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- - 1 - 745397_1 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. - 2 - 745397_1 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. - 3 - 745397_1 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 - 4 - 745397_1 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: +1 212 761-2820 Fax; +1 646 202-9220 [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: +1 212 761-2820 Fax: +1 646 202-9220 [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: +1 212 761-2061 Fax; +1 212 507-4891 [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; +1 212 761-1497 Fax: +1 212 507-4511 [email protected] 2 Highly Confidential Investor Materials