SUPREME COURT OF THE STATE OF NEW YORK COUNTY OF NEW YORK

ODDO ASSET MANAGEMENT, Plaintiff, v. BARCLAYS BANK PLC, BARCLAYS CAPITAL, INC., SOLENT CAPITAL PARTNERS, LLP, SOLENT CAPITAL (JERSEY) LIMITED, and THE MCGRAW-HILL COMPANIES, INC., Defendants. Index No. 109547/08 (Kapnick, J.)

EXHIBITS TO THE AFFIRMATION OF LANCE CROFFOOT-SUEDE

VOLUME I of II

LINKLATERS LLP 1345 Avenue of the Americas New York, New York 10105 (212) 903-9000 Attorneys for Defendants Barclays Bank Plc and Barclays Capital, Inc. October 31, 2008

Exhibit A

SUPREME COURT OF THE STATE OF h i W YORK NEW YORK COUNTY ODD0 ASSET MANAGEMENT,Index No. :

- against BARCLAYS BANK PLC, BARCLAYS CAPITAL, JNC., SOLENT CAPITAL PARTNERS,LLP, SOLENT CAPITAI, (JERSEY) LIMITED, and THE MCGRAW-HILL COMPANIES, N C .

455 Lexington Avenue, 2gtb Floor F e w York, New York 10017 Say W, Eisenhofer, Esq. Geoffrey C. Jawis, Esq. Hung G. Ta, Esq. Telephone: (646) 722-8500 Facsimile: (646) 722-850 1

TABLE OF CONTENTS

PARTIES ....................................................................................................................................... -6

FACTUAL ALLEGATIONS ........................................................................................................ 11

11.

THE JU3Y PLAYERS IN AN SJY-LITE T W Y SACTION ............................................. 12

GOLDEN KEY ............................................................................................................................... 16

1.

BARCLAYS MARKETS GOLDEN KEY TO ODD0 A N D OTHER INVESTORS ...................................................................................................................... 16A.

The Main Features Of Golden Key ...................................................................... 7The CollateraI Management Agreement ............................................................... -201. 2.

B.

General Duties O f And Services To Be Provided By Avendis ................ 21Standard Of Care To Be Excrcised By Avendis ....................................... 22

C.

Oddo Purchases $US30 Million Of Golden Key's Mezzanine Capital Notes ................................................................................................................... 23

II.

AVEKDIS BREACHED ITS FIDUCIARY DUTIES TO GOLDEN K l7Y'S INVESTORS ...................................................................................................................... 24A.

Avendis Occupied A Position As Fiduciary Towards Golden Kcy's Investors................................................................................................................ -24Barclays and Avendis Enter Into A Sclleme T o Sell Toxic Securities To Golden Key .................... ................................................................................... 25

R.C.

. .

In Order To Execute Their Scherne. Barclays And Avendis First Increase The Maximum Size Of Golden Key's Investment Portfoliu ................................. 27

D.

No Rational Economic Purpose Could Justifjr Expanding Golden Key's Investment Portfolio By Purchasing More Sub-prime Sccurjties 3 July n 2007. And Both Barclays And A17endis Knew Of The Risks ................................ 29

E.F.111.

Avendis Causes Golden Key To Acquire Impaired Sub-prime Securities At Inflated Prices From Rarclays' Warehouse ..................... . . ............................ 32Avendis Breached Its Fiduciary Duties To Golden Key's Investors ..................... 33

BARCLAYS AND S&P AIDED AN11 ABETTED AVENDIS' BREACHES OF FIDUCIARY DUTY ..................... . . ............................................................................... 35 A.Barclays' CompIicity In Avendis' Breaches of Fiduciary Duty ............................ 35

TV.

GOT,TIEN KEY COLLAPSES DUE TO ITS OYE.ROUS DEBT -4WD THE PLUMMETING VALUE OF ITS TNVESTMEYT PORTFOLIIl ....................................39

I.

BARCLAYS MARKETS MAWSAIL TO ODD0 AND OTHER INVESTORS ............ 41A. 'The Main Featurcs Of The Mainsail Transaction .................................................. 42The Solent Management Agreement ..................................................................46

B.

I.2.3.

General Duties Of

Services To Be Provided By Solent .................... 46

Solent's Duty To Manage The Swing Tine Facility and the Liquidity Facility ....................... ........................................................................ ... 47 Standard Or Care To Be Exercised By Solent .......................................... 48

C.

Oddo Purchases $US20 Million Of Mainsail's Mezzanirie Capital Notes ............48

I1.

SOLENT BREACHED ITS FDUCIARY Jlll'fIES TO MAINSAIL'S INVESTORS...................................................................................................................... 49

fi.

Solent Occupied A Pnsitian As Fiduciary Towards Mainsail's Investors............. 49In Breach Of Its Fiduciary Duties. Solent Conspired With Bxc-claysTo Sell Impaired Warelloused Securities To Mainsail In April and July 2007.................. 50

B.C.

In Further Breach Of Its Fiduciary Duties. Solent Failed To Take AllNecessary Steps To Draw Upon The Emergency Swing Line And Liquidity Facilities ................................................................................................. 54

III.

HARCT. AYS AND S&P AiDEI) AND ABETTED SOLENT'S BREACHES OF FIDUCIARY DUTY .......................................................................................................... 56A.

Rarclays' Complicity In Solent's Breaches of Fiduciary Duty ............................. 56

B.IV.

S&P's Complicity In Solent's Breaches Of Fiduciary Duly ................................ .58

DUE TO ITS MASSTVE DEBT BURC)F,N AND THE PLUMMETING VALUE OF ITS INVESTMENTS, MAINSAIL COLLAPSES ...................................................... 60

CAlJSES OF ACTION .................................................................................................................. 61FIRST CAUSE OF ACTION (Aiding And Abetting Breach of Fiduciary Duty Against Rarclays And S&P In Connection With Golden Key) .............................1 6SECOND CAUSE OF ACTION (Tortious Interference With Contract Against narclays Tn Connection With Goldcn Key) .......................................................... -63

THIRD CAUSE OF ACTION (Breach of Fidu~iary Duty Against Defendants Solent Capital And Solent Jcrsey In Connection With Mainsail) ......................... 64FOURTH CAUSE OF ACTION (Aiding And Abetting Breach of Fiduciary Duty Against Barclays and S&P In Connection With Mainsail).................................... 65FIFTH CAUSE OF ACTION (Torhous Interference With Contract Against Barclays in Connection With Mainsail) ......................................6

6

Ill

...

l

L

1.

Plaintiff Oddo Asset Management ("Oddo" or "Plaintiff'), by its attorneys, Grant

& Eisenhofer, P.A., for its Complaint against Defendants Barclays Bank PLC ("Barclays PLC");

Barclays Capital, Tnc. ("mcjays Capital", and together wilh Barclays PLC, "Rarclays"); The McGra~v-Hill Companies, Inc. ('-McGra~v-Hill"); Solent Capital Partners IJ,P ("SolentCapital"); and Solent Capital (Jersey) Limited ("Solent Jersev", and together with Solcnt Capital, "Solent"), alleges as follows:

NATURE OF ACTION

2.

This aciion arises from the collapse of two structured investment vehicles, Golden

T Key Ltd. ("Golden Kev") and Mainsail I Ltd. ("Mainsail") that Barclays created and structuredin 2005 and 2006. Golden Key and Mainsail were examples of "SIV-Lites", essentially, highlyleveraged investment funds that made money by borrowing in the short-term debt market and which then used that money to iwcst in interest rate bearing investments, such as high-quality

mortgage-backed securities.3.

Between 2005 and 2006, Oddo invested a total of $US50 rnilliorl in Golden KeyBy August 2007, however, both Golden Key and Mlinsail were effectively

and Mainsail.

"frozen" and suspended from further activity after their investment portfolios had plummeted invalue, and they were no longer able to borrow against their assets. In April of this year, thc two

S1V-Lites were put into receivership. Investors like Oddu have lost lnillions of doltars wlzichthey entrusted to these investment vehicles.4.

The collapse of both Golden Key and Mainsail would not havc happened but for

the egregious and self-serving misconduct of the various parties who created, arranged, managed and issued credit ratjngs for these investil~e~lt vehicles. Indced, virtually all of the parties involved in Golden Key and Mainsail have now comc under some form of regulatory scrutiny.

5.

Barclays, through its investment banking division, Barclays Capital, was at the

heart of the events described in this Complaint. Born about a decade ago, Barclays Capitalstarted out as a debt-focusd investment banking operation. Since then, Rarclays Capital has

grown rapidly, so rapidly that: in recent years, il had become the engine o f Rarclay's growth. In

the first half of 2007, for example, Barclays Capital's profits jumped 33% to 1.7 billion,accounting for an astonishing 4096 of Barclays' overall earnings. And for thc past seven years,

Bardays Capital has been the world's fastest growing jnvcshncnt bank.6.

The success of narclay? Capital lay in its ability to quickly identify and pioneer

new markets and new products. Rased on its prior expertise in debt markets, Barclays Capital

pushcd into cxotic invcstmcnt vchiclcs which BarcIays then sold to invewors, generatingextremely lucrative invcstmcnt banking fees for Barclays in the process. One such investment vehicle was the STV-Lite, an esoteric investment vehicle that Barclays' employees concocled. 7.

Edward Cahill ("'Cahill") is a 34-year-old investment banker who, until his widely

publicized resignation last year, was employed by Barclays Capital as ''European Head ofCollateralized Debt Obligations", reportedly earning close lo f 1 million a year. Between 2005and 2007, Cahill and his team at Barclays created and structured at least four SSIV-L,ites, all of

which either subsequently collapsed or were bailed out. The four SW-1,ites were Golden Kcy

and Mainsail, both of which collapsed in August 2007, and are the subject of thls Complaint;Cairn High Grade Funding I; ari S1V-Lite created by narclays in Jmuq 2006, which wassubsequently bailed out and restructured by Barclays in 2007; and Sachscn Fundjng 1, an SIVT.ite that was set up by Rarclays in May 2007 for its client Sachsen LB, lkree months before Sachsen T.B collapsed, resulting in the SIV-Lite bcing bailed out by Sachsen LB's eventual

acquirer. Upon information and belief, Cahill and his Barclays team structured other SIV-Liteswhich have run into dficulty .

8.

When setting up each of the Golden Key and Mainsail SIV-Lites, Basclays

arranged for the appointment of "collateral managers" to run the SIV-Lites. These managers managed the jnvestment portfolios as well as the borrowings of the S1V-Lites. AvcndisFinancial Services Limited f L A v . e m )(which is now in liquidaiion) was appointed manager of

Golden Key, and Solent was appointed manager of Mainsail. Ostensjbly, Avcndis and Solentwere fiduciaries who owed the highest duty to he SXV-Lites and their investors. However, as itturns out, these managers pIaced their luyalty to Barclays and their sclf-interest in maintaining their profitable business relationship with Barclays above thcir loydties to the investors in theSIV-Lites.9.

In particular, in the first half of 2007, both Avendis and Solent conspired with

Barclays to transfer impaired securities backed by toxic, U.S. sub-prime mortgages to Golden

Key and Mainsail respectively. Thcse securities were securities that Barclays had cornrnellced"warehousing" sometime in January 2007 or earlier, in anticipation of their being sold at a profitto Golden Key and Mainsail. Howevex, during the first half or 2007, as the U.S. sub-prime

mortgagc market reached a crisis, Barclays realized that the value of these assets was pluinmcting, and that it needed to off-load the securities quickly to avoid recording a loss onthem. 10.

Barclays came up with the idea to transfer these securities to Golden Key and

Mainsail at the price it cost Barclays to acquire the securities, even though market values for thesecurities had fallcn significantly. Barcla!senIisted the help of Avcndis and Solent, who were

willing participants because they did not wish to jeopardi7e thcir relationships with Barclays. By

means of various machinations in the first half of 2007, Barclays in conjunction with Avendis and Solent caused each of Golden Key and blainsail to first raise aclditionaI funding and then touse this additional funding to expand their investment portfoIios and purchase the impaired

warehoused securities from Barclays at inflated prices. In short, having set up both SiV-Litcs and promuled them as desirable investments to investors, Darclays procccdcd to use them as adumping gound for ioxic asseLs that Barclays needed to quickly j ettison.

11.

Defendant McGraw-Hill also played a pivotal role in Barclays' scheme, through

the involvemerlt of its Firlarlcial Services business disision, 1%-hich conducted business under thename Standard k Poor's (the Financial Services busincss division shall be referred to hereinafteras

"S&P"). When setting up Golden Key and Mainsail, Barclays retained S&P to issue ratings

for the two investment vehicles. Later, when Golden Key and MainsaiI embarked on raising

additional funding, including more debt, to finance the expansion of their investment portfolios,

S&P was required by the governing documents of the two SIV-Lites to confirm ihe ratings forboth SIV-Lites. In each instance, S&P confirmed the ratings fur Ihe SIV-Lites. Without S&P's

confirmation of these ratings, both Golden Key and Mainsail would not have been permitted to incur more debt and purchase the warehoused securilies from Barclays.12.

S&P'sconfimationsofGoldenKeyandMainsail~sratings~Terefdsc. Among

other things: S&P knew that Barclays was dumping the impaired warehoused securities at inflated prices on Golden Key and Mainsail, and that the ratings of both Golden Key andMainvail would be negatively impacted as a result of acquiring thcse securities. Thai S&P's

ratings were woefully ii~accurateis demonstrated by the fact that, barely a month after itconfinned the ratings of both Golden Key and Mainsail in July 2007, S&P issued a report

downgrading the xatings of both Golden Key and Mainsail by a massive 17 notches, thereby

sealing the fates of the tno SIV-Lites.13.

S&P acted as it did because BarcIays was an irnporlant repeat customer. S&P

was retained by Rarclays to provide ratings for all four SIV-Lites created by Barclays and whichsubsequently got into trouble-Golden Key, MainsaiI, Sachsen Funding 1 and Cairn High Gradc

Funding I. For its work, S&P derived quick m d significant fees, which S&P did not wish tojeopardize. In this fashion, S&P abandoned its professional standards and placed its own selfinterest above the interests of the very people who relied and depcndcd on S&P's ratings,namely, the inveslors in Golden Key and Mainsail.14.

Tt is now widely ackno\vledged that the sub-prime crisis and the wider credit crjsis

could not Imve happened had it not been for the collective failure of ratings agencies such as

S&P, and their complete abdication of proper analysis to the interests of their investmentbanking clients. These agencies played critical roles as gatekeepers, bestowing ratings on vast

amounts of securities, m7hich ratings mere then relied upon by investors when h e y made their

investment decisions. The ratings agencies assumed an especially imporlant role in the lastdecade, with the explosion of structured financing transactions (such as Golden Key and Mainsail).

15.

However, as has now come to light, the ratings issucd by the rating agencies were

in fact tainted because the rating agencies collabora~edwith their investment banhng clients

when issuing the ratings. The rating agencies sougli~ please thejr banking clients because the to banks were important repeat cuslomers, and providing ratings for complicated strucfured financetransactions generated significant rees for the rating agencies. In addition, the investment banks

only pajd the rating agencies if they delivered the desired ratings. Thus, while the profits of the

rating agencies soared in the last decade as a result af their ratings business, the ratings theyissued became increasingly ~uueliable.16.

Jn slim, and m set forth in greater detail below, the results of Defendants' actions

were disastrous for Gnlden and Mainsail and thcir investors.

By causing Golden Key and

Mainsail to purchasc thc toxic sccurities from Rarclags at inflated prices, Defendants caused thetwo SIV-1,itcs to suffer largc and immediate losses. Investors in Golden Key and Mainsail have

lost tcns of millions of dollars as a consequence. PARTIES17.

Plaintiff Oddo is a leading independent asset management company founded in

1979 and based in Paris, France. Oddo offers more than 20 different fund products to more than 350 institutional clients, including mid-cap equity funds, large-cap equity funds, "themed" equity

funds, "directional'! funds and dynamic money market funds. As af the end of 2006, Oddomanaged approximately 16.6 billion i asseis. Oddo is a wl~olly-ownedsubsidiary of Oddo et n

Cie, 1he largest independent finance, investment and advisory company in France, with a historydating back 150 years.

18.

Defendmt Barclays PLC is a public limited company incorporated under the laws

of England and Wales, with its registered head officc at 1 Churchill Place, London El4 5HP.

Bxclays PLC is a major global financial sen-ices provider engaged in retail and commercial banking, credit cards, investment b d n g and wealth management. It operates i over 50 n countries and employs 135,000 pcoplc. Barclays PLC maintains a branch office a1 200 Park

Avenue New York, New York I 0 16G.19.

Barclays PLC conducts significant busincss in the United States, including the

State of New York. According to Barclays PLC's website, "Barclays is autl~orjzed regulated and

by the Financial Services Authority and undertakes US securities business in the name of its

wholly-owned subsidiary Barclays Capital Inc., a SlPC and h-ASD member." Barclays PT,C also provides asset management services in the United States tllrough Rarclays Global Investors,N.A. and other global affiliates of Barclays PLC.Lrl

addition, Barclays PLC sells exchange

traded funds in the United States.

20.

Defendant Barclays Capital is a company incorporated under thc laws of

Coimecticut, wid1 its headquarters and principal placc of business at 200 Park Avenue New

York, New York 10166. Bnsclays Capital is 1013% owncd by Bardays PLC and operates as theinvestment banking division nf Rarclays PLC. Bardays Capital is a U.S. registered securities

brokcr-dcalcr and hturcs commissjon merchant. Barclays Capital conducts significant businessin thc Unitcd Statcs, including thc Statc of New York, performing activities and offering services

and products such as the trading of bonds, commodities, credit products, equity derivatives, and foreign exchange; leveragcd finance; loans; private equity; and securitization.

21.

Defendant McGraw-Hill js a publicly traded company incorporated under the

laws of New York that provides information and experlise to finatlcial markets, educationalinstitutions, businesses and consumers around the globe. McGraw-Hill's corporate hcadquartersare Iocated at 1221 Avenue of the Americas, New York, New York 1 0020-1095. McGraw-Hillconducts business through three business divisions, including SBP. S&P is the world's leading

provider of credil ratings, indices (such as the S&P 500 stock benchmark index), risk evaluation,itn~estmer~t research arid data. S&P conducts significant business in the Slate of New York andjs headquartered at 55 Water Street, New York, New York 1004 1. S&P employs approximately

8,500 employees located jn 23 countries and markets.

I

22.

Tn recent decades, S&P has assumed an increasingly significml role in the

financial industry. As S&P claims on its website: '-[als financial markets grow rnvre complex, the independent analysis, critical thinking, opinions, news and data offered by Standard & Poor'sare an integral part of the global financial infrastructure." So integrated is S&P in all aspects of-

the financial industry that, according to S&P, over $1.5 trillion in investment assets is nowdirectly tied to S&P indzxes and more than $5 trillion is benchmarked to S&1' indices-morc

than all other index providers combined.

In addition, according to S&P, the total amount of

outstandillg debt rated by S8cP globally is approximately US$32 trillion, spread over 100countries. Tn 2007 alone, S&P published more than 5 10,000 ratings, including new and rcvised

ratings. 23.

Dcfcndant Solcnt Capital is a limited liability partnership organized in England

and Wales. Its registered office is located at 20-22 Redford Row, London, UrCIR 45, United

Kingdom. Solent Capital is in the business of providing advisory, portfolio monitoring andinformation services to portfolio managers. According to its website, Solent Capital specializes in advising on credit assets. Solent Capital's principals includc Tim Gledhill, Jonathan Laredoand Geoff Srnailes. Solent Capital is authorized and regulated in the United Kingdom by the

Financial Sen7ices Authority.24.

Defendant Solent Jersey is a limited liabiliiy company incorporated in Jersey and

with its registered oIfice a1 Whiteley Chambers, Dun Street, St. Helier, Jersey JEl 9M7G. SolentJersey is affilialed with Sulent Capilal.

JCTRTSDICTION AND VENUE25.

This Coui-t has personal jurisdiction over all of the Defendants pursuant to New[Zules

York Civil Practice I ,aw and

~'C:PT,R'')

5

301.

Each of the Defendants conducts

8

continuous and systematic business in Ihe State of Yew York. Defendant Barclays Capital has its headquarters and principal place of business at 200 Park Avenue New York, New York 10166and conducts much

of jts business out of that ofice, including securitiration (over 100

professionals in the Asset Securitization Group working out of Barclays Capital's New York and London offices) real estate financing (over 60 professionals in the U.S. K c d Estate Capital

Markets Group based in New York, Chicaga and Los Angeles); equities and equity derivatives(dedicated trading and structuring operations in New York providing services to private banks.investmeilt managers and corporate institutions); foreign exchangc trading and risk management

(professionals in New York servicing hedge funds, active real moncy accounts and retail brokerdealers); and emerging markers expertise and serviccs (over 200 dedicated professionals operating out of New York, Lolldon and Singapore, as well as other regional offices). DefendantRarclays PT,C also maintains corporate offices at 200 Park Avenue, New York, New York10166, and i s a major global financial scrvices provider providing investment banking services,

asset managcmcnt scrviccs and exchange-traded funds through its office in Kew York. Solent

managcs vmous invcstmcnt products, including "coIlateralized debt obligations" and structuredcrcdit hedge funds, on behalf of investors all over the world, incIuding in the State of Ncw York.

To solicit investors for these products, Solent causes "inTomation memnranda", "marketingbooks" and other literature describing Solent and its managernent expertise to be distributed inthe United States. including in the State of New York. Defendant McCiraw-Hill is headquarteredat 1221 Avenue of the Americas, New York, New York 10020- 1 095, and provides informationand expertise, inchding ratings services, in the State of'New York. ?'his Court also has personal

jurisdiction over Defendant McGraw-Hill pursuant to CI'LRincorporated in this State.

3 301

because McGraw-Hill is

26.

Jn addition, the Court has personal jurisdiction over Barclays and Solent under

CPLR 302 because Barclays and Solent transacted business in the S M e of New York inconnection with the matters at issue in this action. Among other activities, Barclays and Solent

solicited investor interest for Golden Key and Mainsail in the State of New York and transacted

business with The Bank of New York, through its office located at 101 Barclay Strcet, New York, New York 10286 in connection with the rnatters alleged in this action. As discussedbelour, The Bank of New York was the "security trustee" who rcprcsented the interests of investors in both Golden Key and Mainsail. Alternatively, the Court has personal jurisdictionover Barclays and Solent under CPLR

5

302 because both Defendants committed torticlus xcts

outside New York that caused injury to persons and property within New York. Barclays and

Solent regularly conduct and solicit business in Ncw York. Both Barclays and Solent alsoshould reasonably have expected thcir tortious acts to have consequences in New York a dderive substantial revenue from interstate and/or international commerce.

27.28.

Venue is proper in this county pursuant to CPLR Ij 503.

New York's courts are the appropriate forum for resoIving this action because

each of the contracts governing Plaintiff Oddo's investments in Golden Key and Mainsail

provide that the contracts are governed by and to be consirued in accordance with the laws of thcState of New York (see paragraphs 64 and 134 irzfia).

FACTUAL ALLEGATIONSSI V-LLTES GENERALLY

I.

HOW AN SIV-LITE WORKS29.An SIV-Litc is a typc of structured investment vehicle. It is a distinct legal entity,

usually incorporated in the Cayman Islands, set up to buy financial instruments that generate monthIy or other periodic revenue streams, such as mortgage-backed securities or other asset-

backed securities. An SIV-Lite obtains the money to purchase these financial instruments by

raising equity and by borrowing.30.First, investors are found to provide the "equity" for h c SIV-Lite.These

investors purchase "capital notes" that are issued by the SIV-Lite. These illvestors can therefore

be thought of as the equity-holders of the SIV-Lite. The SIV-Lite is known as the "issuer".

3 1.

Second, in addition to the equity raised from the capital note investors, the SIV-

Lite will borrow furids. The S1V-Lite issues "mezzanine capital notes": a form of debt that ranksjust above the capital notes in terms of priority of dstrjbutions from the SIV-Lite. Themezzanine capital notes pay a set rate of return. Typically, thc mezzanine debt comprises only asmall portion of the overall borrowings o f the SIV-Lite.

32.market.

T'he SIV-Lite will borrow thc bulk of its funds in the short term commercial paper

Short tcrm cornmcrcial paper is simply promissory notes issued by a borrowing

corporation, in this case, the SIV-Lite. Under the promissory notes, the SXV-Lite promises l opay back its lenders at a certain date in the hture. In the case of short term commercial paper,the SIV-Lite promises to pay back the borrowed funds after only a short period of time, usually

90 days. At that point, the promissory note matures, and the SIV-tilt: is required to re-borrow inthe short term commercial paper market once again. In industry parlance, the SIV-Lite has to

"roll over" its debt approximately ;very 90 days.

Corl~nlercialpaper debt is senior to the

mezzanine capital debt and therefore ranks highcst in terms of priority of distributions from the SIV-Lite.33.

Using the money raised from the equity investors and from issuing debt, the SIV-

Lite proceeds to invest in high-quality mortgage-backed securities and other financialinstruments. The underlying objective is to ensure that the high-quality financial instruments

purchased by the SIV-Lite generate a higher rate of return than the SIV-Lite has to pay the holders of the commercial paper and mezzanine capital deb[, hereby generating a profit for theequity investors.34.

The SIV-Lite has a finite life. In other words, under its organizing documents, thc

SIV-Lite is designed to cease operations aner a nurrlher of years. The SZV-Lite will usually also be of finite size in terms of the equity and debt that it can raise and, thercforc, the m o u n t ofassets that it can pilrclase. However: as was the case with Golden Key, the organizing

documents may pennit the SJY-Lite to increase its maximum size subject to various, specific

conditions.TI.

THE KEY PIJAYERSTN AN STV-LITE 'J'FL4NSACTIOX35 . Apart from the equity investors and the holders of the mezzanine capital notes and

commercial paper notes, there are several other key players in every STY-Lite transaction.36.First, an investment bank, k n u ~ n the "arranger", plays the central role in an as

SIV-Lite deal by setting up and structuring the entire transaction. Thc arranger incorporates the SIV-Litc as a special purpose entity, usually in the Cayman Islands, to purchase and own the portfolio of asset-backed securities and the cash flows they generate. The arranger determines the si7e of the STV-Tile, and selects the debt-to-cquity ratio for the structure. 'The manger alsoprcparcs an "information memorandum" for investors, which serves a similar funclivn to aprospectus.

37.

Apart from structuring the entire transaction, the arranger purchases the initial

portfolio of securities for the SIV-Lite, in a process called "warehousing". Months befors theSIV-Lite transaction closes, i l ~ e arranger will begin warehousing assets to be eventually sold to

the SIV-Lite. Even by the closing date of the STV-Lite, the arranger often will not havccompleted the construction of the SIV-Lite's inves~ment portfolio. Accordingly, thc construction

of the SIV-Lite's investment portfolio may extend for seveml mnnths fbllowing the closing of

the SIV-Lite, a period known as the "ramp-up" peiiod. Once the portfolio is compleie, thearranger sells the entire portfolio lo the SIV-Litc. The arranger sccks to make a profit on the sale. However, until the portfolio is actually sold to the SIV-Litc, the arranger bears the risk of

holding the warehoused assets. For example, if the warehoused securities fall in value during theu~arehousing period, the arranger bears the losses.28.

During the life of the SlV-Litc, the manger may attempt to solicit the STV-Lite's

interest in expanding the size of its investment portfolio. Again, the arranger will warellouse

securities for a potential sale to the SIV-Lite months before the expansion actually l q ~ p e n s .Thearranger seeks to profit from the sale of he securities it pools but, just as before, bears the risk of

loss on the securities wkle they are being warehoused. I addition, if the SW-Lite ultimately ndeclines to expand its portfolio, the arranger will have to relain the warehoused securities on itsown books or sell the securities, for example, into another investment vehicle.

39.

Second. a separate party, the collateral manager (also known as an asset mantgerj

is responsible for overseeing the purchase ol; arid managing, the portfolio of asset-backedsecurities for the SIV-1,ite. The collateral manager may or may not be assisted by a separate

collateral advisor, usualfy an entity that is affiliated with the collateral manager. As part of itsmanagement functions, the collateral manager is responsible for maintaining the credit quality of

thc SIV-Litc's portfolio of invcstmcnts. The collateral manager's activities include makingtrades, reinvesting principal proceeds from maturing assets in the SIV-Lite, and maximizing

recovery rates when defaults on the SIV-Lite's portfolio of asset-backed securities occur. Before

an SIV-Lite is launched, the arranger will work with the collateral manager to detennine thetrading restrictions on how and when the collateral manager can sell any asset, and thelimitations on the ability of the collateral manager to change the asset class or credit rating

composition of tlze SIV-Lite's portfolio at differen1 times during the life of the S1V-Litc.Because an SIV-Lite's assets are managed by the coUatet-a1 manager, the S1V-Litc has little

function other t h n to hold the asset-backed instruments in which the SIV-Idtc invests.Functionally, therefore, the SIV-Lite is the equivalent of a corporate '.zombie7' that takes its

directions lorn he collateral manager.40.

Third; a security trustee is appointed to rcpresent the interests of the commercial

paper note-l~olders,the mez7anine capital note-holdcrs and capital note-holders. The security

trustee is granted a security interest in all the SIV-Lite's assets, and holds that security interesl in

trust for all of thc notc-holdcrs. Under certain conditions. when the SIV-Lite fails lo meetvarious financial covenants, thc sccurity trustee steps into the shoes of the SN-Lite and exercises the rights of the SlV-Lite with respect to the assets held by the SIV-Lite. Furlhermore, wl~cre the

collateral manager fails to adequately perform its obligations in managing

assets of the STV-

Lite, the security trustee may, at least on a temporary basis, relieve the manager of i t s duties and take over the management of the assets of the STV-Lite. The agreement by which the security

trustee is appointed may also outline the circumstarices under which the security trustee is to takc directions directly from the commercial paper note-holdcrs, mexzanine capital note-holders and capital nule-holders.

41.

Fourth. before the mczzmine capital notes and capital notes may be sold to

investors, a rating agency is rctaincd to issue credit ratings on the notes.

The arranger

collaborates with the rating agency to obtain the desired credit ratings for the notes. Investors

who purchase the notes trust in, and rely upon, the rating agencies to provide accurate ratingsbefore they purchase the notes. If the SJV-Lite undertakes an expansion of its investmentportfolio during its lifetime, the rating agency will be requested to confmn the ratings of the

S1V-Lite before each expansion.42.

Fifth, one or more persons may provide, in return for a fee paid by the SIV-Litc, aa11

"liquidity facility". A liquidity facility is esseniiallyIl~e SIV-Lite

emergency line of credit to be uscd by

if it

I-UIE

ir~tufinancing difficulty, for example; if the SIV-Lite is unable for any

reason to roll over its cummercial paper debt and obtain fresh commercial paper financing whenits existing promissory notes mature. In this manner, having a liquidity facility is functiondy

equivalent to adding another tranche to the capital structure of the SIV-Lite. Very importantly,all the participants in an SW-Lite transaction understand this to be the central purpose of the

liquidity facility. I~tdeed, S1V-Litc is usually able to obtain a high rating from a rating agency anonly because it has secured a liquidity facility. 43.

Sixth, security "deaIers" may be appointed to underwrite the rnczzstnine capital

notes and cdpitd notes offerings. These dealers purchase the notes offered by the SIV-Lite and

re-sell them to investors.44.

Seventh, in the case of an SW-Lite, the commer~id paper is not sold directly to

buyers, but is instead sold by the issuer to a commercial paper deaIer. The dealer thcn sclIs thepaper in the market at a profit. This dealer market for cominercial paper consists of large

securities f m s and subsidiaries of bank holding colnpanies.

45.

Eighth, an administrator is appinted by the SIV-Lite to act as the issuer's agent

in carrying out various administrative tasks, including issuing notices to note-holders, calculatingthe mark-to-market value of the investment portfolio and sending note-holders periodic valuaticlrl

reports:

and opening

and operating bank accounts in the name of the issuer.

GOLDEN KEY46.

In September 2005, Barclays crcatcd the SIV-Ljte called Golden Key. According

to Barclays, Golden Key would raise fimds by borrowing in the commercial paper market and by

issuing mezzanine capital notes and capital notes. These funds would then be used to purchase a

"[hligh quality, clean portfolio" of "RMBS [residential mortgage backed securities], Home

Equity Loans ... , Resi As and Resi B/Cs" with a minimum credit rating of Aa3/AA-. GoldenKey would be managed by Avendis who, according to the marketing materials, was aLL

[slpecialist asset management business with a core focus and competency in structured products

supported by diverse in-house product expertise across ABSIReaI Estaie/IG!CDO/MoneyMarkets".

I.

BARCLAYS MARKETS GOLDEN KEY TO O D D 0 AYD OTHER TNVESTOltS47.

On September 27, 2005, Matthieu 'radik, an employee of Barclays Capilal,

n contacted Oddo by email concerning the upcoming Golden Key deal. I his ernail, Tad2attached a "marketing book" produced by Barclays Capital for the Golden Key transaclion.48.

In the following months, 'l'adik continued to communicate with Oddo concerning

the Golden Key transaction. In October 2005, Tadii met with several OdJo employees regardingGolrlcri Key.

49. Key.

On November 9, 2005, Taclik serif Oddo the S&P "pre-sale report'' for Goldcn

In the prc-sale report, based on ii~forniatjnnas of Novembcr 8, 2005, S&P issued

preliminary ratings of A A A for the Tier 1 mezzanine capital notcs, and A4 for the Tier 2

mezzanine capital notes. S&P confirmed thcse ratings in a further letter to Edward Cahill of

Barclays on November 17, 2005.50. On November 14, 2005, Tadie sent Oddo, via email, an Information

Memorandum for the Golden Key transaction (the " a l d e n Key I M ) . The GoIden Key T is a M

252-page document which serves a similar function to a prospectus. It describes the Golden Key

SIV-IJte in specific detail. including the structure of the transaction, the parties to the transaction, and the contracts that govern their variuus relationships. The Golden Key 1M also sets forth the terms and conditions of the mezzanine capital notes and the capital notes. 'These

aspects of the transaction are discussed in greater dehil below.A.

THEMAIN FEATURES GOLDEN OF ICF,,YAsdcscribcdintheGofdenKeyIM.GoldenKeywou1dbefinancedbyissuiuga

51.

maximum amount of $US 1.5 billion of commercial paper, $US 107 rnilliurl of mezzanine capitalnotes (which was further divided into AAA-rated "Tier 1" mezzanine capital notes and AA-i-ated'i?

Irer 2" mezzanine capital notes), and $US41 million or capital notes. The aggregate maximum

,.

size of Golden Key was therefore $US 1.648 billion.52.transaction:a.

The Golden Key Ihf identified and described the following key parties to the

The Issuer was Golden Key, an exempted company with limited liability

incorporated and registered on July 6, 2005 under the laws of thc Cayman Islands. In addition to

the Issuer; there was a Co-Issuer called Golden Key U.S. LLC, a limited liability companyorgani7ed on November 1 ,200.5 under the laws of the State of Delaware. Golden Key was the 0 sole member o f the Co-Tssucr. The sole busincss of the Co-Issuer was to issue (in conjuncliun

with thc Issucrj and scll Unitcd States commercial paper.

b.

The Collateral Manager was Avendis, a private limited company

incorporated in Guernsey on August 23, 2005 and regulated by the Guenlsey Financial Senices Commission. Avendis was incorporated solely for the purpose of managing the assets of Golden

Key. Under a Collateral Management Agreemenl with Golden Key (described in grcatcr detailbelow in paragraphs 54 lo 61), Avendis agreed to manage all the asscts to be acquired by Golden

Key, and to manage he financing uf these illvestments through thc issue of commercial paper.mezzanu~ecapital t~otesand capital notes. According to the Golden Key IM. Avendis is

affiliated with Asiendis Capital SA, a pivatel>> held Swiss investment advisory fr founded by im

Yannis Bilquez ("Bilquez") in Febmasq- 2001. Bilqucz and members of his family own themajority of the issued share capital of Avcndis. Both Avendis and Avendis Capital SA share keydirectors and employees, including Bilqucz. In November 2007, Bilquez was arrested by Swiss

authorities on chargcs of embezzling investors' money and breach of trust.subscqucntIp cntered into liquidation.c.

Avendis

The Arranger of the Golden Key transaction was Barclays. According to

the Golden Key TM, Barclays, in its capacity as Arranger, "has provided structuring advice to the

Issuer and the Collateral Manager in relation to the [cornrnercial papcr notes, mezzanine capitalnotes and capital notes]."As consideration for providing this structuring advice, Barclays

received a "structuring fee" from the Issuer.d.

Barclays also a p e d to act as the "Swing Line Provider" and the

"Liquidity Provider". As the Swing Line and Liquidity Provider, Barclays agreed to provide Golden Key with a committed multicurrcncy revolving "swing line" credit facility and aconunitted rrl~dticurrencyrevolving "I jquidi ty credit facility, both to be used as additional,

emergency credit lines.

T return for inaking these facilities available, Barclays earned n

significant fees from Golden Key.e.

In addition to its roles as arranger and provider of the various liquidity

facilities, Barclays acted as a "Warehousing Party".

As described in the Golden Key IM,

Avendis made arrangements on behalf of Golden Key with various persons (each, a

"Warehousing Party'") pursuant to which the Warehousing Parties agreed to acquire specifiedinvestments: warehouse them and then translcr the assets to Golden Key to form part of itsinvestment portfolio. In consideration for pro\ iding these warehousing services, Barclays was

paid significant fees by Golden Key.

f.

Finally, Barclays acted

a 5

the dealer for the commercial paper, and the

lnezzrtlline capital notes and capital notes. As the dealer, Barclays carned additional profits fromeach sale of commercial paper and horn every salc of mezzanine capita1 notes and capital notes.

g.

Pursuant to a CollateraI Trust and Security Agreement, ctated November

18, 2005, the Sccurity Trustee was The Bank of New York, operating through its office at 101

Barclay Streel, New York, New York 10286.

h.

The rating agency retained to rate the mezzanine cdpital notes and the

capital notes was S&P.

i.

The Administrator was QSR Management Limited, a u~holly-om~ned

subsidiary of The Bank of New York established in Augus~ 2002 and based at 34thFloor, One

Canada Square, London El4 5AL.

53.

The diagram below depicls h e structure of the Golden Key SIV-Lite and its main

Sralures as described above:

ARRANGER: BARCLAYS

sAssct Backed Commercial Pa>@( [ A - I + I P-11 Barclays Capital -Lead CP Dealer

I

Avendis

I

Managemenl Fees

AAAlA.4Pri-narily U.S.

Interest

I

I

Issue Notes

RMBS PortfolioProceeds

Proceeds

LB54.

Secu~ily Trustee

I

Securities Dealer: Barckys

THE C~OI,I,ATERAI.MAY AGEMENT AGREEMENT

One of the critica1 agreements governing the operation of the Golden Key STV-

Lite was the Collateral Management Agreemenl, dated November 18: 2005, between Goldcn

Key, Golden Key U.S. LLC and Avendis ( h e "Avendis Management Agreement").

The

Avendis Matjagerner~tAgreement provides that it is governed by and to be construed inaccordance with the Iaws of New York.

55.

Under the Awndis Management Agreement, Avendis agrced to manage Golden

Key's investments and undertake other functions in rctum for management fees. payable by

1 11!!

OSR manage:^ enI Ltd. Administrator

Capita; NotesSecurities Dealer: BarclaysL---__-----I -----A-

-

----A

B.123.

THESOLENT MANAGEMENT AGREEMEN'I'One of the key agreements in the Mainsail transaction was the SoIent

Management Agreement. Under the Solent Management Agreement, in return for a managementfee equal io 0.07% per arrn~m~ the anlolint under management, as well as reimbursemen1 lur all of of its expenses, Solent agreed tn provide various management services to Mainsail, including theservices described below.

1.124.

General Duties Of And Services To Be Provided By Solent

Very broadly, under the Solent Management Agreement, Solent agrced to advise

and assist Mainsail with respect to two functions, achieving Mainsail's investment objectives and

achieving Mainsail's funding objectives.125.

With respect to achieving Mai~isail'sjllvestmel~tobjectives, Section 4.2(a)(v)

of

the Sofent Management Agreement required Solent to identify assets for Mainsail's investment

portfolio lhat satisfied Mainsai 1's "Investment El jgibility Criteria". Mainsail was only pcrmiikd

to invesl iri assets that satisfied the Investment Eligibility Criteria. The Investment EligibilityCriteria are set forth in Scl~ed~lle to the Collateral Management Agreement, and fa11 into 3 calegories. 126.

First, a putative invcstmcnt must satisfy the "Specific Investment Eligibility

Criteria". These include restrictions on the types of instruments that c n be acquired (eligiblc a investments includc rcsidcntial mortgage-backed securities, cotnrnercial mortgage-backed

securities, assct-backcd securities and collateralized debt obligation securities); the place of origination of the assets underlying the securities; the maturity of the securities; and the rating ofthe securities. As to the rating, the Solent hlanagemellt Agrcenient requjrcd that the instrumentmust have a minimum public rating of at least AA- by S&l'at

the time of acquisition by

Mainsail. Second, immediately after Mainsail acquires an investment, Mainsail's entire portfolioof investments must satisfy the "Portfolio Specific Criteria". These Portfolio Specific Criteria

include a restriction that not more than 55% of the total portfolio can corlsist of instruments rated

below AAA by S&P,

f 27.

Subject to the satisfaction of these Iwo categories o f Investment Eljgibility

Criteria, Solent was required to acquire and dispose of irlvestinents on hehdf of Mainsail, to

monitor Mainsail's portfolio of investments, and to determine my rights and remedies ofMainsail with respect to each of the investments acquired for Mainsail's portfolio.128.

hTithrespect to Mainsail's fundjng objectives, under Scction 4.2(ij of the Solent

Managemelit Agreenlerlt, Solerlt agreed to advise and assist MainsaiI in the issuance of

Eurodollar and US dollar-denominated commercial papcr notes, mezzanine capital notes and

capital nates. The Solent Management Agrecmsnt imposed certain restrictions. For example,under Section 8.5, Solent could not causc Mainsail to issue any mezzanine capital notes urlless,immcdiatcly upon thc issuance of the mezzanine capitaf notes, the Tier 1 me~zanine capital ilntes rctaincd a rating not lower than A4+ and the Tier 2 mezzanine capital nules retained a rating of not lower than AA-. Further, Section 8.7 required Solent to use all reasonable ef'forts to enqurc

that each of the commercial paper notes, nlczzanine capital notes and capital notes maintainedthe rating assigned to them on their respective issuance dates.2. 129. Solent's Duty To Manage The Swing Line Facility and the Liquidity Facility

Under Section 4.2(a)(vi) of the Solent Management Agreement, Solent agreed to

assist Mainsail by maintaining adequate liquidity for Mainsail, ir~cludillg determining whcn a drawing under the Suing Line Facility was necessary, and by making requests to Barclays for

advances under the Swing Line Facjlity if necessary.

130.

Similarly, under Section 4.2(a)(vii), Solent agreed to assist Mainsail in ensuring

adequate liquidity by determining when a drawing under the Liquidity Facility was ncccssary,

and by making requests to Barclays for advances under the Liquidity Facility if necessary.3,

Standard Of Care To He Exercised By SoIent

131.

Under Section 13.1 ("Standard of Care") of the Solent Management Agreemenl,

Solent agreed to "perform all its responsibilitjcs and duties hereunder with reasonable care, ingood faith and i a manner generally consistent with practices and procedures customarily nfbllowed by. and exercising a standard of care and degree of skill and altentiori no less than

generaliy cxcrciscd by, 1nstitutionaI managers of international standing Ibr clients in respect ofassets of the nature and the character [of the investments acquired by the Issuer]." Section 13.1

further required Solcnt, to the extent not inconsistent with the above stmdxd of care, to "followits customary standards, policies and procedures and exercise a degree of shll and attenti011 noless than h a t which it exercises for itself and for other clients in substantially similar transactions

and otherwise in the conduct of ils asset management business fnr other clients."

C.132.

ODDO PURCHASES $us20 CAPITAL NOTES

MILLION OF MAINS,.IIL'S

MEZZANINE

On July 3, 2006, Oddo purchased $ITS20 million of Mainsail's AM-rated Tier 1

mez~anine notes fiom Barclays. Oddo based its decision to purchase upon. among other things:a. the stn~cture the STV-Lite as set forth in the Mainsail IM; of the fact that the collateral manager, Solent. would select jnvestrnents for

b.

Mainsail based on certain explicit, pre-determhed investment criteria;c.

S&P's lFLhA rating for the Tier 1 mezzanine capital notes; and the availability of emergency lines of credit in the form of the Swing Linc

d.

Facility and the Liquidity Facility.

133.

The contract evidencing the purchase of these notes is h e mezzanine capital notes

themselves. The mezzanine capital notes only contain certain specific "Final Tenns". The hulk

of the terms and conditions of mezzanine capital notes is actually set forth in the Mainsail IMunder "Terms and Conditions of the Mezzanine Noles" (the "Mainsail Mezzanine Tenns").

These Mainsail Mezzanine Terms are supplemented and amended by the specific "Final Terns".134. Among other provisions, Section 18 ("Governing Law and Jurisdiction") of the

Mainsail Mezzanine Tenns provides that the mezzanine capital notes are governed by and shall

be construed in accordance with the laws of New York.mezzanine capital notes hwe the benefit ofa

Section I(g) provides that the

I I

security intcrcst i the investments acquired by n

Mainsail. Section 6(a) provides that each mezzanine capital note shall bear interest on theprincipal amount ofthe note outstanding from time to time at the specified interest rate.

135.

On July 18, 2006, the dosing of the Mainsail transaction took place. Barclays

and Solcnt mrrc ablc to raise $1.5 billion for the SIV-Litc, consisting of $1.3275 billion incommercial paper notes; $90 million of Tier 1 mezzanine notes; $45 million of Tier 2 mwzanine notes; and $37.5 million of capital notes. TI, SOLENT BREACHED ITS FTDUCIARY DUTIES TO MAINSAIL'S IN VKSTORS

A.136.

SOLEXT OCCUP~ED POSITION FIDIJCIARY A AS TOWARDS MAINSAIL'S T~VESTORS.A t all times, by acting as Collateral Manager md Collateral Advisor to Mainsail,

and therefore by acting a Mainsail's agent and fiduciary, Solent not only owed duties to s

Mainsail, Solent atso simultaneously came under a fiduciary duty to the inveslors of Mainsailnamcly, thc mezzanine capital note holders (including Oddu) and the capital note holders. Mainsail's investors were induced to purchase their notes because of their knowledge that Solcnt

would manage and advise Mainsail.

hlainsail's jnvestors reposed confidence in Solcnt's

knowledge and cxpcrtisc, and cntrustcd Solcnt to conduct itself in the best interests of Mainsail.By agreeing to advjsc and manage Mainsail, Solent therefore undertook a fiduciary duty,

grounded in a hgher level of trust, to give advice for the benefit of all of Mainsail's investors.137.

For practical purposes, the scopr: of that fiduciary duty was at least as extensive as:

the scope of Solent's contractual obligations to Mainsail under the Solent ManagementAgreement.

138.

Although the Mainsail IM providcd that the maximum size of Mainsail would be

$4.519 billion, Mainsail launched in July 2006 with an initiaI portfolio of only $1.5 billion.While Solent was permitted to expand Mainsail's investment portfolio up to the maximum size, both the Mainsail T and the Solent Management Agreement required Solent to comply wit11 M

various preconditions, to act with due care and to otherwise act in the best interests of Mainsail

and its investors when effecting any proposed expansion.obligations.139.

Solent failed to observe these

In rzppro~irnalt.1~ January 2007, Barclays coilmenced warehousing sccurities with

the intention o r selling them al a profit to blainsail.

As with the Golden Kcy warehouse,

however, the securities in the Mainsail warehouse began to decline in reaction to the growing

turnloil in the credit markets. Barclays soon realizcd that it was sitting on significant losses on

its waselmused portfolio. As a consequence, Rarclays decided to use Mainsail- just like Golden

Key-as

a dumping ground for these toxic sccurities. Under this scheme, Mainsail would

cxpand its investment portfolio by purchasing the warehoused securities from Barclays at

inflated prices. In thjs manner, Barclaj~swould be able to avoid recording a loss securities.

0x1

these

>

,

140.

To acconlplish its schemc, Barclays found a willing collaborator in Solent. Like

Avendis, SclIent did not wish to jeopardize its relationship with Barclays because it sought to be appointed manager on future Basclays-arranged investment vehicles. In ad& tion, Solent hadadditional incentive to e-qand the sj7e of Mainsail to thc maximum because its management fee

of 0.07% was calcuiated based on thc mount of assets that Solent managed. Thus, as the size of

Mainsail's investment portfolio uTas expanded and more assets came under Solenl's

management, Solent earned morc and more management fees. Solent therelbre agreed toBxclays' scheme, placing its ohm interests above the interests of Mainsail and ils investors.141.

On or about April 25, 2007. Barclays and Solent arranged h e frrst of two

expansions by causing Mainsail to purchase an additional $400 rnillio~l sub-prime mortgagein

backed securities from Barclays' warehouse af par, despite the fact that these securities had

fallen significantly in value. To finance this expansion, Barclays and Solent caused Mainsail to borrow an additional $357 million in commercial paper debt and to raise an additional 524million of new Tier 1 rneuaninc capital notes, $12 million of Tier 2 mezzanine capital notes, and$10 million of capital notes.142.

Less t h b~ e mor~thslater, on or about July 16, 2007, Barclay-s and Solent e

arranged anotl~er expansion of Mainsail, this time, by causing Mainsail to purchase

approxhllately $132 illillion of sub-prime securities from Bnxclays' warehouse, again at par. Tofind this expansion, Barclays and Scllcnt caused Mainsail to borrow another $522 million in

commercial paper debt, and to issuc approximately $60 million in Tier 1 mezzanine capital notes, $30 million of Tier 2 mezzanine capital notes. and $25 million uf capital notes.143.

As m?th Golden Key, the decision to increase Mainsail's investments iT1 sub-prime

mortgage-backed securities made very little sense when the timing is considered. As describcd

51

I

,

,

above jn paragraphs 78 to 87, throughout thc first half of 2007. there were numerous, widely

publicized reports of the colIapse in the U S , sub-prime mortgage market. Barclays itself wasexperiencing the difficulties first-hand due to its involvement in the Bear S t e m s Enhanced

Fund.

In addition, Barclays and Solent closely tracked the ABX indices, which signaled

significant declines in the values of sub-prime mortgage-backed securitieh. Fiu-thennore, a a s specialist manager of credit assets, Solent mTaskeenly aware of all of this idormation. I-Iowever,

all of these concerns were cast aside i order to accomplish Barclays' objective of shifiing as n much loss from its oun books on to ~e STV-Lites that Barclays itself had created.144.

By purchasing the impaired sub-prime securilies at jnflated prices finm Barclays'

warehouse: Mainsail suffered an immediate quantifiable loss. For example, in thc case of the July 2007 expansion. Mainsail illcreased ils lotal obligatio~is $637 million ($522 million of bycommercial paper debt, and $1 15 millioil in inez7anine capital notcs and capital notes), but used

these run& to purchase assets that; inl~nediatelyafter acquisition; were valucd by Solent at only approximately $132 million, thus resulting in an instant loss to Mainsail of a massive $505

million. At the same time, Rarclays saved itsclf from having to record a loss in the sameamount.145.

h causing the April 2007 and July 2007 expansions as described above, Solentis, the holder of Mainsail's mezzanine

breached its fiduciary duties to Mainsail's investors-that capital notes and capitill notes-in the following respects.

146.

First, Solent breached its fiduciary duties o f loyalty and good faith by conspiring

with Barclays t o shift impaired securities a1 inflated prices off Barclays' own books and on to

Mainsail. causing instant losses to Mainsail's inveslors.

147.

Second, Solent breached its fiduciary duty of care by causing the two expansions

of Mainsail at the height of the credit crisis. IIere.

the scope of Solent's fiduciary duty of care is

at least as extensive as the scope of Solcnt's contractual duty of care under the SolentManagement A ~ e e m e n t .Under Section 13.1 of the Solent Management Agreement, Solent wasrequired to exercise a standard of care and degree of skill and attention that would be exercised by institutional managers of international standing for clients with respect to similar assets. By

the first half of 2007, the credit markets gIobally had already shown significant signs of stress.and the valuations for U.S. residential mortgage-backed securities were falljng precipitously, ashdicatcd by the ABX indiccs.

Instead of reducing Mainsail's investn~cntpositions and

curtailing it reliance on borrowings in the cummercial paper market, Solent did thc cxactopposite-increasing

Mainsail's investment in US, residential mortgage-backed securities, and

causing Mainsail l incur more comercia1 paper debt. Solent therefore breached its fiduciary oduty oCcare. 148.

Third, Solent breached its fiduciary dutics of care, loyalty and good faith by

causing Mainsail to acquire investnients that did not satisfy Mainsail's Investment EligibilityCriteria.I11 this

i~lstance; scope of Solent's duty of care was at least as extensive as Solent's the

contractual duty under Section 4.2[a)(v) of the Solent Management Agreement to ensure thai

Mainsail only acquired investments that satisfied its hvestment Eligibility Criteria. hmorlg other criteria, the investincnts acquired by Solent for Golden Key had to have a minimum public

rating of at least 1ZA- by S&P at the time of acquisition by Golden Key.

Further, after

acquisition of the investments, not more than 55% of the Lola1 portfolio could consist ofinstruments rated below AAA by S&P.

.

.

149.

By the time of the April expansion, bod1 SoIeilt and Barclays knew that the assets

warehoused by Barclays no longer possessed the nziriimum ratings required to satis@ Mainsail's

Twestment Eligibility Criteria. Despite this knomdedge, Solent breached its fiduciary duties bycausing Mainsail to purchase t h w-arellouscd securities. Alternatively, even if the warehousedsecurities still nnminally possessed the required minimum ratings at the time of transfer toMainsail, Solent breached i t s fiduciary duties by cngaging in ratings arbitrage in order to

circumvent the Tnvestment Eligibility Criteria.

That is, Solent and Barclays deliberately

cxploitcd thc fact that the ratings of thc warehoused securities had not yct factored in a likely downgrade by thc rating agcncics, and the fact that the credit quality of the warehoused assets

was on the lower end of the range implied by the nominal ratings.C.IN Flmwrrr~n BREACH ~ T S OF FIDUCIARY DV'TIES, SOLEYT FAILED TO TAKE ALLNECESSARY STEPS DRAW TO UPON THE EMERGENCY SW~NG LINE ANDLIQUIDITY FACILITI~S

150.

By approximately August 8, 2007, Mainsail was no longer able to roll over its

comrncrcial papcr except on an overnight basis. That is, instead of being able to borrow in the

commerci~llpapcr market on a term (for example, one or several months) basis, Mainsail was

only able to borrow comrncrcial paper overnight, to be repaid the next day.151. Barclays was aware of blainsail's difficulties.

Under the Liquidily Facility,

Mainsail only had a liquidity backing of $US53 1 million, approximately 25% of the value of its total investment portfolio. On or about Monday, August 13, 2007, Barclays and Solent beganworking to restructure Mainsail and to introduce an additional liquidity provider who would be

able to provide backstop liquidity for the remaining 75% of Mainsail's investment portfolio.

With a 100% liquidity backstop, Mainsail would llwe had access to emergency funding tofinance all of its inveshnen~s it would not be required to conduct a fire salc of its assets. and

152.

On Friday, August 17, 2007, at IO:00 a.m., Barclays conducted a conference call

for, among others. Mainsail's mezzanine capital and capital note-lmlders. During this call,

Adam Rarret of Barclays Capital ddjscussed the problem< facing Mainsail and mentioned "restructuring possibilities" as a solution. 153.As of August 17, 2007, however, Solent and Barclays still had not found an

additional liquidity provider.

Faced cvith increasing djfticulty in repaying its maturing

commercial paper debt, Mairisail was compelled to draw on its emergency lines of credit with

Barclays, namely. the Swing T,ine Facility and the Liquidity Facility. On the afternoon of August 17, 2007, Jonathan T,arcdo (a founding partner, Investment Director and Chief ExecutiveOf'fTcerof Solent Capital) contacted Barclnys to request a drawdown on the Liquidity FaciIity on

behdf of Mainsail. Barclays did not immediately respond. Instead, it waited until Suriday, August 19, 2007, at which time Barclays' response was to ask Solcnt to provide further information to justify its request for a drawdown under the Liquidity Facility. Solent complied with this request.154.

On Monday, August 20, 2007, Barclays explained that. based upon the

information supplied by Solent, it believed Mainsail was not entitled to draw from thc LiquidityFacility. In fact, Barclays w a s wrong. All the conditions for a valid drawdown had beensatisfied. Barclays had simply decided by this time that it wmld no longer support Mainsail in

Iight of h e declining credit market cortditions: and thereby expose itself to the potential for morelosses. This was despite the fact that Barclays had becn paid significant fees by Mainsail to make the Liquidity Facility available, the fact that Mainsail's ratings by S&P were predicated onthe availability of the J.iquidity Facility, and dcspitc: the fact that the mezzanine capital and

capital note-holders had purchased their notes based on the explicit comtnitment of Rarclays to

make the Liquidity Facility available to be used by Mainsail as an emergency line of credit.155.

Realizing that its actions were unjustified, Barclays did not decline to meet

Solent's drawdown request under the Liquidity Facilily. Instead, it asked Solent to L L ~ i t h d r ~ ~ ' ' its request. Despite the fact that Barclays' position was untenable, Solent acceded to this requestand failed to take any actions to enforce the Liquidity Facility against Bardays.

156.

Solenl's rail ure to exercise Mainsail's rights under the Liquidity Facility

constituted a breath of Solerlt's fiduciary obIigations of duc care and loyal6 to MainsaiI's mezzanine ccapilal nokholdcrs and capital notel~olders. With rcspect to the Liquidity Facility, thescope of Solent's fiduciary duties to Mainsail's invcstors was at least as extensive as the scope of

Soleilt ' s coiltractuaI duty to Mainsail under Scction 4.2(a)(vii) of the Solent ManagementAgreement. Under this provision, Solcnt ageed to maintain adequate liquidity fur Mainsail,

determine when a drawing undcr the Liquidjty Facility was necessary, and take such rlecessaxysteps for securing advances under the facility. When Barclays requested Sole~lt "withdraw-' to

the request for a drawdawn under the Liquidity Facility, Solent breached its fiduciary duties by

acceding to this request because it was more concerned abuut protectiilg its continuing businessrelalionship with Barclays than it was about upholding the interests of Mainsail and its invcstors.

Instead of obtaining emergency funding, Solent proceeded insfcad to conduct a 5rc sale ofMainsail's assets.

1LI.

BARCLAYS AND S&P AIDED AND ABETTED SOLENT'S BREACHES OF FLU C ClAKY 3JU'SYA.

B.mc~iws' COMPLICITY IN SOLENT'S~ A C H E SFIDUCIARY B OF DUTYAs in the case of the Golden Key SIV-Lite, Solenl's breaches of fiduciary duty

157.

could not have occurred wi thaut Barclays' extensjve and substantial irivol-rremellt and assistance.

158.

It was Barclays who, commencing in Jar~uary 2007, warehoused sccurities for thethe11 realizing

purpose of selling them at a profit to Mainsail, but

that it would have to take a

substantial loss on these securities, vrchestxated tl~e scheme with Solcnt to sell the securities to

Mainsail at inflated prices. With Solerlt's agreement, narclays proceeded to sell a total of $1.04billion in securities from the warel~ouse Mainsail in April and July 2007. to

159.

As previously alleged; at the time of thc two sales, Barclays knew. based on

widely disselllinated news reports and the dccIine of the ABX indices, that the securitieswarehoused for MainsaiI had not only fallcn in value, but did not have the minimum ratings

requi~ed satisfy Mainsail's Investment Eligibility Criteria and therefore were not eligible for to

purchase by Mainsail.

Alternatively, even if the warehoused securities nominally had the

minimum required ratings, Barclays engaged in ratings arbitrage when selling the securities toMainsail. Barclays knew that the ratings for the warehoused securities were not up-to-date and

had not yet fully factored in the market's assessment of the deterioration in the credit quality ofthe securities. Further, Barclays knew that the credil quality of the warehoused sccurities was on

the lower end of the range implied by the ratings that the securities carried. By engaging in such

ratings arbitrage, Barclays was thus able lo sell securities to Mainsai t that, even though they may

have carried the required minimum ratings, were of a much lower quality than implied by those ratings.160.

When Mairlsail experienced an inevitable crisis in August 2007 as a consequence

o r Barclays' actions, Harclays com~~oundcd Mainsail's demise hy refusing to honor its

obligations to provide emergency financing to Mainsail under the Liquidity Facility. Barclaysfnst collaborated with Solent to seek a restructuring of Mainsail and an additiond outside

and Solent finally sought to drawn upon the liquidity provider. Whcn this proved unsuc~ssful

Liquidity Facility, Barclay5 asked Solent to "u.ithdruw" its request. In breach of its fiduciarydrrties to Mainsail's invesims, Solent complied with this request and proceeded to instead

coilduct a fire sale of Mainsail's assets. h this manner, Barclays facilitated Solenl's breaches of fiduciary duty.

B.161.

S&P9sCOMPLICITYSOLEKT'S IF BREACHES FIDUCIARY OF DUTYBoth (he expansion April 2007 and July 2007 expansions of Mainsail required theAs set forth above, under Scction 8.5 of the Solent Management

involvenlent of S&P.

Agreement, Solent was only permitted tn issue additional mezzanine capital notes so long as

S&P had not withdraw11 or reduced its rating on the 'licr 1 mezzanine capital notes to lower thanAA+ and its rating on the Tier 2 mezzanine capital notes to lower than AA-. Thus, before eachof the April and July 2007 expansions, S&P was required to confirm the ratings for Mainsail's

mezzanine capital notes and capital notes.162. In April and July 2007, S&P confirmed the ratings of A . M and AA for

Mainsail's Tier 1 a31d Tjer 2 mezzanine capital notes respectively. Based on these ratings,

Mainsail was able to proceed with both xhe April and July 2007 expansions.163.

Both c o n h a t i o n s were false and misleading. S&P had no hasis for affirming

the ratings of AAA and AA for the Tier 1 and Tier 2 rnezzmine capita1 notes. As with Golden

Key, S&P kncw that, even w-ithoutany expansion of Mainsail's investment portfolio, MainsaiI'sratings wcre already at risk of downgrade. SBP conducted routine sun~eillanceof all the SIVLites that it had rated, including Mainsail. Under this surveillance, S&P received weekly reporls from Mainsail reporting on the results of tcsting Mainsail's investment portfolio against S&P's statistical model, the SRrP Monitor. Furthermore, jn July 2007, S&P had begun a broad review of all SIV-Litc stn~ctures.Hased on its wcckly surveillance and its internal review of SILT-Lites,

'

.

S&P knew that, ever] without any expansion in its investments, Mainsail's ratings were at risk ofdowtlgrade.

164.

When requested to conTim thc ratings for Mainsail's mezzanine capital noies and

capital notes in April and July 2007, SdZP rcvieu~edthe securities that had been warehoused by

Barclays for Mainsail. In rhc course of this review, S&P Iearned that the warehoused securities had fdlen significantly in value: that they were of lower quality than implied by their ratings and

that they did not mcct hlainsd's Investment Eligibility Criteria. S&P learned that the solepurpose of the April and July 2007 expansions was to allow Barclays and Solent, in breach of its

fiduciary duties, to dispose of the warehoused securities and shift losses on to Mainsail.

165.

Despite all of this knowledge+ S&P issued false and misleading reports

confirming Mainsail's ratings for each of the Aprij and July 2007 expansions. The false andmisleading nature of S&P's ratings is demonstrated by the fact that, wifhin a month of the July2007 expansion, on IZugusl 22, 2007, S&P downgraded the 'l'icr 1 and Tier mezzanine capital

notes from AAA and AA to CCC+ and CCC respectively, a downgrade by a massive 17notches.

In addition, S&P placed the mezzanine capital notes on Creditwatch negative.166.

S&P faiIcd to exercise due diligence in issuing the ratings because Barclays w-as

an important client. S&P had been retained to provide ratings on many SIV-Lite structures andother investment

vehicles created by Barclays. S&P therefore sought to protect its relatioilship

with Barclays and placed Barclays' interest in disposing of the warehoused securities above theinterests of Mainsail's investors. By providing false and misleading confirmations of Mainsail'sratings prior to cach of the April and July 2007 expansions, S&P facilitated Solent's breachcs of

fiduciary duty.

1V.

DUE TO ITS MASSlVE DEBT BURDEN AND THE PLUMMETING VALUE OF ITS IhVESTmNTS, MAINSAIL COLLAPSES 167. On August 20, 2007, because its assets were now worth less than its liabilities and

becausc of Barclays' request to "withdraw" the request for a drawdown under the liquidityFacility, Mainsail was forced to commence selling d o n its investments. That day. Solcnt sold$566 million worth of assets h r n the Mainsail invesknent portfolio, at an averagc price of

approximately 90 cents in the dollar.

168.

On ,4ugust 2 1, 2007, S&P lowered ils credit rating of Mainsail's Tier 1 and Tier 2

mezzanine capital notes by seventeen rlvtches from AAA and AA to CCC+ and CCC

respectively. S&P also placed the notes on Creditwatch negative. According to S&P. "MainsailI1 has begmi tu liquidate assets h~ order to repay its matwing [commercial paper1 notes.

...

Mainsail 11 is in wind-domn mode. As such, the cwrcnt rating actions also reflect the necessaryliquidation of assets at distressed prices, which have resulted in a deterioration of the asset poolsupporting the par walue o f the mezzanine and capital notes, and the uncertainty of rulure prices".

169.

On August 23, 2007, duc to the continued decline in value of Mainsail's

investment portfolio, a "mandatory acceleration" of Mainsail's debt obligations was triggered.As a conscqucncc of the mandatory acceleration, all responsibility for managing Mainsail's

investments was immediately transferred from Solent to The Bank of Kew York as SecurityTrustee. Also, an ad hoc committee of holders of Mainsail' conlmercial paper was formcd.

170.

In September 2007, the Security Trustee appointed Houlihan Lokey Howard &

Zukin (Europe) Limited ("Houlihan") as its fulancial adviser. Houlihan proceeded to carry out adetailed valuation analysis of Mainsail's assets.

On March 7, 2008, based on Houlihan's

analysis, the Security Trustee dvised hfainsail's jnvestors that "there is no prospect of theholders of Mezzanine [Capjkal] Notes or C.apita1 Nntes recciving any payment in respect of

amounts owing to thcm."

Further, the Security ' h s t e e advised that. although various

refinancing options had bccn considered, "[nlone of the refinancing proposals presented to the Committee, the Financial Adviser or the Security Trustee offer m y prospect o f a return to any

holder of a Mezzanine Note or a Capital Note ... ."171.

On April 4.2008, accounting firm KPMG was appointed as reccivcr of Mainsail.

CAUSES OF ACTION

FIRST CAUSE OF ACTIOK (Aiding And Abetting Breach of Fiduciary Duty Against Earclays And S&P In Connection With Golden Kcy)172.Oddo repeats and rcalleges the foregoing allegations as if they were pleadcd fully

hcrcin.173.

This is a claim for aiding and abetting a breach of fiduciary duty against

Defendants Barclays and S&P. 174.As set forth above, because it was the collateral manager for Goldcn Key under

the Avendis Management Agreement, Avendis occupied a fiduciary relationship with Golden

Key's in~estors-the purchasers of its rne~zanitle capital nntes and capital notes --suchas Oddo.Avendis breached its fiduciary duties of care, loyalty and good faith by: (a) entering into a scheme with Barclays to Iransfcr to Golden Key impaired sub-prime mortgage-backed securitiesat inflated prices; (b) corlspiring with Barclays to obtain the consent of Golden Key's investors

for x expansiorl of fllc n~axin~urn of Golden Kcy; and (c) causing Golden Key between June i size a-rd August 2007 to raise additional commercial paper debt and issue additional mezzaninecapital nolcs and capital notes, which funds were then used to purchase lhc toxic warehoused

securities from Barclays.

175.

Bsuclays knew of the breaches of ijduciary duty by Avendis because it

orchcstrated the scheme with Avendis to defraud Golden Key and its investors. T3arclays alsoprovided substantial assistance to Avendis by, among olhcr acts:a.

collaborating and agreeing with Aveodis to transfer the warehoused assets

to Golden Key;

b.

sending the Expansjon Notice which failed lo advise investors of the

secret purpose for the proposed expansion of Golden Key's invcstment portfolio;c. working to obtain the consents of the requisite number of investors; and

d.

selling tle warehoused securities to Golden Key.

In this manner, Barclays aided and abetted Avendis' breach of fiduciary duty.17G.

S&P also h e w of the breachcs of fiduciary duty by Avendis. Prior to the

proposed increase in the maximum size of Golden Key, S 8 P was requested to confinn theratings on Mainsail's commercial paper debt and mezzanine capital noleu. As part of its

analysis, S&P conducted a review of the assets to be acquired under the proposed expansion and

learned that the assets were poor quality securities coIla~erdizedagainst 1J.S. sub-primc

mortgages originated in 2006, at the height of the U.S. housing bubble, and that thc value of the

securities had fallen significantly. In addition, S&P knew tlmt, exfen without the proposedexpansion, Golden Key's ratings were at risk of a dourngrade. SBP knew this because it was monitoring the liability structure and perli)nnarlce of STV-Lites such as Golden Key based on

ureekly reports submitted by these issuers, and because of a broad internal review into theseissuers that S&P had commenced in July 2007.

177.

Despite its knowledge of Avendis' hreachcs of fiduciary duty, and its knowledge

that Golden Key's credit ratings were at risk of downgrade, S&P rendered substantial assistance

for Avwdis' breach of its fiduciary duties by issuing reports confirming Golden Key's ratings.

In this manner, S&P aided and abetted the breaches of fiduciary duty by Avcndis.SECOND CAlrSF: OF ACTION (Tortious Interference With Contract Against Earclaps In Connection With Golden Key)178.

Oddo repeats and realleges the foregoing allegations as if they werc plcaded fully

herein.179.180.

This is a claim for tortious interference with contract against Baclays.Ry purchasing the Golden Key nlezanillne capital notcs, Oddo entered into a

valid, enforceable contract wjlh Golclctl Key, as evidenced by thc mezzanine capital notesthemsehes. Under these lrlezzanine capital nntes, Goldcn Key promised to make regular interest

payments to Oddo and to grant Oddo a security intcxcs~ the investments acquired by Golden in

Key.18 1. Tlarclays knew of the contracts between Golden Key, on the one hand, and O d h

and othcr holdcrs of Golden Key's mezzanine capital notes. on the other hand. Despite this,

Barolays entered into a scheme with ,4vendis1tocause Golden Key to increase the maximum s i x of its investment portfolio, and then to acquire impaired mortgage-backed securities at intlatedprices from Barclays' warehouse in July 2007.

182.

By acquiring the warehoused securities, Golden Key breached its contractual

obligations under the mezzanine capital notes to Oddo and other investors. Among otherbreaches, by acquiring the impaired securities, Golden Key devalued the investors' securio

interest in Golden Key's investment portfolio and damaged Goldcn Key's ability to pay intereston the mezzanine capital noles. thereby causing injury to the investors in the mezzanine capitalnotes.

183.

In this manner, Barclays is liable for tortious inlerfere~lcebecause it intentionally

procured Golden Key's breach of Golden Key's contract with Oddo and other investors.

THIXU) CAUSE OF ACTION (Breach of Fiduciary Iluty Against Defendants Solent Capital And Solent Jersey In Connectiun With Mainsail)184.

Oddo repeats and rcafleges the foregoing allegations as if they were pleaded fully

herein.185.

This is a claim for breach of fiduciary duly against Defendants Soler~t Capital and

Solent Jersey. 186.

As Collateral Manager md Collateral Advisor to Mainsail, Solent came under athe rnezzanirlt: capital note holders and the

fiduciary duty to the investors of Mainsail-namely,

capital note holders-such

as Oddo. Mainsail's in\restors were induced to purchase the notcs

because of their knowledge that Solent wouId manage and advise Mainsail. Mainsail's investors

reposed confidence in Solent's knowledge md expertise, and entrusted Soient to conduct itself inthe

best interests o r Mai~isail. By agreeing to advise and managc Mainsail, Solent therefore

urldertook a fiduciary duty, grolulded in a higher level of trust, to give advice to and manage

Mainsail for the benefit of all of Mainsail's investfirs.187.

Solent breached its fiduciary duties of care, loyalty and good faith by:a.

conspiring with Barclays to transfer toxic, sub-prime mortgage-backed

securities from Barclays' warehousc to Mainsail at inflated prices;

b.

causing Mainsail to acquire, in April and July 2007, an additivnal $1.04

billion in sub-prime mortgage-backed securities from Barclays that did not meet Mainsail's

Investment Eligibility Cli teria;c.failing to exercise Mainsail's rights under die Liquidity Facility to draw on

emergency funding from Barclays in August 2007.

FOURTH CAUSE OF ACTION (Aiding And Abetting Breach of Fiduciary Duty Against Barclays and S&P Jn Connection With Mainsail)188.

Oddo repeats and rcalleges the foregoing allegations as if they were pleaded fully

herein.

189.

This i s a claim for aiding and abetting a breach of fiduciary duty against

Ilcfcndants Barclays and S&P.

190.

Barclays knew of the breaches of fiduciary duty by Solenl, as dleged above, in

connection with Mainsail. It was Barclays who orc,hestrated the scheme with Solent to defraud

Mainsail and Mainsail's investors by selling impaired sub-prime mortgage-backed securities at

inflated prices from Barclays' warehouse to Mainsail.

By selling the securities from its

warehouse to Mainsail, Barclays rendered substantial assistance tn Solei~t.191.

In addition, when Solenl requested draw-downs born the Liquidity Facility in

August 2007, ' ~ a r c l a ~ s secured Solent's agreement to withdraw its requcst, again rendering

substantial assistance for Solent's breach of fiduciary duty.

192.

In this manner, Barclays aided and abetted thc breaches of fiduciary duty by

Solent in connection with Mainsag.193.

S&P also knew of the breachcs of fiduciary duty by Solent. Prior to each of the

April and July 2007 expansions, S&ll was rcquested to confirm the ratings on Mainsail'scommercial paper debt and mezzanine capital notes.

In the course of its analysis, S&P

conducted a rcvicw of thc assets to be acquired under the proposed expansions and leanled thatthese mortgage-backed securities had fallen significantly in value, lhal they were of lower quality

than implied by their ralings and tliat they did not meet Mainsail's Investnlent Eligibility

Criteria. Thus, S&P knew that Solent would bc in breach of its fiduciary duties by undertakingthe April and JuIy 2007 expansions. In addition, S&P h e w that, even without the proposed

expansions, Mainsail's ratings were at risk of a downgrade. S&P h e w this bccausc it was rnorlitoring the liability structure and performance of Mainsail based on u~eekly rcports submitted

by Solent, md because of a broad internal review into all SIV-Litcs that S&P had commenced in July 2007.194.

Despite its knowledge of Solcnt's breaches of fiduciary duty, and its knowledge

that Mainsail's credit ratings were at risk of downgrade, S&P rendered substantial assistance for

Solent's breach of its fiduciary dutjcs by confirming Mainsail's ratings. In this manner, SAPaided and abetted the breaches of fiduciary duty by Solent.

FIFTH CAUSE OF ACTION (Tortious Interference With Contract Against Barclays In Connection With Mainsail)195.

Oddo repeats and realleges the tiwegoing allcgations as if they were pleaded h l l y

herein.196.

This is a claim for tortious intcrfcrence with contract against Defendant Barclays. By purchasing the Mainsail mezzanine capital notes, Oddo entered into a valid,

137.

enforceable contrmt with Mainsail, as evidenced by the mezzanine capital notes themselves.Under these mezzanine capital notes, Mainsail promised to makc regular inkrest payments to

Oddo and to grant Oddo a security interest in the investments acquired by Mainsail.

198.

Rarclays knew of the contracts between Mainsail, on the one hand, and Oddo and

other holders of Mainsail's mezzanine capitd notes, on Ille other hand. Despite this, Barclays

entered into a schemc with Solerlt to cause Mainsail to acquire impaired mortgage-backcd

securities from Barclays' warehouse through the April and July 2007 expansions of Mainsail's investment purlfolio.

199.

By acquiring the warel~oused securities, Mainsail breached its contractual

obligations to Oddo and other iilvestors in the mezzanine capital notes. Among other breaches,

Mainsait's investment portfolio arid damaged Mainsail's ability to pay interest on the mezzaninecapital notes, thereby causing damage to Oddo and the other investors. 200.Tn this manner, Rarclays i s 1iable for tclrtious interfcrcncc bccause it intentionally

procurcd Mainsail's breach of Mainsail's contract with Oddo and other investors.

PRAYElZ E'OH RELIEF

WHEREFORE, Oddo prays for relief and judgment as follows:(a)

Awarding Oddo damages in an amount to be determined at trial, together with

pre-judgment interest at the maxin~um allowable by law; rate(b)(c)

Awarding Oddo punitive damages;

Awarding Oddo its reasonable costs and expenses incurred in l l l i s action,

including, to the extent applicable, counsel fces; (d)Awarding Oddo all other such relief as the Court deems jusl and proper.

DPITED:

New York, New York July ,2008.

GRAh-T & EISENHOFER P.A.

Jay bT. i s e ~ r e r , ~ Esq. ~;eoffreyC. Jarvis, ~ s q . Hung G.Ta, Esq. 485 Lexington A-+lenue.~ 9Floor ' ~ New York, New York 10017 Telephone: (636) 722-8500Al6o~neys. Plaintzff for

Ld?-f? 3 l

Exhibit B

GOLDEN KEY LTD.(incorporated with limited liability in the Cayman Islands)

US$107,000,000 Mezzanine Note Programme US84 1,000,000 Capital Note ProgrammeGolden Key Ltd. (the "lssuer"), an exempted company with limited liability incorporated in the Cayman Islands. subject to compliance with all relevant taws, regulations and directives, may k m time to time issue tier 1 mezzanine notes (the 'Trer 1 Mezzanine Notes'') and tier 2 mezzanine notes (the "Tier 2 Mezzanine Hates" and, together with the Tier 1 Mezzanine Notes, the "Menanine Notes") under the mezzanine note programme described herein (the "Menanine Note Programme") and