for the northern district of illinois eastern division … · lawrence d. mishkin silver &...

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FOR THE NORTHERN DISTRICT OF ILLINOISEASTERN DIVISION

In re:

SGK VENTURES, LLC(f/k/a Keywell L.L.C.),

Debtor.

))))))))

Chapter 11

Case No. 13-37603

Honorable Eugene R. Wedoff

Hearing Date: August 25, 2014Hearing Time: 9:30 a.m. (Central Time)

NOTICE OF COMMITTEE’S MOTION IN LIMINETO BAR TESTIMONY OF C. KENNETH WHITE IN PART

PLEASE TAKE NOTICE that on Monday August 25, 2014 at 9:30 a.m. (prevailing Central Time) or as soon thereafter as counsel may be heard, the Official Committee of Unsecured Creditors of SGK Ventures, LLC (f/k/a Keywell L.L.C.), shall appear before the Honorable Eugene R. Wedoff, Everett McKinley Dirksen United States Courthouse, 219 South Dearborn Street, Courtroom 744, Chicago, Illinois 60604, or any other Judge sitting in his place or stead, and then and there present the Committee’s Motion in Limine to Bar Testimony of C. Kenneth White in Part, a copy of which is herewith served upon you.

PLEASE TAKE FURTHER NOTICE that you may obtain copies of any pleadings in this case by visiting the Court’s website at www.ilnb.uscourts.gov and following the procedures set forth therein.

Dated: August 21, 2014 /s/ David A. AgayDavid A. Agay (ARDC No. 6244314)Sean D. Malloy (ARDC No. 6217401)Micah E. Marcus (ARDC No. 6257569)Joshua A. Gadharf (ARDC No. 6296543)McDONALD HOPKINS LLC300 North LaSalle Street, Suite 2100Chicago, Illinois 60654Telephone: (312) 280-0111Facsimile: (312) [email protected]@[email protected]@mcdonaldhopkins.comCounsel to the Official Committee of Unsecured Creditors of SGK Ventures, LLC (f/k/a Keywell L.L.C.)

Case 13-37603 Doc 833 Filed 08/21/14 Entered 08/21/14 20:11:58 Desc Main Document of 14

mailto:[email protected]



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CERTIFICATE OF SERVICE

The undersigned, an attorney, hereby certifies that true and correct copies of this notice and motion were served upon the parties listed on the service list attached hereto via ECF, U.S. Mail, e-mail and/or overnight delivery as indicated below, on August 21, 2014.

By: /s/ David A. Agay

SERVICE LIST

Via ECF

Howard L. AdelmanErich S. BuckAlexander F. BroughamSteven G. ChaikenAdelman & Gettleman LTD53 West Jackson Blvd., Ste. 1050Chicago, IL 60604Counsel to the Debtor

Patrick S. LayngOffice of the U.S. Trustee, Region 11219 S. Dearborn St., Room 873Chicago, IL 60604

Gordon E. GouveiaSteven B. TowbinTerence G. BanichPeter J. RobertsMarc S. ReiserShaw Fishman Glantz & Towbin LLC321 N. Clark Street, Suite 800Chicago, IL 60654Counsel to NewKey Group, LLC, NewKey Group II, LLC, J. Mark Lozier, Ansam Metals, Pollock- Reading, Inc., S.D. Richman Sons, Inc., Staiman Recycling Corp., Anne Rizzo, Bernard E. Platt Trust UAD 12/20/95, David Horing, Dennis C. Trostle, Jill L. Hillas, Joel D. Tauber, Joel D. Tauber Trust, John A. Toth Trust, KCL Management Corp., Karen A. Beninato, Ken Kluska, Kluska Family Limited Partnership, Laura Tauber, Lawrence Plant, Linda A. Trostle, Loganberry, L.L.C., Louis E. Wagner, Jr., Michael C.

Sheffieck, Mark C. Sheffieck Trust, Michael J. Pugliese, Michael Rosenberg, Nicholas F. Cerminaro, Jr., Philip Rosenberg, Platt Family Limited Partnership, Rosenberg Family, L.L.C., Tamarack, L.P., Tauber Enterprises, LLC, Tauber- Keywell Family L.L.C., Tauber-Keywell II, LLC, and Thomas P. Bertrand

Mark W. PageKelley Drye & Warren LLP333 W. Wacker Drive, Suite 2600Chicago, IL 60606Counsel to Alpert & Alpert Iron Metal, Inc.

Matthew T. GensburgNancy A. PetermanGreenberg Traurig, LLP77 W. Wacker Drive, Suite 3100Chicago, IL 60601Counsel to Cronimet Holdings, Inc.

Thomas V. AskounisAlex DarcyAmrit S. KapaiAkounis & Darcy, PC444 N. Michigan Avenue, Suite 3270Chicago, IL 60611Counsel to Wells Fargo Equipment Finance, Inc.

Jacquelyn T. VengalChuhak & Tecson, P.C.30 South Wacker Drive, Ste 2600Chicago, IL 60606-7413Counsel to TCF Equipment Finance, Inc.


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Eric R. von HelmsKohner, Mann & Kailas, S.C.4650 North Port Washington Road2nd FloorMilwaukee, WI 53212Counsel to Banc of America Leasing & Capital, LLC

Monette W. CopeWeltman, Weinberg & Reis Co. LPA965 Keynote CircleBrooklyn Hts., OH 44131Counsel to Toyota Motor Credit Corporation and Gibson Machinery, LLC

Andrew J. AbramsBoodell & Domanskis, LLC353 North Clark Street, Ste 1800Chicago, IL 60654Counsel to Loni-Jo Metal Corporation

Stephen A. YokichCornfield and Feldman LLC25 East Washington Street, Ste. 1400Chicago, IL 60602-1803Counsel to United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union

Steven M. Wolock Maddin, Hauser, Wartell, Roth & Heller, P.C.28400 Northwestern Highway, Third Floor Southfield, MI 48034 Counsel to Marwol Metals, Ltd.

Wendy Kaleta Skrobin McFadden & Dillon PC 120 South LaSalle St. Suite 1530 Chicago, Il 60603Counsel to PNC Bank, NA and PNC Equipment Finance, LLC

Miriam R. Stein Chuhak & Tecson, P.C. 30 South Wacker Drive Suite 2600 Chicago, IL 60606Counsel to TCF Equipment Finance, Inc.

Joel A. SteinDeutsch Levy & Engel, Chtd225 W. Washington St., #1700Chicago, IL 60606Counsel to 75S Corp. d/b/a FMC Metals

Curtis E. KimballRudman Winchell84 Harlow St. – P.O. Box 1401Bangor, Me 04402-1401Counsel to Helm Financial Corporation and Helm-Pacific Leasing

Debra J Vorhies LevineDVL Law Offices, LLC53 W. Jackson, Suite 1001Chicago, IL 60604Counsel to Brami Superalliages

Roger J. HigginsThe Law Offices of Roger J. Higgins, LLC1 North Bishop Street, Suite 14Chicago, IL 60601Counsel to Deborah S. Newman, Edward J. Newman, John D. Joyce, and Cronimet Holdings, Inc..

Lawrence D. MishkinSilver & Mishkin, LLC400 Skokie Boulevard, Suite 850Northbrook, IL 60062Counsel to Lawrence D. Plant and Philip Rosenberg

Brandy A. SargentStoel Rives LLP900 SW Fifth Avenue, Suite 2600Portland, OR 97204Counsel to Caledonian Alloys


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Loren S. CohenWilson, Elser, Moskowitz, Edelman & Dicker55 W. Monroe Street, Suite 3800Chicago, Illinois 60603Counsel to Michael and Philip Rosenberg

John EggumForan, Glennon, Palandech, Ponzi & Rudloff 222 North LaSalle Street, Suite 1400 Chicago, IL 60601Counsel to Commerce & Industry Insurance Company

Yeny C. Estrada Edwards Wildman Palmer LLP 225 West Wacker Drive, Suite 3000 Chicago, IL 60606Counsel to Child’s Trust Created Under the Will of Janet Nadel for the Benefit of Glen L. Nadel and Child’s Trust Created Under the Will of Janet Nadel for the Benefit of Tina Nadel Gravley

William J. BarrettBarack Ferrazzano Kirschbaum & Nagelberg LLP200 West Madison Street, Suite 3900Chicago, IL 60606-3465Counsel to Keywell Metals, LLC

Timothy D. ElliottRathje & Woodward, LLC300 E. Roosevelt Road, Suite 300Wheaton, IL 60187Counsel to Cronimet Holdings, Inc., Edward J. Newman, and John D. Joyce

Via Overnight Delivery Service

Marc E. ShachWeinstock, Friedman & Friedman, P.A.4 Reservoir CircleBaltimore, MD 21208Counsel to PNC Bank, NA and PNC Equipment Finance, LLC

Craig A. WolfeBenjamin D. FederKelley Drye & Warren LLP101 Park AvenueNew York, NY 10178Counsel to Alpert & Alpert Iron & Metal, Inc.

Jay L. WelfordJeffe Raitt Heuer & Weiss, P.C.Suite 250027777 Franklin RoadSouthfield, MI 48034Counsel to FPT Cleveland

Kaye E. TuckerTucker Law Firm9440 Santa Monica Blvd., Suite 504Beverly Hills, CA 90210Counsel to Alpert & Alpert Iron & Metal, Inc.

Thomas P. YoderBarrett & McNagny LLP215 East Berry StreetP.O. Box 2263Fort Wayne, IN 46801-2263Counsel to OmniSource Corporation

Christopher M. Candon Sheehan Phinney Bass + Green PA 1000 Elm Street Manchester, NH 03101 Counsel to wTe Recycling, Inc. and wTe Corporation


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Timothy P. Palmer Buchanan Ingersoll & Rooney PC One Oxford Centre, 20th Floor 301 Grant Street Pittsburgh, PA 15219-1410Counsel to ATI Allvac and ATI Wah Chang, each a division ofTDY Industries, LLC

Kathleen H. Klaus Maddin,Hauser,Wartell,Roth & Heller,P.C. 28400 Northwestern Highway Third Floor Southfield, MI 48034-1839Counsel to Marwol Metals, Ltd.

ACI Industries Ltd.Attn: Jeffrey W. Lewis 970 Pittsburgh Drive Delaware, OH 43015

Richard C. JosephsonSchnitzer Steel Industries, Inc.299 SW Clay Street, Suite 350Portland, OR 97201Counsel to Schnitzer Steel Industries, Inc.

James DevineSchnitzer Steel Industries, Inc.12 E. 49th Street, 24th FloorNew York, NY 10014

American Transport Group c/o Tom Soehike1900 West KinzieChicago, IL 60622

Millis Industries Inc. Attn: Robert Valchuis13 72 Main StreetMillis, MA 02054

Robert A. Soriano, Esq. Greenberg Traurig, P.A.625 East Twiggs Street, Suite 100Tampa, FL 33602

Ted W. Hight III, Esq.Thompson, O'brien, Kemp & Nasuti, P.C.40 Technology Parkway South, Suite 300Norcross, Georgia 30092Counsel to Mansfield Oil Company of Gainesville, Inc.

Linda G. Anderson13407 Farmington Rd., Ste. 102 Livonia, Michigan 48150 (734) 425-0379 Counsel to Marker Metal III, LLC and Three Putt Properties, LLC

Elizabeth L Slaby Clark Hill Thorp Reed One Oxford Centre 301 Grant Street, 14th Floor Pittsburgh, PA 15219 Counsel to Franklin Iron & Metal Corporation & Recycling Center, Inc.

Mark X. Mullin Haynes and Boone,LLP 2323 Victory Avenue Suite 700 Dallas, TX 7521Counsel to KW Metals Acquisition LLC

Cory J. KergerWilson, Elser, Moskowitz, Edelman & Dicker55 W. Monroe Street, Suite 3800Chicago, IL 60603Counsel to Michael Rosenberg and Philip Rosenberg

James F. ManganKoff, Mangan, Vullo & Gartley, PC179 S. Wyoming Ave. Kingston, PA 18704


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Counsel to Louis Cohen & Son, Inc.

Alan B. Patzik Patzik, Frank & Samotny Ltd 150 South Wacker Drive Suite 1500 Chicago, IL 60606Counsel for Debtor SGK Ventures, LLC

Steven M. Prebish Patzik, Frank & Samotny Ltd 150 South Wacker Drive Suite 1500 Chicago, IL 60606Counsel for Debtor SGK Ventures, LLC

Charles Kelly Saul Ewing LLP One PPG Place Suite 3010 Pittsburgh, PA 15222Counsel for Debtor SGK Ventures, LLC

Bruce White Barnes & Thornburg LLP One North Wacker Drive Suite 4400 Chicago, IL 60606Counsel for Debtor SGK Ventures, LLC

ASM Capital, L.P. 7600 Jericho Turnpike, Suite 302 Woodbury, NY 11797

Claims Recovery Group LLC 92 Union Avenue Cresskill, NJ 07626

Contrarian Funds, LLC 411 West Putnam Ave., Ste. 425 Greenwich, CT 06830

DACA VI LLC 1565 Hotel Circle S, #310

San Diego, CA 92108

Fair Harbor Capital LLC PO Box 237037 New York, NY 10023

Hain Capital Group, LLC 301 Route 17 7th Floor Rutherford, NJ 07070

Liquidity Solutions, Inc. One University Plaza Suite 312 Hackensack, NJ 07601

Rust Omni 5955 DeSoto Ave Suite 100 Woodland Hills, CA 91367

Sonar Credit Partners III, LLC 200 Business Park Drive Suite 201 Armonk, NY 10504

TR Capital Management, LLC PO BOX 633 Woodmere, NY 11598

Tannor Partners Credit Fund, LP 150 Grand Street, Suite 401 White Plains, NY 10601

Emily A. ShupeRathje & Woodward, LLC300 East Roosevelt Road, Suite 300Wheaton, IL 60187Counsel for Cronimet Holdings, Inc., John D. Joyce and Edward J. Newman


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IN THE UNITED STATES BANKRUPTCY COURTFOR THE NORTHERN DISTRICT OF ILLINOIS

EASTERN DIVISION

In re:

SGK VENTURES, LLC(f/k/a Keywell L.L.C.),

Debtor.

)))))))))

Chapter 11

Case No. 13-37603


COMMITTEE’S MOTION IN LIMINETO BAR TESTIMONY OF C. KENNETH WHITE IN PART

The Official Committee of Unsecured Creditors (the “Committee”) of SGK Ventures,

LLC (f/k/a Keywell L.L.C.) hereby moves (this “Motion”) for entry of an order barring, in part,

the testimony of C. Kenneth White pursuant to Fed. R. Evid. 702. In support of the Motion, the

Committee states as follows:

Introduction

1. The Objecting Creditors (NewKey Group, LLC, NewKey Group II, LLC, and J.

Mark Lozier) indicated in their witness list that they plan to call C. Kenneth White as an expert

witness at the Confirmation Hearing in this matter. [Docket No. 819.] Based on his Declaration

and his Report [Docket No. 807, Ex. A] (attached hereto as Exhibit A) and his deposition (a copy

of the transcript of Mr. White’s deposition is attached hereto as Exhibit B), the Committee

expects the Objecting Creditors to seek to have Mr. White testify and present evidence on,

among other things, the reasonableness of (a) the reasonableness of the historical and projected

legal fees in general, (b) the reasonableness of the allocation of the historical and projected legal


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fees between NewKey1 on one hand and the Insider Defendants on the other, and (c) the

allocation of the historical and projected legal fees among NewKey I and NewKey II. (Ex. A at

9, 22; Ex. B at 16:19-17:6, 25:12-19, 38:14-16.) The Committee requests that this Court

preclude the Objecting Creditors from eliciting testimony from, and presenting evidence through,

Mr. White on those issues.

Jurisdiction

2. This Court has jurisdiction to consider this Motion pursuant to 28 U.S.C. §§ 157

and 1334. Venue is proper before this Court pursuant to 28 U.S.C. §§ 1408 and 1409. This

matter constitutes a core proceeding pursuant to 28 U.S.C. § 157(b)(2).

3. The statutory predicates for the relief requested herein are Fed. R. Bankr. P. 9017

and Fed. R. Evid. 702.

Relief Requested

4. By this Motion, the Committee seeks an order barring the Objecting Creditors

from eliciting testimony from, or presenting evidence through, Mr. White at the Confirmation

Hearing regarding (a) the reasonableness of the historical and projected legal fees in general,

(b) the reasonableness of the allocation of the historical and projected legal fees between

NewKey on one hand and the Insider Defendants on the other, and (c) the allocation of the

historical and projected legal fees among NewKey I and NewKey II.

Basis for Relief

5. In order to testify as an expert witness on a subject, the witness must meet certain

criteria. Fed. R. Evid. 7022 provides:

1 Capitalized but undefined terms shall have the meanings set forth in the Committee’s Memorandum of Law in Support of the Amended Plan of Liquidation [Docket No. 830].2 Made applicable to this proceeding pursuant to Fed. Bankr. R. 9017.


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A witness who is qualified as an expert by knowledge, skill, experience, training, or education may testify in the form of an opinion or otherwise if:

(a) the expert’s scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue;

(b) the testimony is based on sufficient facts or data;

(c) the testimony is the product of reliable principles and methods; and

(d) the expert has reliably applied the principles and methods to the facts of the case.

Fed. R. Evid. 702; see also Daubert v. Merrill Dow Pharm. Inc., 509 U.S. 579, 592 (1993) (Rule

702 requires the court to determine “whether the expert is proposing to testify to (1) scientific

knowledge that (2) will assist the trier of fact to understand or determine a act in issue.”).

6. This means that an expert may not testify unless the court is satisfied that (a) the

witness is “qualified as an expert by knowledge skill experience, training or education,” (b) the

expert’s testimony is “based on reliable methodology,” and (c) the opinion will “assist the trier of

fact to understand the evidence or to determine a fact at issue.” Catapult Commc’ns Corp. v.

Foster, No. 06 C 6112, 2010 WL 659072, at *1 (N.D. Ill. Feb. 19, 2010) (internal quotations

omitted).

7. Here, Mr. White’s testimony on the reasonableness of the legal fees or the

allocation thereof fails to meet these requirements and should therefore be barred.

A. Mr. White is Not Qualified to Opine on theReasonableness of Legal Fees or the Allocation Thereof

8. Mr. White has absolutely no skill, experience, training, or education that would

allow him to reliably and properly opine on the reasonableness of attorneys’ fees or their

allocation among different defendants.


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9. In his deposition, Mr. White admitted that he is not an attorney, has no

specialization in the study of law, has no law degree, and has no legal education. (Ex. B at

10:18-11:1; 15:13-16.) Indeed, his attorney admitted that “He’s not a lawyer.” (Id. at 38:12-13.)

10. Further, with respect to the issues in this Motion, Mr. White admitted that he has

no expertise with respect to analyzing allocations of attorney’s fees between parties (id. at 14:24-

15:12) and has never been asked to opine on this topic in any other matter (id. at 33:12-15).

11. Rather, Mr. White is a financial advisor with experience in restructurings and an

“in-depth concentration in finance and the recapitalization of financially distressed companies,”

was a CPA, and has a degree in accounting and an MBA. (Ex. A at 1.)

12. Mr. White, therefore, does not possess sufficient qualifications to provide expert

testimony regarding the reasonableness of the legal fees claimed or projected by the Objecting

Creditors in their objection, or the allocation of the legal fees among parties, and should be

prohibited from testifying on those subjects. See In re Polo Builders, Inc., 388 B.R. 338, 359-60,

369 (Bankr. N. D. Ill. 2008) (noting that “financial and investment professional with experience

in real estate finance and development” was prohibited from testifying “as to his opinion of the

size or reasonableness of the trustee’s attorneys’ fees . . . because he is not an expert in attorneys’

fees [among other reasons]. . .”).

B. Even if Qualified, Mr. White’s Analysis is Not Sufficiently Reliable

13. During his deposition, Mr. White admitted that he did not review any of the legal

bills, any time entries, or relevant pleadings to form his opinion on the reasonableness of the

historical fees and the allocations thereof. (Ex. B at 24:7-17, 26:3-27:17, 32:7-16.) Given that,

Mr. White’s testimony is not sufficiently reliable to qualify for admission.

14. In Catapult Communications, the proffered expert had significant practical

experience and knowledge on issues relating to attorneys’ fees (practicing law for over 40 years,


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experienced in the area of law involved in the case, sat on his firm’s management committee for

two years, and co-chaired the relevant department for three years – the responsibilities of which

included setting attorney hourly rates, among other qualifications). 2010 WL 659072 at *1-2.

Despite this experience Magistrate Judge Ashman barred the expert from opining on the

reasonableness of the legal fees. In so doing, Magistrate Ashman found the expert’s

methodology to arrive at that opinion unreliable because the expert only reviewed block-billed

and redacted time entries. As the court noted “[i]t is not enough to know the total hours spent on

a case and, generally, the work performed in that case. To know whether the time spent on those

matters is a reasonable amount, the expert must know the subject matter of the bills and the time

spent on each matter.” Id. at *3-4; see also Catapult Commc’ns Corp. v. Foster, No. 06 C 6112,

2010 WL 3951973, at *1-2 (N.D. Ill. Oct. 8, 2010) (overruling objection to Magistrate Ashman’s

ruling finding “no error of apprehension in Magistrate Judge Ashman’s analysis of the

evidence.”).

15. Here, Mr. White, a witness with far less credentials than the proffered expert in

Catapult Communications, did not even review redacted, block-billed time entries – he reviewed

no time entries to analyze the reasonableness of the historical fees. (Ex. B at 24:7-17, 32:7-16.)

16. Moreover, Mr. White did not review any pleadings in the case to form his

opinion. (Id. at 26:3-12.)

17. Thus, without a review of any time-entries or pleadings, Mr. White has no reliable

basis to testify as to the reasonableness of the fees or the allocation thereof as he does not know

how much time was spent on any task, or to which defendant such task might apply. See also

Polo Builders, 388 B.R. at 369 (noting barred expert on reasonableness of the attorneys’ fees had

“no personal knowledge of the actual fees or work involved” in the matter).


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18. Indeed, Mr. White utilized no methodology to come to his opinions on the

reasonableness of the legal fees or the allocation thereof. Rather, with respect to the amount of

historical fees, as noted above, he did no analysis of the records. With respect to projected fees,

he relied on conversations with one of the Objecting Creditors’ attorneys and did no independent

analysis. (Ex. B at 20:20-21:8, 42:1-9.) With respect to the allocation of the overall legal fees

between NewKey I and NewKey II on the one hand and the other Insider Defendants on the

other, Mr. White admitted that he simply accepted the allocation provided to him by the

Objecting Creditors’ attorneys and performed no analysis or verified that allocation:

Q: Now, with respect to those fees -- we'll call the code A New Key fees -- the allocation determined was 85 percent NewKey, 15 percent Defendants. Was that the number you were presented with?

A. Characterized as other issues.

Q. Okay. And that was the number that you were simply given by Mr. Sheffleck and Mr. Towbin; is that correct?

A. Given definitely by Mr. Towbin when I interviewed him by phone and got the representation as to the accumulated fees as well as the buildup and the split.

Q. And you accepted that number and have not made any change in that number in connection with arriving at your opinion here today?

A. That's correct.

Q. You didn't perform any underlying analysis of the actual invoices to determine the accuracy of that split, correct?

A. I did not obtain the invoices, but I looked -- based upon my experience and understanding of bankruptcy matters, I looked at both the reasonableness and the appropriateness of the charge and the buildup of the legal fees.

Q. I'm not asking you with respect to the overall charge. I'm asking you with respect to the allocation between the multiple parties, you did not perform any analysis or physical inspection of the invoices to see what fees might properly be allocated to a specific party; is that correct?

A. That's correct.

* * * * * *


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Q. Let's talk about the other allocation, by the way, because the other allocation, the code B as you referred to it or we'll say the solvency and other, that's just a 50/50 split, correct?

A. Code B's a 50/50 split, correct.

Q. And, again, that was a number that you simply accepted without any type of attempt to determine the accuracy of that split by reviewing the invoices, correct?

A. I accepted the representations of Mr. Towbin and the work effort that he would understand based upon his billings and time sheets.

(Ex. B at 24:19-26:2, 28:16-29:3; see also id. at 22:7-19, 23:12-20.)

19. Under these facts, Mr. White’s purported expert testimony is not based upon any

reasonable basis or methodology and his testimony regarding the reasonableness and allocation

of legal fees should be barred.

C. Mr. White’s Testimony Will Not Assist the Trier of Fact

20. Finally, even if this Court were to determine that Mr. White was qualified to

opine on the reasonableness and allocation of legal fees (he is not), and that he used a reliable

method (he did not), his testimony will not assist the trier of fact and therefore should be barred.

21. All Mr. White did to arrive at his allocation of fees between NewKey I and

NewKey II was to mathematically calculate the ratio between the claims of each of the NewKey

entities and then apply that ratio to the fees attributed (by the Objecting Creditors’ attorneys) to

the NewKey entities. (Ex. A at 22; Ex. B at 53:18-54:12.)

22. Such simple mathematics do not assist the trier of fact as the Court here can “do

simple math.” See Triad Capital Mgmt., LLC v. Private Equity Capital Corp., Case No. 07 C

3641, 2010 WL 10076450, *3 (N.D. Ill. Nov. 22, 2010) (barring expert testimony on issues in

which expert did “nothing more than add up eight line-items of expenses” incurred by the

plaintiff).


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CONCLUSION

Mr. White is not qualified to opine on the reasonableness or allocation of historical or

projected legal fees, did not use a reliable method to determine the reasonableness or allocation

of historical or projected legal fees, and his testimony on such issues will not assist the trier of

fact. For these reasons, Mr. White’s testimony, and evidence presented through him, on the

reasonableness of the legal fees incurred and to be incurred, as well as the proper allocation

thereof should be barred, and the Committee requests that the Court enter an order, substantially

in the form of the order attached hereto, and award such other relief as the Court deems just and

necessary.

Dated: August 21, 2014 /s/ David A. AgayDavid A. Agay (ARDC No. 6244314)Sean D. Malloy (ARDC No. 6217401)Micah E. Marcus (ARDC No. 6257569)Joshua A. Gadharf (ARDC No. 6296543)McDONALD HOPKINS LLC300 North LaSalle Street, Suite 2100Chicago, Illinois 60654Telephone: (312) 280-0111Facsimile: (312) [email protected]@[email protected]@mcdonaldhopkins.com

Counsel to the Official Committee of Unsecured Creditors of SGK Ventures, LLC (f/k/a Keywell L.L.C.)





EXHIBIT A

Case 13-37603 Doc 833-1 Filed 08/21/14 Entered 08/21/14 20:11:58 Desc Exhibit A Page 1 of 24

EXHIBIT B

Case 13-37603 Doc 833-2 Filed 08/21/14 Entered 08/21/14 20:11:58 Desc Exhibit B Page 1 of 74

3647a4d1-e7f0-4d0c-baaf-49c9daf6eda6Electronically signed by Tina Alfaro (001-097-271-2943)

C. Kenneth White August 19, 2014

(312) 386-2000 www.merrillcorp.com/lawMerrill Corporation - Chicago

Page 1

IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION

IN RE: )Chapter 11 )SGK VENTURES, LLC, )Case No. 13-37603(f/k/a Keywell, LLC) ) ) Debtor. )

The deposition of C. KENNETH WHITE, taken

pursuant to notice, agreement, and by the provisions

of the Federal Rules of Civil Procedure for the

United States District Courts pertaining to the

taking of depositions, taken before Tina M. Alfaro,

CSR No. 084-004220, a Notary Public within and for

the County of Cook, State of Illinois, and a

Certified Shorthand Reporter of said State, at the

offices of McDonald Hopkins, 300 North LaSalle

Street, Chicago, Illinois, on the 19th day of

August, A.D., 2014 at 10:00 a.m.





Page 2

1 APPEARANCES:

2 McDONALD HOPKINS, LLC BY: MICAH MARCUS, ESQ.

3 300 North LaSalle Street, Suite 2100 Chicago, Illinois 60654

4 (312) 642-2141 [email protected]

5 On behalf of the Committee for

6 Unsecured Creditors;

7 SHAW FISHMAN GLANTZ & TOWBIN, LLC BY: STEVEN TOWBIN, ESQ.

8 321 North Clark Street, Suite 800 Chicago, Illinois 60654

9 (312) 276-1333 [email protected]

10 On behalf of New Key Group, LLC, New

11 Key Group II, LLC, and J. Mark Lozier.

12

13

14

15

16

17

18

19

20

21

22

23

24 REPORTED BY: Tina Alfaro, CSR No. 084-004220





Page 3

1 I N D E X

2 EXAMINATION

3WITNESS PAGE

4C. KENNETH WHITE

5 By Mr. Marcus 4

6

7 EXHIBITS

8 DEPOSITION EXHIBITS PAGE

9 Exhibit 4 5 Declaration

10Exhibit 6 36

11 Amended and restated security agreement

12 Exhibit 20 48 Invoices

13Exhibit 21 51

14 NK-449 through NK-456

15 Exhibit 22 64 NK-460 through NK-463

16Exhibit 23 67

17 Proof of claim

18

19

20

21

22

23

24





Page 4

1 (Witness sworn.)

2 WHEREUPON:

3 C. KENNETH WHITE,

4 called as a witness herein, having been first duly

5 sworn, was examined and testified as follows:

6 EXAMINATION

7 BY MR. MARCUS:

8 Q. I'm handing you what was previously

9 identified as Exhibit No. 4 in the depositions of

10 Mark Lozier and Mike Sheffleck.

11 Before we get into that, sir, I understand

12 you've probably taken a few depositions in your

13 past; is that fair to say?

14 A. Yes, sir.

15 Q. Okay. So you know the general ground

16 rules, but we'll cover them anyway.

17 With respect to providing answers, you

18 understand I'll be asking you a number of questions

19 today, correct?

20 A. Yes.

21 Q. If you could give verbal answers, not head

22 shakes or head nods. That makes the best transcript

23 for the court reporter. Is that fair?

24 A. Yes.





Page 5

1 Q. If you answer my question, I will assume

2 that you understood my question; is that fair?

3 A. Yes.

4 Q. And if you don't understand a question, you

5 can ask me to rephrase it and I'll do my best to

6 accommodate you. Okay?

7 A. Thank you.

8 Q. We're doing a great job so far with respect

9 to providing each other the courtesy of allowing

10 each other to finish. If you could please let me

11 finish my question before you start to respond and

12 I'll try and provide you with the same courtesy. Is

13 that fair?

14 A. Yes.

15 Q. As I always say, it's a marathon, not a

16 sprint. If you need to take a break, happy to do

17 so, just not while a question is pending. Is that

18 okay?

19 A. Yes.

20 Q. So I handed you what's been previously

21 identified as Exhibit 4, and you'll note that's

22 your declaration, correct?

23 A. Yes.

24 Q. Have you had an opportunity to review the





Page 6

1 document?

2 A. Yes. I have flipped the pages rapidly

3 here, but it looks very familiar.

4 Q. Did you review this document in preparation

5 for today's deposition?

6 A. Yes.

7 Q. What else did you do in preparation for

8 today's deposition?

9 A. I had a meeting yesterday with Shaw Fishman

10 in preparation of the deposition.

11 Q. Okay. And who did you meet with?

12 A. Mr. Towbin and some other attorneys.

13 Q. Do you recall the other attorneys' names?

14 A. Gordy and Terry, I believe.

15 Q. Do you recall approximately how long those

16 meetings were?

17 A. A little over an hour.

18 Q. Did you -- other than that meeting, did you

19 do anything else to prepare for today's deposition?

20 A. I reviewed -- over the weekend I reviewed

21 the declaration, I traced the numbers back and

22 forth, and that was most of my work.

23 Q. Anything else? You said "most of."

24 Anything else?





Page 7

1 A. I believe I may have flipped the amended

2 plan and disclosure statement.

3 Q. When you say "flipped" the amended plan and

4 disclosure statement, you gave a quick review to the

5 amended plan and disclosure statement?

6 A. I read it a couple times previously just to

7 refresh my memory.

8 Q. Okay. When you say "traced numbers back

9 and forth," what do you mean by that?

10 A. On page 7 of the declaration, 9 of 24 at

11 the top, there's a summary buildup schedule for

12 three scenarios. Then there are various exhibits in

13 the back, and those exhibits are the underlying

14 calculations, Exhibit A through H, to derive the

15 summary table.

16 Q. Okay. So all you did was you tied the

17 backup data to the summary page contained on page 7;

18 that's what you mean by traced numbers back and

19 forth?

20 A. Correct.

21 Q. I want to talk a little bit about your

22 experience and history. On page 1 it sets forth

23 your professional background, correct, page 1 to 2

24 of Exhibit 4?





Page 8

1 A. Correct.

2 Q. And do you believe this is a complete set

3 of information with respect to your professional

4 background as it relates to this case?

5 A. It's a summary.

6 Q. Is there anything material that is omitted

7 from this summary?

8 A. No.

9 Q. It states that you are a principal and

10 co-founder of Cornerstone Restructuring, and prior

11 to that you'd worked at Ernst & Young from 1971 to

12 2002 and you were an independent consultant from

13 2003 to 2006; is that correct?

14 A. That's correct.

15 Q. Why did you leave Ernst & Young?

16 A. I retired.

17 Q. All right. And can you just explain your

18 general roles and responsibilities while working at

19 Ernst & Young.

20 A. Many. Do you want me to go through all the

21 history?

22 Q. Why don't you go through the history of

23 what your expertise was while working at Ernst &

24 Young.





Page 9

1 A. I started on the audit staff auditing

2 banks, auditing various business enterprises. I

3 spent eight years doing audit work.

4 Then I moved to the national office in

5 Cleveland, Ohio for approximately four years where I

6 was a liaison with various specialized committees

7 and industries. One of those was the bankruptcy and

8 reorganization of which I coordinated a lot of

9 training programs, did a lot of research. At the

10 same time I worked on bankruptcy engagements in the

11 Ohio area and elsewhere.

12 Then I moved to Chicago as a partner,

13 promoted as a partner in 1983 where I was the

14 partner in charge of both litigation services,

15 valuation services, and bankruptcy services. I

16 believe at that point in time we called it

17 specialized industries. And I spent ten years in

18 the Chicago office coordinating various bankruptcy

19 assignments as well as litigation assignments.

20 And then in 19 -- that was '83 through '93,

21 thereabouts, I moved to Los Angeles to take a

22 similar position to head up the West Coast region

23 for both valuation services, litigation services, as

24 well as bankruptcy and restructuring services. I





Page 10

1 spent approximately five years in the West Coast

2 headquartered in Los Angeles working on various

3 assignments, primarily restructuring assignments.

4 In 1998 Ernst & Young asked me to be

5 national partner in charge of restructuring and

6 reorganizations. They asked me to move to New York

7 City. I moved to New York City and worked in

8 various capacities as senior managing director. We

9 actually set up an LLC called E&Y Restructuring,

10 LLC, of which I was the president.

11 Then in 2002 I elected to retire and then I

12 became an independent consultant.

13 Q. When you refer to litigation services while

14 working at E&Y, that refers to drafting expert

15 reports and providing testimony in support of

16 litigation, correct?

17 A. Correct.

18 Q. You're not an attorney, correct?

19 A. Correct.

20 Q. You don't have any degrees in legal

21 education; is that correct?

22 A. Correct.

23 Q. No specialization with respect to studies

24 in law, correct?





Page 11

1 A. Correct.

2 Q. You are a CPA -- you were a CPA?

3 A. Yes.

4 Q. But your license is currently inactive?

5 A. Yes.

6 Q. And so going back, why did you elect to

7 retire in 2002?

8 A. I thought there could be more opportunity

9 doing restructuring -- primarily restructuring work

10 outside the firm. As a big organization, the big

11 four had substantial conflicts of interest, and I,

12 quite frankly, got a little frustrated in turning

13 down very big jobs because of other audit

14 relationships. So I thought I could have a greater

15 professional experience doing this on my own and not

16 dealing with conflicts that the big four naturally

17 have.

18 Q. Understood.

19 And with respect to ultimately forming

20 Cornerstone, what was the decision there with

21 respect to 2007?

22 A. Up until about 2005 I was working primarily

23 on my own and I was getting requests for bigger and

24 bigger engagements and I needed a platform for





Page 12

1 others to join, and I thought forming a specialized

2 company with the name restructuring in it would be

3 very targeted and assist in the marketing. And it

4 also afforded us an opportunity to bring others on

5 board, primarily as the engagements got more

6 frequent and larger, to bring them on as

7 subcontractors.

8 Q. With respect to your CPA, how long has your

9 license been inactive?

10 A. Probably sometime around -- it's a

11 continuing professional education issue. Probably

12 around 2002, 2003. I'm not exactly certain of the

13 timing.

14 Q. Sure. And you mentioned the reason why is

15 because you decided to no longer take the required

16 continuing education courses required to keep the

17 license in good standing; is that right?

18 A. At least to go through the formality of

19 reporting it. There's a requirement that you have

20 over a three-year period 120 hours of CPE, I think a

21 minimum of 20 hours a year. While I attended any

22 number of sessions, I elected not to report those.

23 Q. You didn't want to have to satisfy the

24 reporting requirements, correct?





Page 13

1 A. Correct.

2 Q. Have you kept track or recorded your actual

3 attendance at those continuing education courses

4 from 2002 to the present?

5 A. No.

6 Q. So when did you originally pass the CPA

7 exam?

8 A. Pretty much right out of college. Probably

9 passed the exam in 1972 or 1973, and then you needed

10 two years -- at least in Indiana you needed two

11 years of public accounting work experience. So I

12 would have satisfied the work experience by 1973.

13 So I'm guessing I may have received my license

14 around 1974.

15 Q. Okay. And the licensing exam, that's a

16 multi-part test; is that correct?

17 A. Yes.

18 Q. Did you take the test more than once?

19 A. Twice.

20 Q. Okay. How many sections did you pass in

21 the first exam?

22 A. Two.

23 Q. Out of?

24 A. Four.





Page 14

1 Q. Out of four. All right. Then you

2 satisfied the following two the second time you took

3 the test?

4 A. Yes.

5 Q. Do you recall what sections it was that you

6 failed in the initial exam?

7 A. I know in the initial exam I passed

8 problems. It's a two-part section. I passed that.

9 I can't recall the others exactly. I think audit

10 took me a second shot at it.

11 Q. I see that also around the time you became

12 an independent consultant you also took a number of

13 exams with respect to trading, is that correct,

14 Series 7, Series 24?

15 A. I took those while I was still at Ernst &

16 Young when we set up our broker-dealer.

17 Q. Okay. And what was the purpose for those

18 exams?

19 A. To be a member of a broker-dealer, of which

20 Ernst & Young set up, you needed to hold a Series 7

21 and 24. And if you were an executive in the

22 management, I believe you had to also pass the 63.

23 Q. All right.

24 And, again, you testified earlier that





Page 15

1 there's nothing that you thought is materially

2 omitted from your professional background as relates

3 to this case; is that correct?

4 A. That is correct.

5 Q. I don't see any expertise with respect to

6 analyzing allocations of attorney's fees between

7 parties; is that correct?

8 A. I did not disclose that as a regular big

9 area on this background.

10 Q. And that failure was not a material

11 omission in your opinion, correct?

12 A. I believe it's not a material omission.

13 Q. As we discussed before, there's no -- you

14 don't describe any law degree or any type of legal

15 education, correct?

16 A. Correct.

17 Q. All right.

18 Go to the next statement, which was

19 Cornerstone's current engagement.

20 A. What page?

21 Q. Page 2 immediately following the ending of

22 your professional background.

23 A. I'm there.

24 Q. If you just want to read these to yourself





Page 16

1 and advise me if this is the complete scope of what

2 you've been asked to opine to with respect to the

3 objecting creditors' current objection to

4 confirmation of the plan.

5 MR. TOWBIN: Do you understand the question?

6 Not the entire scope of your services, but just with

7 respect to the confirmation objection.

8 BY MR. MARCUS:

9 Q. I understand you've performed other

10 services. We'll get to that on another date. This

11 deposition is not meant to discuss this.

12 A. I want to read this, and then I may ask you

13 to state your question again.

14 Q. Sure. Go ahead.

15 (Witness viewing document.)

16 BY THE WITNESS:

17 A. I've read the paragraphs. If you'd be kind

18 enough to state the question.

19 Q. Sure. My question to you was does this

20 fully state all the tasks that you've been asked to

21 do with respect to the pending objection to

22 confirmation of the plan filed in the SGK

23 bankruptcy?

24 A. Yes.





Page 17

1 Q. Okay.

2 In looking at this request, I don't see any

3 request to opine on the reasonableness of fees

4 incurred by any party. Do you see that here?

5 A. It's imbedded in paragraph 9 to calculate

6 estimated claim amounts.

7 Q. Okay. But the discussion of what the

8 reasonable amounts might be, that's just an

9 omission?

10 MR. TOWBIN: Objection.

11 BY THE WITNESS:

12 A. No. I'm calculating the claim amount. If

13 you're familiar with the buildup on I think page

14 7 --

15 Q. We'll get there.

16 A. -- it's there.

17 Q. That's where you believe it's in?

18 A. Yes.

19 Q. All right.

20 You've not been asked to opine on any other

21 aspect of the liquidation analysis other than what's

22 set forth in Cornerstone's current engagement,

23 correct?






Page 18

1 Q. So you haven't analyzed any of the

2 underlying data supporting the other costs -- the

3 other assets or liabilities that are discussed in

4 the liquidation analysis; is that correct?

5 A. I've read the liquidation analysis?

6 Q. You haven't been asked to opine as to the

7 reasonableness or the accuracy of those other

8 numbers, correct?


10 Q. You're not intending to provide any

11 testimony in support of the plan objection with

12 respect to any of the other assets or liabilities

13 set forth in the liquidation analysis, correct?

14 A. I do not. They may ask me my understanding

15 of the liquidation analysis, but I don't plan any

16 direct testimony at this time.

17 Q. Right. You testified as of this date you

18 haven't analyzed in any way the accuracy of the

19 underlying data that's set forth in the liquidation

20 analysis, correct?

21 A. I have just read that liquidation analysis.

22 Q. You didn't do any --

23 A. There was no supporting documentation

24 provided to me.





Page 19

1 Q. Okay.

2 Why don't we turn to page 5.

3 A. Okay. I'm on page 5.

4 Q. Page 5 says "Summaries of procedures

5 performed" at the top line; is that correct?

6 A. Correct.

7 Q. And this -- am I correct in saying that the

8 various bullet points that are set forth below Roman

9 numeral 1 on page 5 are all the tasks that you did

10 in preparation for providing the opinions set forth

11 in your expert report?

12 A. The last sentence in the first paragraph

13 says "In general my procedures included but were not

14 limited to the following." These are the major

15 efforts.

16 Q. Well, then, we'll discuss what else you

17 did. So these are the major efforts?

18 A. Yes.

19 Q. As you sit here today, what else did you do

20 in preparation for providing your opinion today?

21 A. I hope this is responsive, but --

22 Q. I do too.

23 A. -- I have over 40 years of experience. So

24 part of my preparation is calling upon my knowledge





Page 20

1 and experience that I've gained over the years in

2 order to assess not only these procedures, but

3 understanding what the assumptions and numbers mean,

4 as well as my formal training both as a CPA and an

5 auditor and understanding various professional

6 standards and the standards that one would normally

7 apply in a litigation environment or in a claims

8 calculation.

9 Q. Okay. Can you identify any other documents

10 that you reviewed in preparation of this report?

11 A. No.

12 Q. Okay.

13 Were you provided any information by

14 counsel that sets forth the bases for the

15 assumptions in this report?

16 A. Other than discussions, interviews,

17 inquiries, their representation as to framework and

18 legal fees. So there were numerous discussions, not

19 necessarily documents.

20 Q. Let's discuss the representation to legal

21 fees. What do you mean by that, sir?

22 A. There's an exhibit both here as well as in

23 the model. I interviewed Mr. Towbin to gain an

24 understanding of fees both incurred and projected to





Page 21

1 be incurred through the emergent state, as well as

2 post-emergent. So I had any number of conversations

3 to make inquiry as to those fees and dollar amounts.

4 Q. Okay. Did you rely on those completely in

5 arriving at the various numbers set forth in this

6 document relating to fees that have been incurred

7 and would be incurred in the future?

8 A. I did rely on those representations.

9 Q. Let's discuss those conversations. How

10 many conversations did you have with Mr. Towbin with

11 respect to his representations of what the fees

12 would be -- what the pre-existing fees would be --

13 strike the question.

14 Let's talk about the first conversation you

15 had with Mr. Towbin where he provided you with the

16 belief of the fees attributable to New Key for

17 pre-effective date legal services.

18 MR. TOWBIN: I object to the form of the

19 question. You can ask him a specific question. You

20 can't just ask him to talk about it.

21 BY MR. MARCUS:

22 Q. Do you recall the first conversation where

23 you discussed that issue?

24 A. I recall the first effort to understand the





Page 22

1 legal fees was prepared by Michael Sheffleck. He

2 had presented us the company's model and

3 interpretation of interest rate calculations, as

4 well as professional fees. So the first effort to

5 gain an understanding of the fees came from

6 management or Michael Sheffleck in his model.

7 I can't tell you the exact date, but I had

8 a rather comprehensive discussion with Mr. Towbin on

9 the fees, and if you received a copy of the model,

10 there's a breakout between code A and code B and we

11 discussed code A, code B, the allocation of those.

12 He explained to me that June year-to-date numbers

13 for code A and code B were fees that had been

14 incurred year-to-date. Then he estimated July,

15 August fees to be rolled forward and gave an

16 appropriate -- what he believed to be an appropriate

17 split based upon work effort between, if you will,

18 core Keywell items versus solvency, fraudulent

19 conveyance, and litigation items.

20 Q. You used a lot of pronouns in there. So I

21 apologize.

22 A. That's fine.

23 Q. Let's take it back. I'm not sure I

24 received the exact model you're referring to. I did





Page 23

1 receive some documents we'll go through, and you'll

2 let me know whether we are talking about the

3 document you referred to that actually assigns the

4 numerical allocation between code A and code B. Is

5 that okay?

6 A. Yes.

7 Q. All right.

8 Your first discussion was suggesting the

9 initial numbers came from Michael Sheffleck,

10 correct?

11 A. Correct.

12 Q. And Michael Sheffleck came up with the

13 allocation that was used with respect to code A and

14 code B, correct?

15 A. I don't know if -- I believe Shaw Fishman

16 came up with the allocation from their billing

17 sheets.

18 Q. So you believe Shaw Fishman provided the

19 allocation to Michael Sheffleck?

20 A. As well as to us.

21 Q. Okay. And if Michael Sheffleck testified

22 to the contrary yesterday, do you have any reason to

23 dispute what he was saying?

24 A. No.





Page 24

1 Q. And was the allocation that they provided

2 to you a -- we'll say code A, we'll call that the

3 New Key invoices. You understand there were two

4 sets of invoices being forwarded by Shaw Fishman to

5 the Defendants in the Committee's lawsuit, correct?

6 A. Yes, that's my understanding.

7 Q. Right. There was one addressed to New Key,

8 correct?

9 A. I've not physically inspected the invoices.

10 So I don't know how they were addressed, but it's

11 been represented that code A was for one level and

12 timing of services and code B another.

13 Q. We'll get to that. That was actually

14 another question. You actually have never

15 physically inspected the underlying invoices that

16 make up the fees incurred to date; is that correct?


18 Q. Okay.

19 Now, with respect to those fees -- we'll

20 call the code A New Key fees -- the allocation

21 determined was 85 percent New Key, 15 percent

22 Defendants. Was that the number you were presented

23 with?

24 A. Characterized as other issues.





Page 25

1 Q. Okay. And that was the number that you

2 were simply given by Mr. Sheffleck and Mr. Towbin;

3 is that correct?

4 A. Given definitely by Mr. Towbin when I

5 interviewed him by phone and got the representation

6 as to the accumulated fees as well as the buildup

7 and the split.

8 Q. And you accepted that number and have not

9 made any change in that number in connection with

10 arriving at your opinion here today?


12 Q. You didn't perform any underlying analysis

13 of the actual invoices to determine the accuracy of

14 that split, correct?

15 A. I did not obtain the invoices, but I

16 looked -- based upon my experience and understanding

17 of bankruptcy matters, I looked at both the

18 reasonableness and the appropriateness of the charge

19 and the buildup of the legal fees.

20 Q. I'm not asking you with respect to the

21 overall charge. I'm asking you with respect to the

22 allocation between the multiple parties, you did not

23 perform any analysis or physical inspection of the

24 invoices to see what fees might properly be





Page 26

1 allocated to a specific party; is that correct?


3 Q. Similarly, you didn't review any of the

4 pleadings in this case, correct?

5 A. I've read many documents in this case. I

6 mean, I've been involved since October, and I've

7 probably read most of all filings in this case.

8 Q. Okay. But you didn't believe that your

9 review of the pleadings had anything to do with

10 respect to the opinion set forth in this report,

11 correct?

12 A. No. This is my independent opinion.

13 Q. Right. And it's not based in any way upon

14 your review of any of the pleadings in this case,

15 correct?

16 A. I believe that's correct. I don't know

17 what pleadings you're exactly referring to.

18 Q. Have you reviewed the motion for -- sorry.

19 Have you reviewed the Defendants' objection to

20 standing of the committee in this case?

21 A. I believe I have.

22 Q. Okay. And are you aware of what the

23 general argument of that objection is?

24 A. I read it. I can't recall the legal





Page 27

1 citings that may have been offered.

2 Q. Do you understand it was an objection that

3 the Committee did not have the authority to pursue

4 the individual Defendants and did not attack the

5 authority of the Committee to attack New Key? And I

6 used the word attack. Let me strike that question.

7 Do you realize that the objection stated

8 that the Committee lacked standing to pursue the

9 individual Defendants in the Committee lawsuit,

10 although it had standing to pursue its claims

11 against New Key?

12 A. I did not read it in the context of trying

13 to understand the legal foundation or basis. I

14 merely read it to gain a general understanding. So,

15 you know, I wasn't trying to interpret a legal

16 document or whether somebody has standing or doesn't

17 have standing.

18 Q. Right.

19 How many Defendants are in the Committee's

20 action against New Key and the individual

21 Defendants?

22 A. I don't recall.

23 Q. That wasn't a number that came into any --

24 that wasn't a number you looked at in arriving at





Page 28

1 your conclusion regarding the reasonableness and

2 allocation of fees, correct?

3 A. Correct.

4 Q. Did you review -- you reviewed the motion

5 to dismiss, correct?

6 A. Yes, I read it.

7 Q. What portion of the motion to dismiss

8 address statute of limitation arguments with respect

9 to the individual Defendants?

10 A. I didn't refresh my memory on that document

11 since I read it.

12 Q. Was that percentage in any way a factor you

13 analyzed when accepting the allocations provided to

14 you by Mr. Towbin and Mr. Sheffleck?

15 A. No.

16 Q. Let's talk about the other allocation, by

17 the way, because the other allocation, the code B as

18 you referred to it or we'll say the solvency and

19 other, that's just a 50/50 split, correct?

20 A. Code B's a 50/50 split, correct.

21 Q. And, again, that was a number that you

22 simply accepted without any type of attempt to

23 determine the accuracy of that split by reviewing

24 the invoices, correct?





Page 29

1 A. I accepted the representations of

2 Mr. Towbin and the work effort that he would

3 understand based upon his billings and time sheets.

4 MR. TOWBIN: Maybe you're deposing the wrong

5 guy.

6 MR. MARCUS: Who else are you calling as a

7 witness, Steve? You've already identified --

8 MR. TOWBIN: I'm just kidding.

9 MR. MARCUS: If you want, I'm happy to depose

10 you, Steve.

11 MR. TOWBIN: Sure.

12 MR. MARCUS: Last time I checked you were not

13 identified as a witness. So we'll leave that for

14 another day.

15 BY MR. MARCUS:

16 Q. Okay. So did you review any of the fees

17 that related to the litigation between Keywell Metal

18 and Mr. Newman in this case?

19 A. No.

20 Q. Did you review the objection to the

21 Committee counsel's fees?

22 A. I don't recall reviewing that objection.

23 Q. Do you recall who filed that objection?

24 A. No.





Page 30

1 Q. Are you aware that it was Mr. Lozier who

2 filed that objection and New Key did not?

3 A. No.

4 Q. If Mr. Lozier personally objected to fees

5 in the bankruptcy on behalf of his position as an

6 unsecured creditor, do you believe that those should

7 be included in any allocation of New Key's expenses

8 today?

9 A. I haven't looked at it in that framework.

10 Q. Okay.

11 With respect to the objections of the

12 individual Defendants regarding the standing to

13 pursue claims against them, do you think that should

14 be included in any allocation of New Key's expenses

15 to date?

16 A. I've not assessed that.

17 Q. How about with respect to the future, you

18 haven't assessed that either?

19 A. Other than relying on Shaw Fishman's

20 allocation that that's the way their work effort

21 would split.

22 Q. Right. And, again, just accepting that on

23 face value without any independent analysis of your

24 own, correct?





Page 31

1 A. Accepting their representation through my

2 inquiry.

3 Q. Without any independent analysis of the

4 accuracy of those numbers by yourself, correct?

5 A. No independent analysis.

6 Q. So accepting your statement you didn't look

7 at the historical fees in any way to date, you

8 certainly didn't compare the historical fees

9 incurred to determine the accuracy of the projected

10 fees going forward, correct?

11 MR. TOWBIN: Can I hear that question again.

12 MR. MARCUS: I'll restate it, Steve.

13 MR. TOWBIN: Okay.

14 BY MR. MARCUS:

15 Q. You stated you didn't look at the

16 historical fees -- any of the underlying invoices

17 for the historical fees, correct?

18 A. I stated that I looked at the fees in the

19 aggregate as presented as being historical and I

20 looked at them in the context of all the other cases

21 that I work on where -- just about every case I get

22 involved in has legal fees, professional fees, and

23 in various cases I've been asked in my other

24 assignments to assess the reasonableness as to the





Page 32

1 fees. Sometimes -- oftentimes just a general review

2 is this within a general range of reasonableness.

3 So I looked at the fees within the context are these

4 reasonable under the circumstances and reasonable

5 from the standpoint of the presentation of the

6 claims analysis. So I did look at the fees.

7 Q. You didn't look at a single invoice,

8 correct?

9 A. Correct.

10 Q. You didn't look at a single individual time

11 entry, correct?

12 A. Correct.

13 Q. You didn't analyze whether any particular

14 time entry was attributable solely to the individual

15 Defendants or New Key, correct?

16 A. Correct.

17 Q. You testified a bunch there with respect to

18 prior testimony on the reasonableness of legal fees;

19 is that correct?

20 MR. TOWBIN: No. I object to the question.

21 BY MR. MARCUS:

22 Q. I thought you just told me --

23 MR. TOWBIN: Why don't you read the answer

24 back.





Page 33

1 MR. MARCUS: I can ask the questions.

2 MR. TOWBIN: Don't mischaracterize the

3 testimony or try to guess at it.

4 BY MR. MARCUS:

5 Q. I thought you testified earlier that you've

6 been called in the past to testify on the

7 reasonableness of attorney's fees; is that correct?

8 A. I said in substantially all my engagements

9 I've looked at the reasonableness of the attorney

10 fees. It had nothing to do -- I didn't say anything

11 about testifying.

12 Q. So you've never been asked to opine to a

13 court on the reasonableness of attorney's fees; is

14 that correct?

15 A. Specifically on that line, I don't know.

16 Q. Okay.

17 Have you ever been excluded from testifying

18 in any case where you were retained as a testifying

19 expert?

20 A. No.

21 Q. Let's switch gears here for a second. What

22 do you understand is the basis for New Key's rights

23 to attorney's fees relating to the pending

24 bankruptcy and litigation matters?





Page 34

1 A. That the fees that have been incurred

2 they're an obligation of the estate.

3 Q. So you actually don't know the legal

4 genesis for their entitlement to those fees?

5 MR. TOWBIN: You're asking for a legal

6 conclusion, and I would object.

7 BY MR. MARCUS:

8 Q. What's your understanding of their right --

9 what exists in the world that provides them with a

10 right to recover attorney's fees in this case?

11 A. They're representing secured lenders, New

12 Key I and New Key II, and as a general matter

13 attorney fees are recoverable when representing

14 secured creditors.

15 Q. So you think there's a law out there that

16 says attorney's fees in general are recoverable by

17 secured creditors?

18 MR. TOWBIN: Objection, mischaracterizes his

19 testimony. He didn't say anything about there's law

20 out there.

21 BY MR. MARCUS:

22 Q. I'm trying to understand your point.

23 A. I believe every case I've worked on the

24 attorney fees are recoverable when they're





Page 35

1 representing a secured creditor.

2 Q. Do you tend to find that because it's based

3 on the contracts between the parties that sets forth

4 what attorney's fees are recoverable in the case of

5 default?

6 A. Yes, that's generally the case.

7 Q. Do you understand that's the case here as

8 well?

9 A. I'm not certain.

10 Q. Okay. Other than any contractual right

11 that the secured parties might be entitled to

12 recover fees, are you aware of any other law or

13 document upon which you're relying to suggest they

14 would be entitled to fees in connection with those

15 estimated in your report?

16 A. I'm not an attorney and I didn't research

17 the law. So I'm not aware of any law or position.

18 Q. So you're certainly not opining to me as to

19 any basis for them to recover their fees outside of

20 the loan documents, correct?

21 A. This is a compilation and a general overall

22 review of the appropriateness and reasonableness of

23 the fees, and it's not unusual for professional fees

24 to be recovered. So I'm just talking about the





Page 36

1 framework of calculation. I'm not rendering as

2 opinion as to law.

3 Q. I'm going to hand you what was identified

4 yesterday as Exhibit No. 6.


6 BY MR. MARCUS:

7 Q. Sir, have you reviewed what I handed you

8 that was previously identified as Exhibit No. 6?

9 A. Yes, I have.

10 Q. Okay. And you recognize this as the

11 amended and restated security agreement for New

12 Key -- the New Key II loan; is that correct?

13 A. Correct.

14 Q. You'll notice that there is language in

15 this document that provides with respect to recovery

16 of attorney's fees; is that correct?

17 A. Correct.

18 Q. All right. And that is in particular in

19 one section, that's section 11, immediately

20 following subsection D there is language that

21 provides for recovery of certain attorney's fees; is

22 that correct?

23 A. Correct.

24 Q. Do you mind reading that into the record.





Page 37

1 A. "The proceeds of any sale or other

2 disposition under this section 11 shall be applied

3 first to payment of expenses of retaking, holding,

4 preparing for sale, or other disposition of the

5 collateral, including reasonable attorney's fees and

6 legal expenses incurred by the secured party, then

7 to any overdue or accrued interest upon the note,

8 then to the repayment of all or any portion of the

9 principal sum of the note at the time outstanding,

10 and then to the discharge of any other obligations

11 of the company to the secured party under the note

12 in such order as the secured party shall determine.

13 Any funds remaining after payment of the foregoing

14 shall be paid to the company."

15 Q. You can stop there. I wanted to focus of

16 the particular language regarding the "Including

17 reasonable attorney's fees and legal expenses

18 incurred by the secured party." Do you see that

19 phrase, sir?

20 A. I do.

21 Q. And you understand that phrase to relate to

22 the prior clause with respect to "Expenses of

23 retaking, holding, preparing for sale, or other

24 disposition of collateral," correct?





Page 38

1 A. Correct.

2 Q. Okay. Have you done any analysis

3 whatsoever to determine whether any of the fees that

4 were included in your New Key estimates related to

5 the retaking, holding, preparing for sale, or other

6 disposition of the collateral?

7 A. I did not do a split or an analysis of

8 that.

9 Q. Okay. Do you think it would be reasonable

10 to do so to determine what fees were actually

11 recoverable under this clause?

12 MR. TOWBIN: I object. He's not a lawyer. He

13 wasn't asked to do a legal analysis.

14 MR. MARCUS: He was asked to opine as to the

15 reasonableness of the fees.

16 MR. TOWBIN: Right. The amount.

17 MR. MARCUS: Let the witness answer my

18 question.

19 BY MR. MARCUS:

20 Q. Do you think it would have been appropriate

21 to make that determination in connection with

22 determining the reasonableness of the fees that New

23 Key's entitled to under this provision?

24 A. Under our professional standards when we





Page 39

1 prepare a claims analysis, compile that analysis, we

2 look at the reasonableness of the fees, the

3 appropriateness of the assumption, and in this case,

4 the line of questioning, the appropriateness of the

5 legal fees, and based upon my inquiry of Shaw

6 Fishman as well as my experience with other cases,

7 for purposes of this analysis, what I did in my

8 conclusion is appropriate.

9 Q. Okay.

10 So you're aware there's a litigation with

11 New Key that does not relate to the retaking,

12 holding, preparing for sale, or other disposition of

13 collateral, correct?

14 A. Correct.

15 Q. And you in providing your opinion that's

16 stated in this report did not take any efforts to

17 determine what portion of those New Key fees relate

18 to this clause and what portion of New Key fees do

19 not relate to this clause, correct?

20 A. I did make an effort. So incorrect to your

21 answer to my question. I did make an effort.

22 Proper documentation standards require making

23 inquiry, interviewing to assess the reasonableness

24 of the fees, and I did exactly that.





Page 40

1 Q. So the sum total of that was asking

2 Mr. Towbin and Mr. Sheffleck their opinions on that,

3 correct?

4 A. Correct.

5 Q. We mentioned earlier you don't know how

6 many individual Defendants there are in the

7 Committee action, correct?

8 A. Correct.

9 Q. You also can't tell me how many claims are

10 asserted against the individuals versus asserted

11 against New Key, correct?

12 A. Correct.

13 Q. Do you know the total amount at issue in

14 the New Key -- in the creditor's committee

15 complaint?

16 A. I believe it's over $60 million.

17 Q. Do you understand what portion of that

18 relates to New Key?

19 A. No.

20 Q. But you understand the over $63 million --

21 it's actually over $63 million -- refers to claims

22 against the individual Defendants, correct?

23 A. I believe that's true based upon my

24 recollection of reading that earlier.





Page 41

1 Q. You said you reviewed the motion to

2 dismiss. Are you aware of the number of arguments

3 made in the motion to dismiss?

4 A. I don't recall those.

5 Q. And, again, you can't tell me how much of

6 the New Key fees relate to drafting and filing

7 proofs of claims for individual Defendants in this

8 case?

9 A. No, I cannot.

10 Q. Likewise, you can't tell me how much of the

11 fees related to representing Michael Sheffleck's

12 negotiation of the consulting agreement with the

13 debtor, correct?

14 A. Could I have that question again, please.

15 Q. How much of the New Key fees included in

16 your estimation related to representing Michael

17 Sheffleck's negotiation with the debtor to become an

18 independent consultant to the debtor?

19 A. No.

20 Q. And you can't tell me how much of the New

21 Key fees included in your estimate related to

22 advising Mr. Lozier with respect to his role at

23 Keywell Metals, correct?

24 A. Correct, I cannot tell you.





Page 42

1 Q. So that's historical fees. Let's talk

2 about projected fees. Did you do any independent

3 analysis to determine how many hours would be needed

4 to complete the litigation in this case?

5 A. I did not look at the number of hours.

6 Q. Did you take any look into the blended rate

7 of the Shaw Fishman firm in determining the

8 estimated projected fees going forward?

9 A. I did not calculate a blended hourly rate.

10 Q. What portion of litigation tends to be the

11 most expensive portion, sir, in your experience?

12 A. All of it.

13 Q. So you don't believe a specific portion

14 generally tends to have more hours and time

15 associated to it than others?

16 A. No. Your comment and question is a good

17 one. You know, based upon the complexity of the

18 litigation, based upon the intensity, based upon the

19 timing, there will be portions that could be more

20 expensive.

21 Q. How much document production is left in

22 this case?

23 A. I don't know.

24 Q. How much document review is left in this





Page 43

1 case?

2 A. There should be a lot.

3 Q. What's your basis for that statement?

4 A. I believe I've read that Judge Wiedoff is

5 going to deal with discovery and discovery cutoff

6 some time in October. There's yet to be all

7 documents produced that will be required for the

8 ongoing litigation on other Keywell issues, those

9 items surrounding fraudulent conveyance, insolvency.

10 So it's my understanding that will be an ongoing

11 matter, that documents will have to be produced and

12 work will have to be performed.

13 Q. So you believe New Key hasn't produced all

14 its documents so far in this matter?

15 A. I haven't seen them all.

16 Q. Is it your position that the documents that

17 have to be produced by the individual Defendants

18 should be included in the estimate for New Key's

19 fees?

20 A. I haven't given that thought.

21 Q. Referring back to Exhibit No. 6, you recall

22 the language provided the secured party with a

23 limited right of fees subject to section 11,

24 correct?





Page 44

1 A. Correct.

2 MR. TOWBIN: Object to the form of the

3 question.

4 BY MR. MARCUS:

5 Q. And the secured party is defined as New Key

6 II, correct? It's in the first paragraph, sir.

7 A. Yes, New Key II.

8 Q. And we don't necessarily need to go through

9 the document, but would you just take my

10 representation that the secured agreement for New

11 Key I is identical in all material respects other

12 than the name of the secured party, the date of the

13 agreements, and the amount of the loan? Does that

14 sound consistent with your recollection?

15 A. That's consistent with my recollection.

16 Q. Do you know when the trial date is set

17 forth with respect to the committee's action?

18 MR. TOWBIN: Objection, assumes a fact not in

19 evidence.

20 BY MR. MARCUS:

21 Q. You can answer the question.

22 A. I don't recall.

23 Q. Are you -- so you're not aware that a trial

24 date has or has not been set, correct?





Page 45

1 A. I can't recall.

2 Q. And that didn't factor into your analysis

3 with respect to determining the reasonableness of

4 future fees, correct?

5 A. What did factor into my analysis was that

6 these things can be time-consuming, at least based

7 upon the other cases that I've been involved in, and

8 the framework that has been established looking at

9 two years seems to be reasonable, recognizing that

10 it could go longer.

11 Q. But you think two years seems to be

12 reasonable, correct?

13 A. It could go either direction.

14 Q. But your exact testimony is looking at it

15 you thought two years seems to be reasonable; was

16 that your statement before?

17 A. Two years seems to be reasonable, but it's

18 going to have to be on a fast track.

19 Q. Are you understanding that Judge Wiedoff's

20 comments with respect to his intent to put this case

21 on a fast track?

22 A. I do not, no.

23 Q. So you didn't consider that in arriving at

24 your calculation for future fees estimate, correct?





Page 46

1 MR. TOWBIN: Objection, assumes facts not in

2 evidence.

3 BY MR. MARCUS:

4 Q. You can answer the question.

5 A. Could you rephrase the question?

6 Q. Sure.

7 You did not consider the fact of Judge

8 Wiedoff's comments about putting this case on a fast

9 track in arriving at your estimates; is that

10 correct?

11 A. I did not consider that. I considered

12 litigation in general taking a lengthy amount of

13 time.

14 Q. All right.

15 Other than trial briefs in this case, are

16 you aware of any extensive briefing that will need

17 to take place from this point forward?

18 A. Regarding which litigation?

19 MR. TOWBIN: Objection. This is so far beyond

20 the scope of his opinion, which is primarily on

21 interest rates.

22 MR. MARCUS: Off the record.

23 (Whereupon a discussion was had

24 off the record.)





Page 47

1 (A short break was had.)

2 BY MR. MARCUS:

3 Q. Can you turn to page 9 of your report. Are

4 these the sum totals of your findings and

5 conclusions that you've proffered with respect to

6 this case?

7 A. Yes.

8 (Short interruption.)

9 BY MR. MARCUS:

10 Q. Sir, we were discussing your summary of

11 findings and conclusions, correct?

12 A. Yes.

13 Q. And as I was pointing out, I see in

14 subsection C it says "The amount and allocation of

15 the professional fees on a pro rata basis between

16 the two entities would appear to be reasonable"; do

17 you see that?

18 A. Yes.

19 Q. The two entities you're referring to are

20 New Key I and New Key II, correct?

21 A. Correct.

22 Q. Can you show me anywhere in your findings

23 that the amount and allocation of the professional

24 fees as between New Key and the individual





Page 48

1 Defendants would appear to be reasonable?

2 A. It does not explicitly state that here.

3 Q. Does it implicitly state that anywhere in

4 this document, sir?

5 A. It's implied in the allocation in the

6 calculation spreadsheet in the model.

7 Q. But it's not stated in your summary of

8 finding and conclusions, correct?


10 Q. what you advised me about a minute ago was

11 the sum total of all your opinions expressed in this

12 case, correct?

13 A. Correct.

14 (Deposition Exhibit 20 was

15 marked as requested.)

16 BY MR. MARCUS:

17 Q. I've got a few questions regarding some

18 other documents. We are just going to start this as

19 Exhibit No. 20. Take a quick opportunity to review

20 the document.


22 BY THE WITNESS:

23 A. I've reviewed Exhibit 20.

24 Q. Do you recognize Exhibit 20, sir?





Page 49

1 A. Yes, I do.

2 Q. Does this appear to be a set of invoices

3 that Cornerstone Restructuring has sent to the Shaw

4 Fishman firm?

5 A. Correct.

6 Q. This relates solely to fees that you are

7 allocating to New Key Group, LLC and New Key Group

8 II, LLC, correct?

9 A. It's fees that have been incurred -- it's a

10 hundred percent of our fees that have been incurred

11 on New Key I and New Key II.

12 Q. Okay. So it includes other fees that

13 you've been allocating to the individual Defendants

14 as well?

15 A. It would be imbedded in these numbers.

16 Q. And with respect to allocating these

17 numbers to the New Key estimate, did you simply

18 apply the same allocation set forth in the code B

19 fees?

20 A. No.

21 Q. Did you provide the same allocation in the

22 code A fees?

23 A. No.

24 Q. What allocation did you -- strike that.





Page 50

1 Is there any allocation that you assess

2 with respect to what fees relate to what Defendant?

3 A. We split the fees 70/30, 70 percent to New

4 Key matters, 30 percent to other matters. Other

5 matters basically includes the fraudulent

6 conveyance, solvency work either that's been done or

7 is expected to be done.

8 Q. With respect to the allocation as between

9 New Key Group and New Key Group II, you understand

10 you're allocating those fees based upon the -- we'll

11 actually deal with that in a later document.

12 Turn to the next page. You'll notice

13 underneath total fees and expenses there's a

14 black-out?

15 MR. TOWBIN: What's the Bates number?

16 BY MR. MARCUS:

17 Q. Bates No. NK-171.

18 A. Yes, I'm on Bates No. 171.

19 Q. You'll see there that there's a black-out

20 underneath that document?

21 A. Correct.

22 Q. Is that a redacted provision?

23 A. It's my understanding just looking at it

24 that would qualify as a redacted provision.





Page 51

1 Q. Is this support for your opinion you are

2 rendering in this case?

3 A. The 41,763.50 is part of our estimated fees

4 up to emergence, which is $185,000. So this would

5 be costs incurred and billed, say, through July.

6 Then we estimated August time to come up to a total

7 fee of $185,000 through emergence.

8 Q. I'm just asking you are you aware of what

9 was redacted on this page?

10 A. I believe I can tell you based upon my

11 understanding of these invoices.

12 Q. What was redacted on this page?

13 A. Outstanding fees.

14 Q. So you're telling me a fair amount of these

15 fees actually have not been paid?

16 A. We're substantially current as of today.

17 Q. Okay.



20 BY MR. MARCUS:

21 Q. I'm going to hand you what's been

22 identified now as Exhibit 21. You can review the

23 whole document if you like, but I'm really just

24 going to ask questions on the last page, sir.





Page 52


2 BY THE WITNESS:

3 A. Okay.

4 Q. All right. So Exhibit No. 21 with Bates

5 label NK-449 through 456, do you recognize the

6 document?

7 A. I do.

8 Q. Did you prepare this document?

9 A. It was prepared under my supervision.

10 Q. By someone working for you?

11 A. Yes.

12 Q. So who prepared the document?

13 A. Louise Nash, my business partner.

14 Q. And this document appears to be various

15 support relating to your buildup of the New Key

16 estimates; is that fair to say?

17 A. Yes.

18 Q. If we could turn to the last page, NK-456.

19 First of all, if you could focus on the section

20 discussing "Split of fees based on principal and

21 interest amounts at effective date"; do you see

22 that, sir?

23 A. Yes, I see that.

24 Q. And underneath that line you have "New Key





Page 53

1 Group" and "New Key Group II, LLC," correct?

2 A. Correct.

3 Q. And then directly to the right of both of

4 those names you have what you've calculated as the

5 principal and interest due as of the effective date

6 with respect to each perspective party, correct?


8 Q. Then you have an allocation of the total

9 fees incurred by both of those parties to the right

10 of that line, correct?

11 A. Correct.

12 Q. And then a rounded number there following,

13 correct?

14 A. Yes.

15 Q. And your allocation as between New Key

16 Group and New Key Group II is based simply on the

17 percentage -- let me find a better way to ask that.

18 How did you calculate the allocation as

19 between New Key Group and New Key Group II here?

20 A. Based upon the relationship on a pro rata

21 basis of the total fees -- total principal and

22 interest accumulated through the anticipated

23 effective date, this would be a pro rata sharing and

24 pro rata allocation based upon a 43/57 percent





Page 54

1 relationship.

2 Q. So New Key II is owed approximately

3 50 percent of the outstanding amount or the amount

4 at issue. So therefore you're applying

5 approximately 57 percent of the fees towards New Key

6 Group II, correct?

7 A. Correct.

8 Q. And New Key Group, LLC has claims for

9 approximately 43 percent of the amount at issue, and

10 therefore you are applying 43 percent of the rates

11 of the attorney's fees to them, correct?

12 A. Correct.

13 Q. And you think that is a reasonable basis in

14 which to allocate the fees between parties?

15 A. Yes.

16 Q. Okay.

17 Have you provided a similar analysis with

18 respect to the amount that Mr. Lozier has

19 outstanding with respect to the litigation in this

20 case?

21 A. No.

22 Q. Would it be a reasonable -- would a

23 reasonable test to determine the allocation of legal

24 fees be to apply a similar analysis as what you did





Page 55

1 on page NK-456?

2 A. We were looking at reasonableness and

3 materiality. This materially captures the principal

4 and interest at the effective date, and so this

5 seems to be an appropriate allocation methodology.

6 Q. And I'm asking you would it be an

7 appropriate allocation methodology to use with

8 respect to other parties in this case?

9 A. That could be another scenario.

10 Q. Now, with respect to the line above that on

11 the post 9/8/2014 split percentage, can you just

12 walk me through what you're doing there.

13 A. Post 9/8?

14 Q. So in the upper right-hand corner.

15 A. Yes.

16 Q. You understand post 9/8/2014 to apply the

17 post effective date of a plan of liquidation,

18 correct?

19 A. Correct.

20 Q. Can you just walk me through where these

21 numbers are coming from and what you're doing here.

22 A. Yes. The Shaw Fishman number was based

23 upon our interview and inquiries of Mr. Towbin.

24 They'd estimated total post 9/8 fees of





Page 56

1 approximately 700,000, which is roughly or exactly

2 50 percent of total professional fees expected to be

3 incurred.

4 Q. What does that mean when you say it's

5 approximately 50 percent to be incurred?

6 A. See the 700,000 for Shaw Fishman?

7 Q. I see that.

8 A. And see the million four hundred thousand?

9 Q. Okay.

10 A. All I said is the 700,000 is 50 percent of

11 the total professional fees.

12 Q. All right.

13 A. Consultant No. 1 is 225, and when we looked

14 at the fees incurred pre, I felt that it's

15 appropriate to continue to maintain the 70/30 split,

16 70 percent New Key matters which aligns with the

17 pre-September 8 allocation and percentage.

18 Q. Can I ask why you did not choose to use the

19 85/15 analysis that was used by Mr. Towbin and

20 Mr. Sheffleck with respect to the New Key fees?

21 A. Well, the 85/15 only applies to billing

22 code A on a historic basis. So the mix of work

23 effort and intensity and complexity is likely to

24 change.





Page 57

1 Q. And with respect to determining the

2 70/30 -- so consultant 1 is Cornerstone, correct?

3 A. Correct.

4 Q. So you analyzed what you thought was going

5 to apply towards the various parties when you came

6 up with this estimate, correct?

7 A. Apply between those core New Key matters

8 versus the fraudulent conveyance, solvency matters.

9 Q. Did you perform any analysis whatsoever to

10 determine what portion of these fees would relate to

11 the retaking, holding, preparing for sale, or other

12 disposition of the collateral?

13 A. Well, it's implied and imbedded in the

14 70 percent.

15 Q. So you think your 70 percent took into

16 consideration the language which you didn't recall

17 earlier in this deposition?

18 MR. TOWBIN: Object to the form of the

19 question, mischaracterizes his testimony.

20 BY MR. MARCUS:

21 Q. I believe you testified earlier that you

22 really hadn't taken this into consideration in

23 making your estimates. Wasn't that your testimony

24 earlier today?





Page 58

1 A. I believe that's true, but when you showed

2 me this, it refreshed my recollection on the

3 exercise I went through.

4 Q. So you went through the exercise and tried

5 to figure out which portion of your services was

6 going to specifically relate to either retaking,

7 holding, preparing for sale, or other disposition of

8 collateral; is that your testimony?

9 A. As I just stated, that's imbedded in that

10 70 percent as a New Key matter, which a New Key

11 matter would also in addition to those items include

12 such items as debt inequity characteristics,

13 market-based interest rate of interest on the notes,

14 you know, equitable subordination.

15 Q. So I think I understand you. What you're

16 saying is the 70 includes expenses that would relate

17 to taking, holding, preparing for sale, or other

18 disposition of collateral, but it would also include

19 those additional topics you just set forth?

20 A. Correct.

21 Q. With respect to those additional topics you

22 just set forth, where is the contractual right for

23 New Key to recover those fees from the estate?

24 A. I made the assumption that such fees would





Page 59

1 be recoverable from the estate.

2 Q. Right. But you agree those aren't included

3 in the list that we just discussed, correct?

4 MR. TOWBIN: Objection, that's a legal

5 conclusion as to the interpretation of the contract.

6 BY MR. MARCUS:

7 Q. And the assumption you just testified with

8 regard to, sir, that's what you just told me,

9 correct?

10 A. What I just told you was imbedded in there,

11 and I made the assumption that it was recoverable as

12 a New Key matter.

13 Q. All right.

14 Then with respect to the following line,

15 consultant 2, who is consultant 2?

16 MR. TOWBIN: Object. That's a consulting

17 expert that we're not required to disclose at this

18 point in time.

19 MR. MARCUS: Understood. I was advised

20 yesterday that there is actually no retained

21 consultant 2. Is that consistent with your

22 understanding as well?

23 MR. TOWBIN: I don't know what you were told

24 yesterday, but I can tell you that's not true.





Page 60

1 by MR. MARCUS:

2 Q. So if Mr. Sheffleck testified that he

3 believed that there wasn't, in fact, a retained

4 consultant 2, would you have any basis to object to

5 that testimony?

6 A. I believe there is -- it's my understanding

7 there is a retained consultant No. 2.

8 Q. So you believe there is a retained

9 consultant No. 2?

10 A. Yes, I do.

11 Q. What is consultant No. 2's billable rate?

12 A. I don't know if those rates were ever

13 disclosed in the draft engagement letter that I saw.

14 I think it was an estimated fixed fee.

15 Q. So you believe there was just an estimated

16 fixed fee of $475,000 in a draft engagement letter

17 that you saw; is that correct?

18 A. For their proposed scope of services.

19 Q. And you relied upon that in providing your

20 estimate set forth herein, correct?

21 A. Yes, I relied upon that as well as my

22 understanding that that final draft engagement

23 letter was executed by the firm of Shaw Fishman and

24 Shaw Fishman concurred with the 475.





Page 61

1 Q. But it was a document upon which you relied

2 in providing your report and your estimates set

3 forth in your expert report, correct?

4 A. It was a document that I had seen and

5 subsequently confirmed as the correct number by Shaw

6 Fishman.

7 MR. MARCUS: I would ask that that document be

8 produced.

9 MR. TOWBIN: It's privileged. It's work

10 product.

11 MR. MARCUS: The second you give it to your

12 expert and he relied upon it in coming to his

13 estimate --

14 MR. TOWBIN: He relied upon our representation

15 that's what it was.

16 MR. MARCUS: Well, you just completely

17 misstated what your expert just said.

18 MR. TOWBIN: We're going to redact everything

19 that's in it. Do you want to see it?

20 MR. MARCUS: You send it over however you think

21 you're entitled to send it over.

22 BY MR. MARCUS:

23 Q. With respect to that --

24 MR. TOWBIN: I don't believe he testified that





Page 62

1 he relied on it. Can I have the answer read back.

2 MR. MARCUS: Why don't we move on and we'll get

3 to that towards the end. I'm pretty certain we'll

4 look at the final transcript and see what it says.

5 Okay? I don't think it makes sense for us to bicker

6 over it right now.

7 BY MR. MARCUS:

8 Q. With respect to the 475 that was identified

9 in this letter and confirmed by Shaw Fishman, you

10 didn't provide any independent analysis with respect

11 to how that number was calculated, correct?

12 A. No independent analysis on the 475, but I

13 made the determination of the split between the

14 20 percent and 80 percent.

15 Q. What was the basis for your determination

16 of New Key being only entitled to 20 percent of

17 that -- strike that.

18 What was the basis for your determination

19 that the proper allocation with respect to New Key's

20 liability on that obligation was only 20 percent?

21 A. It was my estimate that a substantial

22 portion of their fees, in this case 80 percent,

23 would apply to other matters. Yet their findings in

24 the other matters would apply to some degree to the





Page 63

1 extent of 20 percent to core New Key matters.

2 Q. And how did you make that determination?

3 A. Based upon my experience of doing similar

4 work.

5 Q. Are you going to tell me what work that is?

6 What work is being split here at 20 percent and

7 80 percent?

8 MR. TOWBIN: You know, I think that's work

9 product as to what the consultant is consulting

10 about, and I am going to instruct the witness not to

11 answer that question.

12 BY MR. MARCUS:

13 Q. Are you going to accept the instruction of

14 counsel?

15 A. Yes, I will.

16 Q. Without disclosing the substance, can you

17 provide me with any reasonable basis to believe that

18 20 percent of those fees should be apportioned to

19 New Key?

20 A. Based upon my prior testimony, the other

21 matters are the lion's share, and I have an

22 understanding through doing similar work, if not

23 identical work, in other cases that their scope is

24 applicable to these other matters.





Page 64

1 Q. Yet you're refusing to advise me what that

2 similar work was or what the substance of that work

3 was and allowing us to analyze this calculation,

4 correct?

5 A. I was instructed not to answer that

6 question.



9 BY MR. MARCUS:

10 Q. I'm handing you what we've now marked as

11 Exhibit 22. Take a minute to look at the document,

12 sir.


14 BY MR. MARCUS:

15 Q. My questions are going to relate to the

16 last page of the document, sir.

17 A. I'm on the last page.

18 Q. Have you had an opportunity to review

19 Exhibit 22 with Bates label NK-460 through 463?

20 A. Correct.

21 Q. And you recognize the document, sir?

22 A. I do.

23 Q. And was this a document likewise prepared

24 at your direction?





Page 65

1 A. No.

2 Q. Do you know who prepared this document?

3 A. The first three pages, Bates 460 through

4 462, were prepared under my direction.

5 Q. Okay. By Mr. Nash?

6 A. Ms. Nash.

7 Q. Sorry. Louise?

8 A. Yes, Louise.

9 Q. Louise Nash. Thank you.

10 A. This --

11 MR. TOWBIN: There's no question pending.

12 MR. MARCUS: That's fine.

13 BY MR. MARCUS:

14 Q. The final page, do you know who prepared

15 that document -- who prepared this page of the

16 document?

17 A. It's my understanding that this is out of

18 context.

19 Q. That makes perfect sense to me. Do you

20 know what this document is?

21 A. I believe it was prepared by former

22 management.

23 Q. So you believe this document was prepared

24 by former management?





Page 66

1 A. Correct.

2 Q. Correct me if I'm wrong. So the upper

3 left-hand corner refers to New Key Group, LLC and

4 New Key Group II, LLC legal fee split trial and

5 appeal process; is that correct, sir?

6 A. Correct.

7 Q. And this sets forth the estimated fees that

8 management thought might be incurred in connection

9 with the litigation; is that correct?

10 A. I believe it's limited only to legal fees.

11 It doesn't include consultants 1 or 2.

12 Q. And did you rely upon this number in any

13 way in your calculations in estimating the New Key

14 claim estimates?

15 A. We accepted the methodology for the

16 43/57 percent as being a reasonable approach that

17 management had used. These numbers were

18 subsequently revised based upon my interviews and

19 inquiries of Shaw Fishman.

20 Q. In what way were they revised?

21 A. The numbers are just different. I think

22 they may represent a different period of time.

23 Q. But you didn't rely on these numbers in

24 arriving at your analysis?





Page 67

1 A. I did not rely on the 825,000 other than in

2 my final analysis I did accept them for what they

3 were, that these were management's estimate at this

4 point in time.

5 Q. Do you understand this is their estimate of

6 all fees, or how did you understand this estimate to

7 be?

8 A. I don't have perfect recollection, but I

9 thought it was legal fees.

10 Q. So all legal fees incurred in connection

11 with the trial and appeal process for the Committee

12 action?

13 A. Yes. A hundred percent, yes.



16 BY MR. MARCUS:

17 Q. I'm handing you now what's been identified

18 as Exhibit No. 23.


20 BY THE WITNESS:

21 A. I've inspected Exhibit No. 23.

22 Q. Do you recognize Exhibit No. 23?

23 A. Again, it's out of context, but I believe

24 it was part of the proof of claim.





Page 68

1 Q. Okay. Well, I just wasn't sure what this

2 was trying to say. Can you walk me through what the

3 calculations are in this document?

4 A. I did not prepare this. I can speculate.

5 Q. I don't want you to speculate. So you

6 didn't prepare this document and you're not sure

7 what the analysis is trying to show, correct?

8 A. I believe it's the proof of claim.

9 Q. Now, getting back to your report, we looked

10 at your conclusions. Do you recall that testimony,

11 sir?

12 A. Page 9?

13 Q. Yes, starting on page -- well, yeah, page

14 9.

15 A. Yes.

16 Q. And since the filing of this report have

17 you revised any of your opinions with respect to an

18 appropriate interest rate to be applied in this

19 case?

20 A. Nothing has been revised.

21 Q. And you think the numbers that are set

22 forth in your report would constitute reasonable

23 assumptions to use in estimating any New Key claim?

24 A. Correct.





Page 69

1 MR. MARCUS: Let's take a break for a couple

2 minutes. We might be done.

3 (A short break was had.)

4 MR. MARCUS: I have no further questions for

5 you today, sir. Thank you for your time.

6 Mr. Towbin, any questions?

7 MR. TOWBIN: No. We'll save those for the

8 hearing.

9 COURT REPORTER: Signature?

10 MR. TOWBIN: We'll read the deposition.

11 (Whereupon, at 12:08 p.m., the

12 signature of the witness having

13 been reserved, the witness being

14 present and consenting thereto,

15 the taking of the instant

16 deposition ceased.)

17

18

19

20

21

22

23

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Page 70

1 STATE OF ILLINOIS ) ) SS:

2 COUNTY OF C O O K )

3

4 The within and foregoing deposition of the

5 aforementioned witness was taken before Tina M.

6 Alfaro, C.S.R. and Notary Public, at the place,

7 date, and time aforementioned.

8 There were present during the taking of the

9 deposition the previously named counsel.

10 The said witness was first duly sworn and

11 was then examined upon oral interrogatories; the

12 questions and answers were taken down in shorthand

13 by the undersigned, acting as stenographer and

14 Notary Public; and the within and foregoing is a

15 true, accurate, and complete record of all the

16 questions asked of and answers made by the

17 aforementioned witness at the time and place

18 hereinabove referred to.

19 The signature of the witness was not

20 waived, and the deposition was submitted, pursuant

21 to Rules 30(e) and 32(d) of the Rules of Civil

22 Procedure for the United States District Court, to

23 the deponent per copy of the attached letter.

24





Page 71

1 The undersigned is not interested in the

2 within case, nor of kin our counsel to any of the

3 parties.

4 Witness my official signature and seal as

5 Notary Public, in and for Cook County, Illinois on

6 this 20th day of August, A.D., 2014.

7

8

9 _____________________________

10 Tina M. Alfaro, CSR, CRR, CLR C.S.R. No. 084-004220

11 311 South Wacker Drive Suite 300

12 Chicago, Illinois 60606 (312) 386-2000

13

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22

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Rev: 20130104_bko

UNITED STATES BANKRUPTCY COURTNORTHERN DISTRICT OF ILLINOIS

In Re: ) BK No.:)) Chapter:)))

Debtor(s) )

SGK VENTURES, LLC (f/k/a KEYWELL L.L.C.),

13-37603

11

Eastern Division


ORDER GRANTING THE COMMITTEE'S MOTION IN LIMINE

This matter coming before the Court on the Motion of the Official Committee of Unsecured Creditors (the “Committee”) of SGK Ventures, LLC (f/k/a Keywell L.L.C.) to Bar Testimony of C. Kenneth White in Part (the "Motion"), the Court having reviewed the Motion, the Court having found that (a) the Court has jurisdiction over this matter pursuant to 28 U.S.C. 157 and 1334, (b) venue is proper in this district pursuant to 28 U.S.C. 1408 and 1409, (c) this is a core proceeding pursuant to 28 U.S.C. 157(b), and (d) notice of the Motion and opportunity for a hearing on the Motion having been appropriate and sufficient under the circumstances, and that no other or further notice need be given; and the Court having determined that the legal and factual basis set forth in the Motion establish just cause for the relief granted herein; IT IS HEREBY ORDERED THAT: 1. The Motion is GRANTED. 2. The Objecting Creditors (NewKey Group, LLC, NewKey Group II, LLC and J. Mark Lozier) are barred from eliciting testimony from, or presenting evidence through, C. Kenneth White during the Confirmation Hearing regarding (a) the reasonableness of the historical and projected legal fees in general, (b) the reasonableness of the allocation of the historical and projected legal fees between the NewKey entities on one hand and the individual defendants on the other, and (c) the allocation of the historical and projected legal fees among the NewKey entities. 3. This Court shall retain jurisdiction with respect to all matters relating to teh interpretation or implementation of this Order.

Enter:

United States Bankruptcy JudgeDated:

Prepared by:David A. Agay (ARDC No. 6244314) Sean D. Malloy (ARDC No. 6217401) Micah E. Marcus (ARDC No. 6257569) Joshua A. Gadharf (ARDC No. 6296543)

Rev: 20130104_bko

McDONALD HOPKINS LLC 300 North LaSalle Street, Suite 2100 Chicago, Illinois 60654 Telephone: (312) 280-0111 Facsimile: (312) 280-8232 [email protected] [email protected] [email protected] [email protected]

for the northern district of illinois eastern division … · lawrence d. mishkin silver &...

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