

know, but I'm not going to give you a ruling in the

abstract on almost anything but certainly not on this.

MR. DESPINS: Okay. Then, the next issue is the

issue of production by third parties, Your Honor, so

we're talking about non-GDB, non-Banco Popular and

non-Santander, and there are a bunch of issues there.

The first thing is the Investigator says that the

search terms they used for those parties may be

confidential.

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You know, we don't know how that's the case, but

the point is that you wanted to avoid duplication, so

if we don't know what the search terms are, we don't

know how to give them -- or correct the search terms.

If the producing parties are willing to live with that,

you know, that's -- that doesn't bother us. I think

it's going to delay the process, but we don't think

that giving us the search terms would breach an NDA

with a bank because we've seen the other search terms

as to -- so it's hard to believe that the use of, I

don't know, the term "insolvency" as a search term

somehow would violate an NDA.

But the point is the consequence of not forcing

them to give us the search terms on the third parties

is that we may be back here August 15th with -- you

know, it's not going to be as efficient as Your Honor

anticipated. So that's the first point.

The second point is that it appears that a

number of third parties were not provided search terms,

meaning they were told, This is what we want

generically, so produce what you have on that, as

opposed to telling them, Go into your email system and

do the following search. And, well, the problem with

that is of course we're relying a hundred percent on

the third party to do what's right, and you know, it is

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what it is, but I think that's -- what I mean by that

is that, on August 15th, I don't think we're going to

be necessarily asking the same thing. We may ask them

to run specific search terms, so they may say, We've

produced all of that already, which is fine, but the

point is that I want you to know there's a number of

them where no search terms were used.

The second part about this list of third parties

is that -- and you have that -- is that a number of

them, I count five of them, those are the folks --

right? -- who said, No, don't give it to the Committee,

don't -- to the Committees in plural, these are people

who are Court-retained in this case, meaning the first

one is local --

THE COURT: I want to make sure that we're not

going into any sealed information right now. So you

have concerns about some of the categories of people,

but let me go back a little bit more, though, to the

2004 motion. That was to the banks. I don't remember

them dealing with the third parties.

MR. DESPINS: That's correct. Yeah, but it

doesn't --

THE COURT: No. I just want to make sure that,

if we're focusing on the 2004 motion, that was to the

three financial institutions.

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MR. DESPINS: Correct, Your Honor, but --

THE COURT: So now we're trying to make it

better so that, when the end of this report comes, it

comes as efficiently as possible.

MR. DESPINS: This is the same thing as a

subpoena to the Investigator, meaning we can amend our

motion tomorrow and take that list and say, Give all

of -- it would be the same -- we can do that. I mean,

I don't want to be tripped up in August by not having

amended our motion to include all those folks, but --

THE COURT: You won't be tripped up in August.

MR. DESPINS: Okay.

THE COURT: I'm just trying to make sure that

we --

MR. DESPINS: You're correct.

THE COURT: -- move this as efficiently as

possible and that the big focus is on the three

financial --

MR. DESPINS: You are correct. But as to those

entities, the point I want to make, no need to mention

who they are, but there are five of them that are

Court-retained professionals getting paid in this case.

So those are the folks who are saying, No, I don't want

to share the documents that I have. These are people

who were instrumental in structuring these transactions

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in the past, and they're saying, No, I don't want to

share our documents with the Committee.

I mean, that's a bizarre set of facts,

Your Honor, that Court-retained professionals would

refuse to share the documents that they have from prior

relationships with the Government with the Committee.

THE COURT: So, have you had the opportunity to

have this conversation with --

MR. DESPINS: Well, we have, meaning that we've

asked for the documents, and you've heard Mr. Yates

saying basically, These people -- we've asked them,

those third parties, to provide -- to allow us to share

with the Committees, and they said no. My point is

that those -- five of those at least are right before

this Court, or at least before Judge Swain, as

professionals getting paid by the estate, and they're

saying, No, I don't want to share documents.

That's bizarre, and that should not happen. At

the very least, these people should be told that, you

know, if they want to continue their involvement in the

case, they should produce documents -- they should

allow the Investigator to share these documents. As I

said, these are people who were instrumental in

structuring a lot of these documents pre-bankruptcy.

So, that's another issue with the third parties.

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The next issue with the third parties is --

well, we've talked about this -- we don't have the

search terms. There are some -- and we'll provide this

to Mr. Yates. There are some banks that were involved

as underwriters and who are not on that list. No need

to talk about that, but we'll give that to Mr. Yates

after the hearing.

And next item, Your Honor, is August 15th, and

I -- you know, I said at the last hearing nobody was

talking about August 15th, but Mr. Mungovan said,

Oh, no. It's August 15th. Now we're hearing the

end of the summer. End of the summer is I think

September 21st. So we have this -- I think that's

technically the end of the summer.

THE COURT: I'm waiting for summer to start.

MR. DESPINS: Okay. So, the point here is that

we have this motion for asking the Court to make some

determination as of August 15th, and we're asking the

Court again to rule on that because September 21st is a

full month after that, plus it's just teeing up further

discovery fighting for the next month after that, so --

by the way, I'm not against the Investigator taking

their time to write the best report that they can, so

I'm not trying to rush them to September 21st, and they

have their own objective, I applaud that; but, on the

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other hand, this doesn't work anymore in terms of

starting our own process. So that's -- so there's the

August 15th date.

Now, the search terms and custodian, Your Honor,

we've made some comments on the Friday call with -- or

not we, I was not on the call, but some colleagues of

mine have made some suggestions. We will have more.

There's a number of terms that should be researched,

and so that will happen. But the bottom line,

Your Honor, is that we need to deal with August 15th,

we need -- the production by the other parties, we need

to somehow at least facilitate that with respect to

Court-retained professionals. They shouldn't have any

discretion to withhold this from the Committee in the

case.

And then the other issues I raised, which is the

access to the GDB document, not the 5,700 that were

produced but another subset -- not subset -- another

set of the documents that's broader than that. And on

that, we will work with the parties to come up with a

rational approach that's cost-effective, but I am

asking the Court to keep that on a short leash.

Otherwise, we'll be here August 15th arguing about the

same thing.

THE COURT: All right. Before I hear a response

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to it, does the Retirees' Committee want to chime in?

MR. RAIFORD: Please.

The beauty of going last is that I get the

benefit of what everyone else thought, but then I have

the burden of not repeating what everyone else just

said. So I will start with this: On last Friday, the

Retiree Committee had a nice call with Kobre & Kim, as

we usually do on Fridays, and we made some suggestions

later on in the afternoon via email, all designed to

achieve I think what Your Honor brought up originally

in November, which was, How can we do this where we're

not all doing the same thing over and over again? It

doesn't make sense financially, and quite frankly, I

would pity the poor souls at Jenner who had to go and

look through millions of documents that the

Investigator already looked at. We have no interest in

reinventing the wheel.

So, we made several suggestions. One was to

make sure that the draft of the exit plan is given to

both Committees before July 3rd. I heard -- Mr. Yates,

who's been very helpful throughout all this process,

said we'll be included in discussions, and that is

wonderful. I just want to make sure that by that he

also means the Committees will see the actual document

before it's filed because I do think we can give some

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insight that would be helpful. Now, they may not agree

with everything we want, but I think there are some

things that they can live with, and I think it would

shorten the time that we would spend fighting over the

exact terminology and what is in the exit plan.

Other things that we wanted was that, at least

maybe in the data room that they're going to provide,

that they include the exact document request that they

made, not just for Santander, Popular and GDB, but

everyone; who are the custodians for everyone; and

other types of things, again, just to make sure that

the Committees have as much knowledge as they need to

figure out if -- what, if anything, else we think we

need to do.

And that -- and another point that we brought up

was, and it's been brought up a little earlier, is

there are tens of thousands of documents that have been

produced to the Investigator, and those individuals and

entities have refused to allow us or the other

Committee to look at them.

THE COURT: So, these are the third-party

documents?

MR. RAIFORD: These are the third parties. And

we just want confirmation as well that all of those

documents will be in the database when it's produced on

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July 3rd or whenever because, if it's not, then I think

that it really starts to minimize the effectiveness of

the investigation if the parties, not just the

Committees, but other parties in interest don't have an

opportunity to look at, quite frankly, a vast ocean of

information that at least the Investigator found to be

relevant to his investigation.

I won't beat to death the GDB issue, but I think

Your Honor's leaning to what you told us to do, which

is, Just sign the thing and then carve out this

confidential category, and GDB can come to Your Honor

if they ever want to label something like that, and

then we can decide then whether it should be withheld

or not is -- we gave GDB two options today, and I think

that was Plan B. So the Retiree --

THE COURT: It should have been Plan A.

MR. RAIFORD: Yeah, right. So the Retiree

Committee would support that compromise.

I think for -- that is it because, at some

point, my fellow attorneys have done an admirable job

hitting all the other other issues, so I'll shut up.

THE COURT: Thank you.

Mr. Friedman.

MR. FRIEDMAN: Thank you, Your Honor.

Peter Friedman from O'Melveny & Myers.

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So, we agree that the NDA should be executed in

exact accordance with the way you've laid it out. Just

so you know, Your Honor, one of the provisions that

we've agreed to in the NDA is that issues, bilateral

issues -- or I guess trilateral issues between

AAFAF/GDB on the one hand and the Retiree Committee and

the Creditors' Committee on the other hand should be

heard in the Title III case. So, one way or another,

our issues will be resolved before you or Judge Swain,

as Your Honors see fit.

Your Honor, with respect to the documents, other

than those which have been relied upon by Kobre & Kim

in connection with the investigation, we have a real

issue with having those produced or made available to

the Unsecured Creditors' Committee and the Retirees'

Committee. You have to understand, this production and

this document-sharing with the Oversight Board was done

not subject to a subpoena but subject to a statutory

right that's much broader than any subpoena.

Under 104(c) of PROMESA, which gives the

Oversight Board, when necessary to conduct its work,

the right to basically go to somebody like Mr. Sobrino,

the head of a territorial instrumentality and say, Let

us see all of your documents, let us essentially have

access to your servers. Now, there are many

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circumstances in which that might not be necessary or

appropriate, but it's clearly appropriate in the

context of this investigation, which was statutorily

mandated under PROMESA.

And so, to argue either that that's some sort of

waiver or that the Unsecured Creditors' Committee

should be entitled to all of those materials just

because we were complying with a statutory obligation

imposed by Congress I think creates all kinds of

problems. For one, because of that and other reasons,

which, you know, we'll explain to you if necessary, you

know, the documents which Kobre & Kim don't have in

their 5,700 but may have otherwise looked at we didn't

do a privilege screen on because, as I said, for

multiple reasons, we didn't have to. If we have to

provide those to the Committee, again, not GDB's

committee, but a different entity's creditors'

committee --

THE COURT: Can you just back up for me for a

minute, though? So, I understand that the Investigator

had full access to your records.

MR. FRIEDMAN: Yes.

THE COURT: I'm not talking about that. But

then they did have search terms. Did the search terms

end up with the 5,700, or is there a subsequent

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production of documents?

MR. FRIEDMAN: My understanding is there was a

subsequent cut-down, but there are an extraordinarily

large number of general search term hits, which have

never been reviewed for privilege, which have never

been reviewed by GDB. The cost of doing that and then

having two Committees look at them in the context of an

investigation -- remember what we're talking about.

We're talking about a potential investigation that the

Oversight Board can easily conduct itself if it so

chooses.

So, to give the Unsecured Creditors' Committee

and the Retirees' Committee license to spend an

inordinate amount of additional money in terms of

investigation, which we don't even think is warranted

at this stage, you know, is, in our opinion, completely

inappropriate. Remember, the Court has, as I'm sure

you know, the Court has denied the Rule 2004 motions

and said, A, let's see what happens with this

investigation, but we want you to basically be able to

follow along with what the Committee -- with what the

Special Investigative Committee, Kobre & Kim, is doing.

And I think giving them -- giving the

Committees, the documents, other than privileged ones,

that are being actually relied upon more than -- is

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more than sufficient for that purpose, and to let them

decide from a bunch of search terms what the Committees

think is relevant is tantamount to giving them their

own Rule 2004 investigation, again, which -- for a

highly uncertain purpose; right? Again, the Oversight

Board is the party that, in the Title III, is permitted

to object to claims in the first instance. It's the

Oversight Board that's going to be pursuing causes of

action, if it's appropriate.

At this point, it's simply economically wasteful

to put on -- to force the Government to be required to

engage in additional document productions. I mean, you

know all the other document productions that are going

on. And so, you know, let the report come out, let the

Oversight Board decide what it wants to do with respect

to causes of action or objections to claims, let's see

what they ask for us in the context of pursuing any

causes of action or defenses to any claims, instead of

having to answer to multiple parties routing around in

the Government's documents and foisting more costs on

us. You know, if I sound impassioned about this, I am.

I think it's -- at this point, forcing us to do more

with respect to those documents would be wasteful and

inefficient.

THE COURT: So, the way I generally envision

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this is that the Committees will be aware of the scope

of the information that has been produced, that they

would await the report, assuming we're dealing with

mid-August and not September 25th -- 21st, okay -- and

that, at that point, if the Committees required

additional document requests, they would need to

justify it and, as I talked about last time, some sort

of budget on it.

But I don't want to have that process derailed

with a fight over what was actually produced, like, I

don't want you to be able to say, I've already produced

that and then have the Committee say to me, I can't see

that, that was produced because I don't have the search

terms or whatever it is. And that's the balance that

I'm trying to --

MR. FRIEDMAN: Your Honor, we're okay with our

search terms being produced. You know, maybe other

people have an issue with that. We don't have an issue

with that. We're fine with producing our search terms

to the Committee. We are fine producing, you know, the

custodians whose inboxes we provided to the Oversight

Board's Special Investigator. I don't have a problem

with that either.

You know, I'm willing to give the Committee the

knowledge as to how the -- you know, as to what we

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gave. Mr. Yates's client has given the search terms.

I assume -- I mean, Mr. Yates has told me he engages in

dialogue with the Committees before witness interviews

and otherwise so they can have insight into how they

got to the 5,700, why they believe those were relevant

and important. And, you know, again, we were a little

on the late side in doing it, but I think we actually

have done what we're supposed to do and would ask that

the Court, at this point, not order anything more.

THE COURT: Mr. Yates.

MR. YATES: Thank you, Your Honor.

I won't address the issue about privilege

vis-a-vis GDB. The statute, PROMESA, says what it

says, and so that is for others to argue. I think the

key point that I wanted to make was to really refocus

the Court on the exit plan because a lot of the

disputes or issues or questions that are being raised,

we wanted to create a single forum whereby these issues

could be addressed. And so things like, What happens

to the third-party documents? I've already said we

intend to put them into the depository. Will that

include search terms and custodians? We can make that

part of the motion. So this is, again, our attempt to

corral and collar all of these specific issues into one

process.

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Now, the notion that filing in a District Court,

Federal District COURT of Puerto Rico, is going to

create some sort of procedural red herring, I think

that's misplaced. We can start a miscellaneous

proceeding there, we could advise about these

proceedings, the Title III cases, and we want a

resolution to these issues. And so, if we file with

the United States District Court, the need to remove or

any of these other procedural pathways really obviates

what we're trying to do, which is to, in an efficient

way and a timely way, address these issues, that they

are resolved by the end of July.

We put in our response that we're not talking

September 21st. This is -- this date keeps getting

thrown up like it keeps moving, and we've been pretty

clear with our commitment on when this report will be

produced for everyone.

So, just to reiterate, we don't have kind of an

interest in trying to keep people from documents or

gaining access, et cetera. That's not our job. Our

job is to find facts, produce a report to benefit the

people of Puerto Rico, and then these fights over who

gets what is really for another day because they'll be

used in other ways, that this Court ultimately is going

to have to decide who gets what.

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THE COURT: Let me ask you this, though: On

what goes into this document room, I hear part of the

fight being which GDB documents would be included --

MR. YATES: Right.

THE COURT: -- in what you believe has been

produced to be available to others, and I'm assuming

that's not their whole computer system.

MR. YATES: That's correct, Your Honor. So, to

explain our process, we provided search terms, we have

provided those search terms to both Committees. We

asked for them to produce documents, paper documents to

us, which they did. Some of them include privileged

documents. That's already been addressed here. And so

we have those, and I understand the non-privileged

documents have been produced to the Committees.

So, this undefined, We must have asked for

something within the million-five using these search

terms and reviewed and excluded as being irrelevant or

for whatever reason, those documents, I can -- we can

construct the process in order to give the Committees

comfort that they are getting what we relied on as we

produce and finalize our report.

So, the issue about how we're different under

PROMESA, as opposed to what the Committee may get or

what they say they're entitled to, is an issue that,

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again, if it needs to be addressed, we thought it would

be addressed as part of this process, this exit plan,

to bring all of these issues together precisely so that

it's concluded and resolved by the end of July.

THE COURT: So, does it make sense to say, You

need to meet and confer now, since July 3rd is coming

up, to at least ensure that the proposed exit plan

addresses all of the issues that the Committees have,

especially with respect to the third parties?

So, I'm not sure you're going to be able to come

to a resolution of what it is, but at least you will

have a proposal, and that is a good framework for

talking about I guess all of these things, sort of what

is the scope of the GDB documents and -- so, I guess

what I'm saying to the Committees is, using the exit

plan, the burden is kind of on you at this point to say

to the Investigator, We want the exit plan and the

objections process that the exit plan is going to come

up with to have room in it to address the following, be

it privilege, be it the scope of the documents, be it

third parties.

How do we deal with the third-party issues? Or

do you say to him, I want the third parties to have --

these five categories should absolutely be produced,

and you can either say yes or no. I mean, I think it

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makes sense to have the exit plan be the process for

addressing things.

On the other hand, I don't want to wait until

August 15th to resolve some of these issues if they are

legal issues that could be resolved before then. So,

now that I've said that, I don't actually know the

right way to do this.

MR. YATES: So, Your Honor, I would suggest, if

I could, that we stick with what was envisioned, which

was we are committed to filing this motion by July 3rd.

That gives us an opportunity, because we've said we

always intended to consult with both Committees with

respect to the plan. I can confirm to the Retiree

Committee that certainly both Committees would receive

drafts before filing, and in that way, hopefully, at

least identify for a Court what issues are extant and

what needs to be addressed as part of resolving any

remaining disputes about who gets access to what.

THE COURT: So, does it make sense to say -- I

always like sending you home with homework -- coming up

with a schedule for -- first of all, you do need to

meet and confer about what's included in the plan, in

the exit plan.

The NDA with GDB I think we've resolved. You

need to sign that, and you can have this category of --

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to be presented to the Court in the form of a motion

for a protective order, if appropriate; okay?

MR. YATES: Okay.

THE COURT: So, why don't I ask you to report

back within a week on that, that that's been signed?

Is that okay?

MR. DESPINS: Sure.

MR. FRIEDMAN: Absolutely.

THE COURT: July -- do you need a date for

meeting and conferring before July 3rd, or is -- let me

ask the Committees.

MR. YATES: I don't think so, Your Honor.

MR. RAIFORD: I don't think so.

THE COURT: Is that just something that I can

just smile at you nice and say it'll get done?

MR. YATES: We hear you loudly and clearly,

Your Honor.

THE COURT: Okay, so that'll be done. And

that'll identify the items in the exit plan.

For the Unsecured Creditors' Committee, do you

want a schedule for addressing some of these other

issues? The privilege log is coming out -- what? --

Wednesday?

MR. FRIEDMAN: Our anticipation -- yes,

Your Honor, we'll have a categorical log.

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THE COURT: Do you -- I guess I await a motion

to compel off the privilege log, if there are certain

waiver issues or specific documents or whatever.

Otherwise -- I mean, I'm ready to address it, but it

needs to be in the context of a motion.

The briefing on the privilege log, I will let

you all -- on the exit plan, I mean, you can come up

with a schedule, but the goal will be, whether you file

it in the Title I or the Title III, that this will be

on the omni, unless we all decide otherwise, so that's

the outside goal. It may be in the context of the

2004, how do these documents get produced?

So, I'm not preventing you from filing the

Title I, I'm not taking an opinion one way or the other

on it, but I think that the production of those

documents is relevant to the resolution of the 2004

motion, so I think it's the same issue. I'm not sure

where it comes up, but I think it does need to be

addressed in the context of our proceedings.

So, I need you all to come up with a briefing

schedule on that of there'll be an exit plan, there'll

be a response, I want some time to think about it, and

I want to see if we need discussion or if we can just

have it resolved before the omni or at -- or I'll hear

argument at the omni, if I need to; okay?

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Who takes the lead on that? Everybody's staring

at me. The Committee?

MR. DESPINS: Sure, we can do it.

THE COURT: All right. Would you do that?

So, what else -- a lot of your issues were to be

determined, as opposed to actually needing resolution.

Is there anything else that needs to be resolved

right now?

MR. DESPINS: I would just say, Your Honor, that

I don't think the exit plan will resolve the issue of

us having access to what was produced. I'm not talking

about paper produced but what they had access to. That

issue, you know, we'll need to come back, Your Honor,

if we can't resolve it. But I don't see how the -- you

know, how the Investigator can resolve that issue

through an exit plan because he can only give us the

documents that were -- that he actually -- the paper

documents that he has, which we have at this point, the

5,700 pages.

THE COURT: So, the exit plan can have a

schedule in it for discussion of what should be

included in the room; all right? And if that is a way

to join the issue, maybe that makes sense?

MR. DESPINS: Okay.

MR. FRIEDMAN: We'll talk it through,

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Your Honor.

THE COURT: But I do recognize that the exit

plan -- as part of the exit plan, there is an issue as

to which GDB documents are included. I recognize -- I

hear that. I'm leaving you to figure out the way to

present it to me. I don't want to resolve it in an

abstract, nobody does, but the ultimate goal of this

is, again, that there will be an exit plan, and we'll

have that hopefully resolved by the end of the month

and that the next request for documents, I guess -- do

I leave this 2004 open? Does that make the most sense?

MR. DESPINS: Well, I think it should be

adjourned to the omnibus, Your Honor.

THE COURT: All right. I'll adjourn it till

then.

But then the next step would be what additional

discovery is necessary with support. If there is a

change in the schedule, I'm hearing here that everybody

is still sort of aiming for -- are we saying

August 15th, or are we saying August 30th now? What

are we saying?

MR. YATES: We're saying August 15th,

Your Honor.

THE COURT: All right. If there is a change

from the August 15th, save everybody a lot of gray hair

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and give notice -- all right? -- because, obviously, if

it's a day or two, it's one issue; if it's months, I

mean, I'm not ordering you to produce it, you do

whatever, but I think people need to know what it is,

and everybody is operating on the assumption right now

that we're in the August 15th timeframe --

MR. YATES: Thank you, Your Honor.

THE COURT: -- all right?

Anything else? See you all in Puerto Rico?

Okay. Thank you.

(Adjourned, 2:44 p.m.)

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C E R T I F I C A T I O N

I, Debra D. Lajoie, RPR-FCRR-CRI-RMR, do

hereby certify that the foregoing pages are a true and

accurate transcription of my stenographic notes in the

above-entitled case.

/s/ Debra D. Lajoie

6/18/18

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