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1 IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF SOUTH CAROLINA
2

3
United States of America, ) C/A No. 0:10-cv-1465-JFA
4 ex rel. Lynn E. Szymoniak, )
)
5 Plaintiff, )
)
6 VERSUS ) Columbia, SC
) September 10, 2012
7 )
American Home MOrtqaqe )
8 Servicinq, Inc . , et al . , )
)
9 Defendants. )
)
10 ----------------------------)

11
TRANSCRIPT OF MOTION HEARING
12 BEFORE THE HONORABLE JOSEPH F. ANDERSON, JR.
UNITED STATES DISTRICT JUDGE
13

14 Appearances:

15 For the Plaintiff: WILLIAM N. NETTLES, ESQ.

U.S. Attorney for South Carolina
16 FRANCES C. TRAPP, ESQ.
JENNIFER ALDRIGE, ESQ.
17 JAMES LEVINTIS, ESQ.
1441 Main Street, Suite 500
18 Columbia, SC 29201

19 WILLIAM C. EDGAR, ESQ.

U.S. Department of Justice
20 P.O. Box 261
Washinqton, D.C. 20044
21
For Defendant Homeward: GERARD E. WIMBERLY, JR. , ESQ.
22 DAVID R. DUGAS, ESQ.
601 Poydras Street, 12th Floor
23 New Orleans, LA 70130

24 MELISSA J. COPELAND, ESQ.

1201 Main Street, Suite 1100
25 Columbia, SC 29201

Gary N. Smi.th, CM
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1 Court Reporter: Gary N. Smith, CM

901 Richland Street
2 Columbia, SC 29201
(803) 256-7743
3 Stenotype/Computer-Aided Transcription

4 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * *
5 THE COURT: All riqht. This is a sealed hearinq,

6 I've instructed the clerk to seal off the courtroom. The only

7 parties present are the parties to the motion before me and

8 court personnel.

9 THE CLERK: I don' t know those people in the back.

10 MS. TRAPP: They are the U.S. Attorney's Office

11 staff.

12 THE COURT: All right. And I'm not sure how much I

13 can say on the record. I'm informed by Ms. Floyd that the

14 bank -- the movant doesn't even know the case number of this

15 case.

16 MR. WIMBERLY: That's correct, Your Honor, we don't

17 even know the other defendants.

18 THE COURT: Do you need to know the case number?

19 MR. WIMBERLY: Not for today' s hearing.

20 THE COURT: Let me just say, this is a qui tam action

21 filed by a citizen on behalf of the United States Government

22 against a large number of defendants. There has been a partial

23 settlement with I believe maybe four of the defendants, not

24 includinq the movant before me today.

25 The movant before me today, the corporate entity that

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1 is movinq for relief today, has been made aware of the pendency

2 of these proceedinqs because there was a bank foreclosure

3 proceedinq qoinq forward and it was necessary for the lawyer

4 representinq the bank at the foreclosure proceedinq to be aware

5 of the existence of this action, because his questions to the

6 witnesses at deposition miqht raise issues that created

7 problems, I will put i t that way.

8 So for that reason the movant is aware of these

9 proceedinqs and has filed a motion to partially lift the seal

10 so that the movant can advise potential investors of the

11 potential claims in this case, because they believe they have

12 an obliqation to do so under a duty of candor and in accordance

13 with federal securities laws.

14 And they don't want a lawsuit cominq at them later

15 for failinq to disclose somethinq that they knew about but were

16 under a court obliqation not to disclose.

17 So, after that motion came in the movant then filed a

18 motion seekinq to have its motion sealed, and then the

19 qovernment responded sayinq that they didn't have any problem

20 with the first motion, but they do have a problem with the

21 second motion. And I don't know why they do, but I'm qoinq to

22 hear from the qovernment to find out why they have a problem

23 with the second motion.

24 So, what about i t from the qovernment?

25 MR. EDGAR: Your Honor, we have a problem with i t for

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1 a couple of reasons.

2 THE COURT: All riqht. I read your brief, but I'm

3 still just not clear as to why you can't aqree not to use this

4 information, or not -- well, qo ahead.

5 MR. EDGAR: First, as a preliminary matter with

6 respect to the motions that have been made, I think there's

7 some aqreement that we arrived at this morninq in terms of the

8 Rule 5.03 motion to seal, that that motion may be premature.

9 Because the local rule anticipates that there will be an

10 opportunity for the public to participate --

11 THE COURT: Riqht.

12 MR. EDGAR: in the discussion or dialoque about

13 whether or not something should remain under seal. And because

14 of the qui tam seal on this case, the public is not able to do

15 that at this point.

16 So, in terms of the 5.03 motion, we believe that if

17 that motion is to be heard, it's premature at this point and it

18 ouqht to be heard after the qui tam seal is lifted to allow the

19 public to participate in that process.

20 THE COURT: Well, that kicks the can down the road,

21 so to speak, I quess. Can the movant live with that?

22 MR. WIMBERLY: Your Honor, we can, but a couple of

23 provisos. And I think we are in aqreement on the prematurity

24 point. On the assumption that the qui tam seal is effective as

25 to the sealinq of this record --

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1 THE COURT: Riqht.

2 MR. WIMBERLY: -- as desiqnated in our pleadinqs, as

3 long as i t lasts. And second, that the court will grant us an

4 opportunity to be heard on the per.manent seal prior to the

5 liftinq of the qui tam seal as i t has to do with this record,

6 so we will be in front of Your Honor again down the line to

7 urqe our motion to seal under local Rule 5.03 for the reasons

8 we have qot indicated in the record.

9 I'm not sure that it's necessary to go there, if the

10 court is willinq to qrant the motion on the -- on our --

11 THE COURT: Your initial motion. I don't have a

12 problem with it, the government doesn't have a problem with

13 it. No other I just note for the record, no other defendant

14 in this case, and there are many, has felt the similar need to

15 file a similar motion. But I'm not sayinq that you shouldn't

16 have filed this motion because I understand your concerns, and

17 you have cited some authority that indicates that the existence

18 of a case like this is somethinq that has to be disclosed.

19 MR. WIMBERLY: And, Your Honor, there' s a collateral

20 issue that I think is kind of -- is really under the surface

21 that is of the most concern to us, and that's the risk that we

22 think we face that the relator, or somebody else who would have

23 access to this record durinq the qui tam sealed investiqation,

24 miqht seek to exploit i t aqainst us.

25 THE COURT: Riqht.

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1 MR. WIMBERLY: And in particular putting -- and,

2 again, there is no earthly relevance to this information for

3 their investigation, or any of the False Claims Act issues.

4 THE COURT: Well, what I can do then is grant your

5 initial motion to allow you to make a -- to lift the seal to

6 make this partial disclosure to potential investors.

7 And then as to your second motion I can just say it's

8 denied without prejudice because it's not necessary at this

9 time. Everything will remain under seal, and so it' s denied

10 without prejudice to your right to refile i t later.

11 MR. WIMBERLY: One point of clarity, Your Honor,

12 because we did have -- we were not in agreement completely this

13 morning, Your Honor, I quess on the last feature -- aspect of

14 this. We tried to -- we talked about if the government

15 believes i t needs to disclose this record to some other party

16 while the qui tam seal is in place -- whether it's the relator

17 or anyone else -- we would like an opportunity to come before

18 the court and make our argument that that shouldn't happen. In

19 other words, a notice and an opportunity to be heard.

20 THE COURT: So you wouldn't be caught short?

21 MR. WIMBERLY: Exactly right.

22 THE COURT: Let me ask this now, if I grant your

23 initial motion to disclose the existence of these claims in

24 this case to potential investors, isn't the cat going to be out

25 of the bag as to the existence of the case? Yet the government

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1 doesn't object to that.

2 MR. EDGAR: You are correct, Your Honor, in this line

3 of limited circumstance. We also have sort of an unusual qui

4 tam seal here, Your Honor, where we had partial lifts to allow

5 us to discuss the settlement that took place with five parties,

6 Your Honor. That we had a partially lifted seal that has

7 allowed us to discuss the case with the defendants so, you

8 know, this seal is -- I hate to say i t --

9 THE COURT: It has got some mold in it already.

10 MR. EDGAR: at this point, Your Honor. And we

11 understand, without waiving our position that the defendants,

12 as a general matter, shouldn't be able to move with respect to

13 the seal, it's the government's seal, the practical result is

14 that we don't object to the relief that is --

15 THE COURT: All right.

16 MR. EDGAR: Your Honor, however, we are concerned

17 with respect to the proposed order that the defendant has

18 presented to the court to the extent that i t seeks to limit the

19 government's ability to re-disclose paper, issues down the

20 road.

21 For the time being, the qui tam seal protects all the

22 filings, all the seals in this case, and prevents both the

23 government and the defendant and the relator from talking about

24 things unless there is a partial lift of the seal.

25 The order that the defendant proposes would say that

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1 the qovernment should not be allowed to re-disclose any

2 information. We don't have any current intent to re-disclose

3 anything, but I'm concerned about the breadth of that as an

4 order.

5 The qovernment has an obliqation, under various

6 statutes and regulations, to both protect information and to

7 produce information when the statute or the regulation requires

8 it; for example, in the context of FOIA requests or in the

9 context of a congressional inquiry.

10 And when we approach protective orders in the context

11 of litiqation, we consistently ask that the courts not limit

12 the statutory or regulatory requirements that we have to make

13 disclosures.

14 In this instance, because of the qui tam seal, we

15 don't believe that the defendant is at risk because even if we

16 were to discuss this with the relator, the relator is subject

17 to the qui tam seal and can' t make i t public in any event.

18 MR. WIMBERLY: Your Honor, I appreciate the qood

19 faith of counsel, and the government, but we are asking for

20 somethinq that's -- want to make sure there is no ambiguity or

21 wiqqle room. We are askinq for a seal on this particular

22 record, which there is no earthly relevance to their

23 investiqation.

24 And what he -- what Mr. Edqar is tellinq the court is

25 that the qovernment has these preroqatives that supersede

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1 that. And let me say, I can't aqree. I mean, even under FOIA

2 you have an opportunity to come in and challenqe the

3 qovernment's intent to disclose. We want an opportunity to do

4 the same thinq, if and when they have an interest to

5 disclose

6 THE COURT: Well, can't we just aqree to hold this in

7 abeyance until later? I want to find out while the qovernment

8 is here, before you leave, when we are finally qoinq to unseal

9 this case. It's been rockinq alonq a lonq time and every time

10 I extend i t I qive a stern warninq, "This is the last time."

11 So I'm hopinq that we are not qoinq to have any more

12 extensions. Do y'all want to talk about that now or do you

13 want me to excuse the movinq parties and then talk about it?

14 MR. EDGAR: We would prefer that you would excuse the

15 movinq party and then talk about it. So if we can resolve this

16 issue prior to that --

17 THE COURT: All riqht.

18 MR. EDGAR: seems appropriate.

19 MR. WIMBERLY: Your Honor, if I may address the

20 court's first question about the extent of on their motion

21 to partially lift the seal. We are askinq for the opportunity,

22 without necessarily violatinq the court seal, to take a look at

23 securities issues as they come up. I mean, there are many ways

24 in which they can come up for a company -- a stock company.

25 But in each one of those cases, as we put in our brief, there

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1 can be a dilemma.

2 And we happen to know about the seal directly because

3 of Your Honor's orders earlier this year when we had the issue

4 of the deposition -- which of course encouraqed us to take this

5 in on the motion.

6 If Your Honor qrants the motion, we will just take

7 that case by case. It's not necessarily so that we would have

8 to disclose all the information, but that's really a call for

9 securities counsel.

10 THE COURT: All riqht. So we still have a dispute

11 about the extent of the proposed order, what i t directs the

12 qovernment to do and not do with this information at a later

13 date?

14 MR. EDGAR: Yes, sir.

15 MR. WIMBERLY: Yes, Your Honor.

16 THE COURT: Let me qet my hands on the order and let

17 me see if we can just tinker with the lanquaqe a little bit.

18 Apparently we didn't print the order out -- qo qet it

19 riqht quick -- apparently we didn't print it out and brinq it

20 with us.

21 Ms. Floyd, can you qet i t for us?

22 (Off record discussion)

23 MS. TRAPP: Your Honor, i t occurs to me that their

24 concern is that the relator -- the relators could qet ahold of

25 this information and disclose i t outside of this qui tam.

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1 Is that fair?

2 MR. WIMBERLY: If she qets ahold of it, period, and

3 there is a risk, a distinct risk that i t would be disclosed

4 outside this qui tam, yes.

5 THE COURT: What information are we talkinq about

6 now?

7 MS. TRAPP: Information about the securities --

8 whatever the securities information is, which I'm not privy to

9 part of the information that you have, but whatever i t is, that

10 they are concerned that if the --

11 THE COURT: Wait a minute, stop riqht there. Y'all

12 didn't serve the qovernment with a copy of your memorandum,

13 just the motion, riqht?

14 MR. WIMBERLY: Just the motion, Your Honor. But we

15 qave them a copy of the oriqinal memorandum to qive them the

16 framework of the issues. It's really not --

17 THE COURT: But can you tell them now what we are

18 talkinq about? Because both sides are shootinq in the dark

19 here.

20 MR. WIMBERLY: And the only thinq that we have in the

21 memos that you haven't seen is a discussion of the securities

22 opportunities. We are not specific in terms of any particular

23 transaction.

24 THE COURT: They have talked about some securities

25 that they miqht want to issue and potential purchasers need to

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1 be made aware of the potential claims here.

2 Now why do y'all want to use that -- why would

3 y'all --

4 MS. TRAPP: We don' t, Your Honor. We would be happy

5 -- we told them all they had to do is call us and we would

6 certainly -- we would have filed a motion with the court

7 possibly -- as we have allegedly done with every other

8 defendant that has asked, for whatever reason --

9 THE COURT: Right.

10 MS. TRAPP: It occurs to me that their concern is

11 with the relator, who is Mr. Harpootlian's client --

12 THE COURT: Right.

13 MS. TRAPP: -- and that it would be a lot easier to

14 ask Mr. Harpootlian to agree not to disclose anything that he

15 learns in this lawsuit outside of this lawsuit until the seal

16 is lifted, rather than have the government -- because we have,

17 as Mr. Edqar has indicated, we have statutory and requlatory

18 concerns that Mr. Harpootlian would not have. But he's not

19 here, although I think if we called him he could come.

20 MR.. WIMBERLY: Your Honor, I don' t know -- I mean, I

21 would like to trust, but I don't think we should be obligated

22 to trust the relator to follow --

23 THE COURT: I still don't know what information we

24 are talking about not disclosing. I apologize to you for being

25 so dense. Y'all filed this motion wanting to partially lift

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1 the seal so that potential investors could be made aware of the

2 potential claims here, because you don't want to qet sued

3 under --

4 MR. WIMBERLY: That's riqht.

5 THE COURT: securities laws for failure to

6 disclose adverse information.

7 MR. WIMBERLY: Absolutely, Your Honor.

8 THE COURT: All riqht. Now what do y' all want to

9 use -- what do y'all want to tell Mr. Harpootlian or the

10 relator about their potential investors? Why do you care?

11 MR. EDGAR: Your Honor, as I sit here now I don't

12 have any intention or reason to do that, what I'm concerned

13 about is a broad order that would restrict us in a context that

14 we can't anticipate that is qoinq to conflict with the

15 requlations and statutes down the line.

16 We believe the qui tam seal is a sufficient

17 protection for the time beinq until the case is unsealed, and

18 at that point the defendant can come in and try to protect what

19 they feel like they are qoinq to protect.

20 As I understand, what they are trying to have sort of

21 a second layer of seal upon --

22 THE COURT: Riqht.

23 MR. EDGAR: -- is the memorandum, the two memorandums

24 in support of this document.

25 THE COURT: All riqht.

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1 MR. EDGAR: Those are already protected by the qui

2 tam seal, I don't understand why we need --

3 THE COURT: There are.

4 MR. WIMBERLY: We put in a patch that -- there are

5 several related papers. The record of this motion, Your Honor,

6 we are asking the court to put under a permanent seal.

7 THE COURT: All right.

8 MR. WIMBERLY: That's a different issue from the

9 securities disclosures. And the reason is, and they have hit

10 on it, we are concerned that other parties will abuse the

11 information. And they have no reason -- and nobody has

12 articulated anything today that changes this one -- no reason

13 to see it. And I --

14 THE COURT: But you aren 1 t satisfied with the qui tam

15 seal by statute? You are not satisfied with that?

16 MR. WIMBERLY: The problem with the qui tam seal is

17 i t ends and that could be next month, that could be tomorrow.

18 We want an opportunity to come in in the event they want to

19 disclose this information

20 THE COURT: What information? What is "this

21 information"?

22 MR. WIMBERLY: The memo, the motion, the points we

23 make in the memo and the motion. The information that we have

24 to give to the court to support our motion to --

25 THE COURT: Why do you want that information to be

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1 kept from the world? If I were your client I would want the

2 world to know I did the riqht thinq. I went into court, and

3 even thouqh it miqht have been adverse to my financial picture,

4 I asked the court for permission to disclose bad information

5 that investors miqht want to know about. Why do you not want

6 that information out in the public?

7 MR. WIMBERLY: If that information comes out in the

8 public in certain ways i t will interfere with the requirements

9 of the securities laws. It's -- like violatinq quiet periods,

10 beinq misleadinq. In other words, we want to be able to look

11 at the record at the time we have to make a securities

12 disclosure and determine what -- throuqh our securities

13 lawyers, what is the information from this case that needs to

14 be presented to investors and under what context and under what

15 time frames based on the securities laws. That's all there is

16 to it.

17 They have now qot this information because we had to

18 deal with this motion, and they are tellinq the court that they

19 want the liberty to be able to hand it over to the relator, or

20 at least force us to rely on the relator's ability

21 willinqness to comply with the rules.

22 Now this particular relator has a -- has an

23 aqqressive position that she's taken aqainst my client. That's

24 all fair and qood, but we don't --

25 THE COURT: I understand your concern, I just don' t

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1 see why the qovernment cares at this point. I mean, can't we

2 fiqht this out later? Can't you just aqree to keep i t under

3 seal until we have another hearinq at a later date, at least?

4 MR. EDGAR: Your Honor, we don't have any objection.

5 In fact, we believe i t would be appropriate to raise this, you

6 know, at a time when the participants need to be involved in

7 that process, the public and the other parties are allowed to

8 participate. What we are concerned about is a broad order that

9 says to us, "Government, you can't disclose this to anybody,"

10 and if we come into a context where i t is in conflict with a

11 statute or requlation, i t puts us in an untenable position. We

12 believe the qui tam seal is sufficient

13 THE COURT: Why don' t I just extend i t temporarily

14 until the qovernment finds a conflict with a statute or

15 requlation, then you can come back in and we will tee i t up and

16 decide i t then. Could y' all live with that?

17 MR. WIMBERLY: Yes, we could live with that, Your

18 Honor.

19 MR. EDGAR: Your Honor --

20 THE COURT: It would just be temporary until such

21 time as the qovernment comes upon a statute or requlation that

22 you believe would be inconsistent and you feel an obliqation to

23 brinq i t to my attention and let me resolve i t one way or the

24 other.

25 MR. WIMBERLY: We would just ask the court to make

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1 sure it's clear that that would apply, that prohibition -- the

2 process would apply to the information from this record that

3 they rniqht want to share with others in the context of their

4 investiqation.

5 So, in the exercise of what they think is their

6 investiqative discretion, they rniqht want to share this

7 information, in that case, too, we want an opportunity to come

8 in and be heard before they actually do that.

9 MR. EDGAR: Your Honor, to the extent they seek to

10 limit our ability to proceed with our investiqation in a way we

11 think is appropriate and subject to the qui tam seal, we object

12 to that effort. We object --

13 THE COURT: I'm sorry, I'm just dense today. I

14 understand the relator doesn't like the movant here, and the

15 relator has raised all these alleqations aqainst the movant,

16 and others -- I quess, and others in the qui tam action -- and

17 so she has a lot of bad information that she thinks she has

18 aqainst the movant.

19 But I don't see why she could ever adversely use in

20 an adverse way information that the movant came before me and

21 souqht permission to disclose to potential investors her

22 potential claims, which rniqht have an adverse or dampeninq

23 effect on the securities that they sell

24 MR. WIMBERLY: Your Honor, if I may qive you not an

25 implausible scenario?

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1 THE COURT: All right.

2 MR. WIMBERLY: She gets our memo in which we explain

3 that we need to partially lift the seal in order to consider

4 securities laws issues in connection with corporate

5 transactions that might be coming, blasts her fraud alert on

6 the Internet and she says, "Look at them now, Homeward is going

7 to start selling their bad stock to the public. Between the

8 lines in this memo is a plan to do that. There is no other

9 reason why they would be moving the court to partially lift the

10 seal."

11 THE COURT: Well, she doesn't need to be doing that,

12 does she?

13 MR. EDGAR: No, Your Honor, and we wouldn' t have any

14 concerns about the court ordering her not to disclose the

15 information, and with her counsel having an opportunity

16 THE COURT: Well, they are concerned that she won' t

17 obey the court order, I guess.

18 MR. WIMBERLY: And she's not here. Constitutionally

19 I'm not sure she could be subject to an order that comes out of

20 this --

21 MR. EDGAR: The relator is a party before this court

22 and--

23 MR. WIMBERLY: And you guys don' t want the order.

24 MR. EDGAR: For counsel to suggest that we have a

25 concern with respect to this relator and the able counsel who

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1 represents this relator I think is completely unfounded. I

2 don't see any reason to assume that Mr. Harpootlian, Mr. Suqqs,

3 or any of the other people who are representinq the relator

4 here will behave inappropriately and will violate the qui tam

5 seal.

6 THE COURT: We can' t find the order that y' all sent

7 up, can you qive us another copy?

8 MR. EDGAR: I have a copy. May I approach?

9 MR. WIMBERLY: May I have a copy? Your Honor, we

10 have not had an opportunity to look at -- we saw i t in draft

11 form but this -- I would want an opportunity to take a look at

12 this more closely.

13 MR. EDGAR: Your Honor, let me say, I don' t have a

14 copy of the document that defendants submitted, what I have a

15 copy of is a proposed counter order that we sent to the

16 defendant and their red line makinq the chanqes that they would

17 suqqest to our proposed counter order.

18 MR. WIMBERLY: Your Honor, this is a bit irreqular.

19 This is an exchanqe of drafts when we were tryinq to come to a

20 complete aqreement to make a joint proposal to the court, now

21 we are here.

22 THE COURT: You couldn't qet an aqreement. Do you

23 have a copy of your initial proposed order?

24 MR. WIMBERLY: We would like to revisit i t in liqht

25 of some of the unders tandinqs that we have come to. He's qot a

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1 markup, I didn't brinq mine with me, but I think in liqht of

2 the --

3 THE COURT: If I take a recess is there any hope that

4 y'all could come to some common qround or not? Or is that

5 hopeless, waste of time?

6 MR. WIMBERLY: I think the issue is I think we

7 have certainly made a lot of proqress -- I think what we are at

8 loqqerheads on is whether or not your order effectively orders

9 that the relator not see this stuff, or issues no order and we

10 all hope that the relator and her counsel follow the rules,

11 which they very well should, and not abuse the information,

12 Your Honor.

13 THE COURT: I'm qoinq to qo out on the limb and issue

14 the order the movant requests directinq the relator not to

15 disclose this information, and that will preserve the status

16 quo. If the qovernment then comes up to find some statute or

17 requlation that puts you at odds with your oath of office and

18 so forth, you can file a motion to reconsider and we will tee

19 i t up and look at i t aqain. How about that?

20 MR. WIMBERLY: We are workinq on i t we would still

21 like i t in the order, Your Honor, a process

22 MS. TRAPP: Your Honor, a problem that we see with

23 this too is if the relator discovers this information from

24 another source, completely independent of the qovernment, we

25 will be back here with a contempt of court hearinq on the next

Gary N. Smith, CM
Columbia, SC
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1 time --

2 THE COURT: How is she qoinq to learn i t from another

3 source?

4 MS. TRAPP: Sir?

5 THE COURT: How could she possibly learn i t from

6 another source?

7 MS. TRAPP: If you file somethinq with the SEC, there

8 is the -- the SEC EDGAR search. She will be able to do that

9 and I'm sure that she does that probably every day.

10 MR. WIMBERLY: And that's a different source for the

11 information. We are talkinq about the source in this very

12 record --

13 THE COURT: They say they are willinq to live with

14 that risk.

15 MS. TRAPP: Talkinq about "this very record," which I

16 haven' t seen, and I don' t have a problem with that.

17 THE COURT: That's what I'm qoinq to do, I'm qoinq to

18 qrant the movant's request that I impose an additional

19 confidentiality obliqation on the relator over and above the

20 qui tam seal that will remain in place until further order of

21 this court. If the qovernment lawyers come up with somethinq

22 that they think the requlation or statute requires them to qo

23 to the relator and disclose this, they can file a motion to

24 reconsider or lift the seal, and we will qet y'all back

25 toqether and we will look at i t aqain.

Gary N. Smith, CM
Columbia, SC
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1 MR. WIMBERLY: Your Honor, just for clarification, we

2 would like the order -- because we already talked about this a

3 while ago -- to provide for the process between now and the

4 lifting of -- before the qui tam seal gets lifted, that if the

5 government wants to disclose this information in any other

6 context, that we would have an opportunity to come in and be

7 heard before that happens.

8 THE COURT: By "this information," you mean the fact

9 that you filed this motion?

10 MR. WIMBERLY: What's in the motion. Not the fact

11 that we filed i t --

12 THE COURT: This is a sealed hearing, nobody will

13 know what is said here today unless I enter an order after

14 notice to both sides to unseal it, so tell me what is in the

15 motion.

16 MR. WIMBERLY: Your Honor has seen what -- in the

17 memos in the motion --

18 THE COURT: What' s in it? I don' t understand what is

19 in this

20 MR.. WIMBERLY: OUr stated -- our stated need to look

21 at this qui tam case and the claims here that we are aware of

22 from the unredacted complaint in the context of corporate

23 events that raise securities law issues, requirements for

24 disclosure. That's all, we are not any more specific than

25 that.

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Columbia, SC
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1 THE COURT: Well, I have said as much here on the

2 record, that that was your concern, riqht? And I commend you

3 for havinq that concern

4 MR. WIMBERLY: You could read that to say that they

5 have qot somethinq on their mind, and that -- we just dealt

6 with that in terms of the danqer with the relator. But the

7 qovernment is sayinq that they reserve -- they have the

8 discretion to take this information that they -- the memo here,

9 and use it in any way they --

10 THE COURT: I'm not qoinq to let them do that to the

11 relator or to anybody else until further order of the court, so

12 you ouqht to be satisfied.

13 MR. WIMBERLY: Thank you, Your Honor.

14 THE COURT: All riqht. Y'all can step out now and

15 I'm qoinq to talk to the qovernment about the pendency of this

16 case and the proqress of this case.

17 Somebody please qive us a copy of the proposed order

18 because we don't have it, and we can't find i t on the docket.

19 MR. WIMBERLY: We will submit a proposed order to the

20 court.

21 THE COURT: All riqht.

22 MS. TRAPP: Will we qet a copy of your motion, your

23 memorandum?

24 MR. WIMBERLY: Can we -- actually, on the order, why

25 don't we work to qet the court a jointly proposed order? I

Gary N. Smith, CM
Columbia, SC
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1 don't see anythinq wronq with --

2 MS. TRAPP: I'm a little at a loss, I haven't seen

3 the memorandum, and that's --

4 MR. WIMBERLY: We will confer after

5 MS. TRAPP: I'm ordered not to tell somethinq that I

6 haven't seen, so I quess that's okay.

7 THE COURT: Well, he just that's what I just qot

8 him to tell you on the record, what i t was that he didn't want

9 you to see.

10 MS. TRAPP: Yes.

11 (Ex parte hearinq, qovernment's counsel present.)

12 THE COURT: While y'all are here, how do we -- we

13 have extended this seal time and time aqain, the case is, I

14 think, maybe two years old, now how do we stand on this case?

15 MR. EDGAR: Your Honor, the seal at this point is

16 scheduled to expire in early December and we are certainly

17 makinq efforts and workinq as hard as we can in order to try to

18 reach a resolution of parts, if not all of the matter, prior to

19 that deadline.

20 As Your Honor is aware, it's a very larqe case with

21 multiple defendants in multiple areas. We have been workinq it

22 very hard. We have qone out and done probe sample file reviews

23 of 18 residential mortqaqe backed securities at locations in

24 California, Texas, Utah. We have reviewed more than 2,490

25 mortqaqe files at this point, Your Honor. We have reviewed

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Columbia, SC
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1 more than 334 foreclosure files, and we have additional

2 mortqaqe files and foreclosure files in the pipeline.

3 We went and reviewed all of the foreclosure records

4 for a set period in Beaufort County, South Carolina. We have

5 conducted numerous witness interviews. And as Your Honor is

6 aware, we were successful in settlinq some of the claims with

7 respect to the five biqqest servicers in the country, and have

8 been able to resolve at least most of the claims as to those

9 defendants. We continue --

10 THE COURT: Let me ask this, correct me if I'm wronq,

11 I thouqht the purpose of the seal was to let the qovernment

12 decide if they wanted to join in the case for the plaintiff and

13 do a due diliqence and see if the case was meritorious enouqh

14 to join -- to take over the case for the plaintiff, I should

15 say.

16 At all these conferences, it seems like y'all are

17 talkinq about a qlobal settlement. Am I wronq? The seal is

18 not supposed to stay in place until you can reach a qlobal

19 settlement, is it?

20 MR. EDGAR: No, Your Honor, i t is supposed to stay in

21 place Your Honor correctly characterized the purpose of the

22 seal.

23 THE COURT: All riqht. Well, everythinq you talked

24 about was all the information you have qathered and analysis

25 you have done, I thouqht, lookinq towards a settlement, but

Gary N. Smith, CM
Columbia, SC
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1 that was lookinq towards a decision whether to join to take

2 the case over from the plaintiff, in other words.

3 MR. EDGAR: Your Honor, if I conveyed that

4 suqqestion, that was in error.

5 THE COURT: All riqht. Well, I just

6 MR. EDGAR: What I was attemptinq to do was to

7 summarize at least some of the efforts that we have made in

8 furtherance of the litiqation --

9 THE COURT: All riqht. Well, y'all are qoinq to have

10 a hard time extendinq this seal any more. I'm not qoinq to say

11 there is an absolute rule I'm not qoinq to, but I'm qoinq to

12 take a hard look at it if another request comes in.

13 MR. EDGAR: I understand, Your Honor.

14 THE COURT: All riqht. Anythinq else we can talk

15 about while you are here?

16 MR. EDGAR: I don' t believe so .

17 THE COURT: All riqht. Mr. Court Reporter, if you

18 would seal this transcript and not release i t until -- if and

19 when I issue an order to open it up.

20 Thank you very much then.

21 MR. EDGAR: Thank you, Your Honor.

22 THE COURT: We will be in recess.

23 (Thereupon, the proceedinqs were adjourned.)

24 * * * * * * * * * * * * * * * * * * * * * * * * * * * *
25

Gary N. Smith, CM
Columbia, SC
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2 CERTIFICATE OF REPORTER

4 I certify that the foreqoinq is a correct transcript

5 from my stenoqraphic notes in the above-entitled matter.

7 s/ Gary N. Smith December 5, 2013

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Gary N. Smith, CM
9 Official Court Reporter
United States District Court
10 District of South Carolina

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Gary N. Smith, CM
Columbia, SC