[Senate Hearing 108-473]
[From the U.S. Government Publishing Office]




                                                        S. Hrg. 108-473

   U.S. TAX SHELTER INDUSTRY: THE ROLE OF ACCOUNTANTS, LAWYERS, AND 
                        FINANCIAL PROFESSIONALS


=======================================================================

                                HEARINGS

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               ----------                              

                        NOVEMBER 18 AND 20, 2003

                               ----------                              

                             VOLUME 3 OF 4

                               ----------                              

      Printed for the use of the Committee on Governmental Affairs

          U.S. TAX SHELTER INDUSTRY: THE ROLE OF ACCOUNTANTS,

                  LAWYERS, AND FINANCIAL PROFESSIONALS
                                                        S. Hrg. 108-473
 
   U.S. TAX SHELTER INDUSTRY: THE ROLE OF ACCOUNTANTS, LAWYERS, AND 
                        FINANCIAL PROFESSIONALS

=======================================================================

                                HEARINGS

                               before the

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                                 of the

                              COMMITTEE ON
                          GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE


                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                        NOVEMBER 18 AND 20, 2003

                               __________

                             VOLUME 3 OF 4

                               __________

      Printed for the use of the Committee on Governmental Affairs


94-085              U.S. GOVERNMENT PRINTING OFFICE
                            WASHINGTON : 2003
____________________________________________________________________________
For Sale by the Superintendent of Documents, U.S. Government Printing Office
Internet: bookstore.gpo.gov  Phone: toll free (866) 512-1800; (202) 512ï¿½091800  
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                   COMMITTEE ON GOVERNMENTAL AFFAIRS

                   SUSAN M. COLLINS, Maine, Chairman
TED STEVENS, Alaska                  JOSEPH I. LIEBERMAN, Connecticut
GEORGE V. VOINOVICH, Ohio            CARL LEVIN, Michigan
NORM COLEMAN, Minnesota              DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas

           Michael D. Bopp, Staff Director and Chief Counsel
      Joyce A. Rechtschaffen, Minority Staff Director and Counsel
                      Amy B. Newhouse, Chief Clerk

                                 ------                                

                PERMANENT SUBCOMMITTEE ON INVESTIGATIONS

                   NORM COLEMAN, Minnesota, Chairman
TED STEVENS, Alaska                  CARL LEVIN, Michigan
GEORGE V. VOINOVICH, Ohio            DANIEL K. AKAKA, Hawaii
ARLEN SPECTER, Pennsylvania          RICHARD J. DURBIN, Illinois
ROBERT F. BENNETT, Utah              THOMAS R. CARPER, Delaware
PETER G. FITZGERALD, Illinois        MARK DAYTON, Minnesota
JOHN E. SUNUNU, New Hampshire        FRANK LAUTENBERG, New Jersey
RICHARD C. SHELBY, Alabama           MARK PRYOR, Arkansas

       Raymond V. Shepherd, III, Staff Director and Chief Counsel
        Elise J. Bean, Minority Staff Director and Chief Counsel
        Robert L. Roach, Minority Counsel and Chief Investigator
                     Mary D. Robertson, Chief Clerk



                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Coleman.............................................. 1, 69
    Senator Levin................................................ 4, 72
    Senator Lautenberg...........................................     9

                               WITNESSES
                       Tuesday, November 18, 2003

Debra S. Petersen, Tax Counsel IV, California Franchise Tax 
  Board, Rancho Cordova, California..............................    11
Mark T. Watson, former Partner, Washington National Tax, KPMG 
  LLP, Washington, DC............................................    13
Calvin H. Johnson, Andrews & Kurth Centennial Professor, The 
  University of Texas at Austin School of Law, Austin, Texas.....    14
Philip Wiesner, Partner in Charge, Washington National Tax, 
  Client Services, KPMG LLP, Washington, DC......................    32
Jeffrey Eischeid, Partner, Personal Financial Planning, KPMG LLP, 
  Atlanta, Georgia...............................................    32
Richard Lawrence DeLap, Retired National Partner in Charge, 
  Department of Professional Practice-Tax, KPMG LLP, Mountain 
  View, California...............................................    34
Larry Manth, former West Area Partner in Charge, Stratecon, KPMG 
  LLP, Los Angeles, California...................................    34
Richard J. Berry, Senior Tax Partner, Pricewaterhouse Coopers, 
  New York, New York.............................................    54
Mark A. Weinberger, Vice Chair, Tax Services, Ernst & Young LLP, 
  Washington, DC.................................................    55
Richard H. Smith, Jr., Vice Chair, Tax Services, KPMG LLP, New 
  York, New York.................................................    57

                      Thursday, November 20, 2003

Raymond J. Ruble, former Partner, Sidley Austin Brown and Wood, 
  LLP, New York, New York, represented by Jack Hoffinger.........    76
Thomas R. Smith, Jr., Partner, Sidley Austin Brown and Wood, New 
  York, New York.................................................    77
N. Jerold Cohen, Partner, Sutherland Asbill and Brennan, LLP, 
  Atlanta, Georgia, accompanied by J.D. Fleming..................    79
William Boyle, former Vice President, Structured Finance Group, 
  Deutsche Bank AG, New York, New York...........................    95
Domenick DeGiorgio, former Vice President, Structured Finance, 
  HVB America, Inc., New York, New York, accompanied by Brian 
  Skarlatos......................................................    97
John Larson, Managing Director, Presidio Advisory Services, San 
  Francisco, California..........................................   114
Jeffrey Greenstein, Chief Executive Officer, Quellos Group, LLC, 
  formerly known as Quadra Advisors, LLC, Seattle, Washington....   115
Mark Everson, Commissioner, Internal Revenue Service, Washington, 
  DC.............................................................   128
William J. McDonough, Chairman, Public Company Accounting 
  Oversight Board, Washington, DC................................   130
Richard Spillenkothen, Director, Division of Banking Supervision 
  and Regulation, The Federal Reserve, Washington, DC............   131

                     Alphabetical List of Witnesses

Berry, Richard J.:
    Testimony....................................................    54
    Prepared statement...........................................   303

Boyle, William:
    Testimony....................................................    95
    Prepared statement with an attachment........................   317

Cohen, N. Jerold:
    Testimony....................................................    79
    Letter dated November 18, 2003, submitted with answers to 
      questions..................................................   315

DeGiorgio, Domenick:
    Testimony....................................................    97
    Prepared statement...........................................   326

DeLap, Richard Lawrence:
    Testimony....................................................    34

Eischeid, Jeffrey:
    Testimony....................................................    32
    Prepared statement...........................................   298

Everson, Mark:
    Testimony....................................................   128
    Prepared statement with an attached chart....................   338

Greenstein, Jeffrey:
    Testimony....................................................   115
    Prepared statement...........................................   334

Johnson, Calvin H.:
    Testimony....................................................    14
    Prepared statement...........................................   286

Manth, Larry:
    Testimony....................................................    34

Larson, John:
    Testimony....................................................   114

McDonough, William J.:
    Testimony....................................................   130
    Prepared statement...........................................   349

Petersen, Debra S.:
    Testimony....................................................    11
    Prepared statement...........................................   275

Ruble, Raymond J.:
    Testimony....................................................    76

Smith, Richard H., Jr.:
    Testimony....................................................    57

Smith, Thomas R., Jr.:
    Testimony....................................................    77
    Prepared statement...........................................   312

Spillenkotchen, Richard:
    Testimony....................................................   131
    Prepared statement...........................................   361

Watson, Mark T.:
    Testimony....................................................    13
    Prepared statement...........................................   285

Weinberger, Mark A.:
    Testimony....................................................    55
    Prepared statement...........................................   309

Wiesner, Philip:
    Testimony....................................................    32

                                APPENDIX

Minority Staff Report of the Permanent Subcommittee on 
  Investigations entitled, ``U.S. Tax Shelter Industry: The Role 
  of Accountants, Lawyers, and Financial Professionals, Four KPMG 
  Case Studies: FLIP, OPIS, BLIPS, and SC2,'' released in 
  conjunction with the Permanent Subcommittee on Investigations' 
  hearings on November 18 and 20, 2003, S. Prt. 108-34...........   145

I. INTRODUCTION..................................................   145

II. FINDINGS.....................................................   147

III. EXECUTIVE SUMMARY...........................................   149

      A. Developing New Tax Products.............................   151
      B. Mass Marketing Tax Products.............................   152
      C. Implementing Tax Products...............................   153
      D. Avoiding Detection......................................   157
      E. Disregarding Professional Ethics........................   159

IV. RECOMMENDATIONS..............................................   160

V. OVERVIEW OF U.S. TAX SHELTER INDUSTRY.........................   162

      A. Summary of Current Law on Tax Shelters..................   162
      B. U.S. Tax Shelter Industry and Professional Organizations   164

VI. FOUR KPMG CASE HISTORIES.....................................   166

      A. KPMG In General.........................................   166
      B. KPMG's Tax Shelter Activities...........................   168
        (1) Developing New Tax Products..........................   172
        (2) Mass Marketing Tax Products..........................   188
        (3) Implementing Tax Products............................   206
           a. KPMG's Implementation Role.........................   206
           b. Role of Third Parties in Implementing KPMG Tax 
      Products...................................................   215
        (4) Avoiding Detection...................................   235
        (5) Disregarding Professional Ethics.....................   245

APPENDIX A
    CASE STUDY OF BOND LINKED ISSUE PREMIUM STRUCTURE (BLIPS)....   255

APPENDIX B
    CASE STUDY OF S-CORPORATION CHARITABLE CONTRIBUTION STRATEGY 
      (SC2)......................................................   266

APPENDIX C
    OTHER KPMG INVESTIGATIONS OR ENFORCEMENT ACTIONS.............   270

                              EXHIBIT LIST
                                Volume 1

   1. a. GBLIPS: Bond Linked Issue Premium Structure, PowerPoint 
  presentation with eight slides prepared by the Permanent 
  Subcommittee on Investigations.................................   371

       b. GSC\2\, PowerPoint presentation with five slides 
  prepared by the Permanent Subcommittee on Investigations.......   379

       c. GMass Marketing of Tax Shelters, chart prepared by the 
  Permanent Subcommittee on Investigations.......................   384

       d. GKnowledge of Counter Parties, chart prepared by the 
  Permanent Subcommittee on Investigations.......................   385

  2. GKPMG Memorandum, February 1998, re: Summary and 
  observations of OPIS...........................................   386

  3. GKPMG Memorandum, May 1998, re: OPIS Tax Shelter 
  Registration...................................................   393
  4. GGibson, Dunn & Crutcher LLP Memorandum to KPMG, March 2000, 
  re: BLIPS Tax Opinion..........................................   400

  5. GKPMG email, April 1999, re: BLIPS (``The original intent of 
  the parties was to participate in all three investment stages 
  of the Investment Program.'' It seems to me that this is a 
  critical element of the entire analysis and should not be 
  blithely assumed as a ``fact''. If it is true, I think it 
  should be one of the investor's representations. However, I 
  would caution that if there were, say, 50 separate investors 
  and all 50 bailed out of at the completion of Stage I, such a 
  representation would not seem credible.).......................   408

  6. GKPMG email, February 2000, re: Product champions needed for 
  S Corp strategy (I want to personally thank everyone for their 
  effort during the approval process of this strategy. It was 
  completed very quickly and everyone demonstrated true teamwork. 
  Thank you! Now lets SELL, SELL, SELL!!)........................   412

  7. GKPMG email, February 2000, re: BLIPS/OPIS (. . . the sooner 
  we get them out the door the better since the law--especially 
  the primary profit motive test--is evolving daily and not in a 
  taxpayer friendly manner. * * * As I understand the facts, all 
  66 closed out by year-end and triggered the tax loss.).........   415

  8. GKPMG email, February 2001, re: SC2 Solution--New 
  Development (Quick Snapshot--We are now offering a modified SC2 
  solution. S Corp shareholders can use the structure of direct 
  significant gift to 501(c)(3) tax exempts of their choice. Net 
  tax benefit is less than original SC2 . . . shareholder ``feel 
  good'' factor is higher. We need targets and ICV's. * * * Look 
  at the last partner scorecard. Unlike golf, a low number is not 
  a good thing. . . . A lot of us need to put more revenue on the 
  board before June 30. SC2 can do it for you. Think about 
  targets in your area and call me.).............................   423

  9. GKPMG email, June 2000, re: Revised SC2 Script, Rosenthal/
  Stein approval of SC2 calling script...........................   426

 10. GKPMG emails, September 1998, January 1999, and October 2000 
  re: Grantor Trust Issue and KPMG Memorandum of Telephone Call, 
  May 2000, re: Grantor Trust Issue (So our best intelligence is 
  that you are increasing your odds of being audited, not 
  decreasing your odds by filing that Grantor Trust return. So we 
  have discontinued doing that.).................................   428

 11. GKPMG email, March 1998, re: Simon Says (. . . and yet in 
  truth the option was really illusory and stood out more like a 
  sore thumb since no one in his right mind would pay such an 
  exorbitant price for such a warrant.)..........................   439

 12. GEmail, May 1999, re: Who is the Borrower in the BLIPS 
  transaction (Based on your analysis below, do you conclude that 
  the tax results sought by the Investor are NOT ``more likely 
  than not'' to be realized? * * * Yes.).........................   448

 13. GEmail, August 1999, re: BLIPS (However, before engagement 
  letters are signed and revenue is collected, I feel it is 
  important to again note that I and several other WNT 
  [Washington National Tax] partners remain skeptical that the 
  tax results purportedly generated by a BLIPS transaction would 
  actually be sustained by a court if challenged by the IRS.)....   450

 14. GKPMG email, May 1998, re: OPIS Tax Shelter Registration (If 
  for some reason the IRS decides to ``get tough'' with someone 
  vis-a-vis the old rules, I suspect it could easily pick on ANY 
  of the Big 6, or for that matter any number of law firms/
  promoters--I don't think we want to create a competitive 
  DISADVANTAGE, nor do we want to lead with our chin.)...........   451

 15. GKPMG email, December 1998, re: OPIS (After December 31, 
  1998, there will be no marketing of OPIS in any circumstances.)   452

 16. GKPMG email, July 1999, re: National Accounts Database 
  (VALUE PROPOSITION: . . . The all-in cost of the program, 
  assuming a complete loss of investment principal, is 7% of the 
  targeted tax loss (pre-tax). The tax benefit of the investment 
  program, which ranges from 20% to 45% of the targeted tax loss, 
  will depend on the taxpayer's effective tax rates. FEE: BLIPS 
  is priced on a fixed fee basis which should approximate 1.25% 
  of the tax loss. Note that this fee is included in the 7% 
  described above.)..............................................   453

 17. GKPMG email, August 1999, re: BLIPs (Depicting the approval 
  of BLIPS and views of some at KPMG about the strategy.)........   455

 18. GKPMG email, September 1999, re: BLIPS 2000 (A number of 
  people are looking at doing BLIPS transactions to generate Y2K 
  losses. We currently have bank capacity to have $1 billion of 
  loans outstanding at 12/31/99. This translates into 
  approximately $400 million of premium. This tranche will be 
  implemented on a first-come, first-served basis until we fill 
  capacity. Get your signed engagement letters in!!).............   459

 19. GKPMG email, February 2000, re: Hot Tax Products (5 Month 
  Mission) (Thanks for help in this critically important matter. 
  As Jeff [Stein] said, ``We are dealing with ruthless 
  execution--hand to hand combat--blocking and tackling.'' 
  Whatever the mixed metaphor, let's just do it.)................   460

 20. GKPMG email, April 2000, re: SC2 (There have been several 
  successes--the West and South Florida with many ICV's in other 
  parts of the country. We are behind. This is THE STRATEGY that 
  they expect significant value added fees by June 30. The heat 
  is on. . . .)..................................................   463

 21. GKPMG Document, SC\2\--Meeting Agenda June 19th, 2000.......   464

 22. GKPMG email, July 2000, re: Attaching memorandum to Tax 
  Partners and Tax Management Group. re: Selling with Confidence: 
  Skills for Successful Selling--``Positioning.''................   486

 23. GKPMG email, August 2000, re: Solution Activity Reports--SC2 
  (Our team of telemarketers is particularly helpful in a number 
  of respects: --to further qualify prospects; --to set up phone 
  appointments for you and your deployment team.)................   488

 24. GKPMG email, November 2000, re: SW SC2 Channel Conflict 
  (Attached is a list of SC2 targets in the Southwest that we are 
  including in an upcoming telemarketing program.)...............   490

 25. GKPMG email, December 2000, re: STRATECON WEST--KICK OFF 
  PLAN FOR '01 (. . . we must aggressively pursue these high-end 
  strategies.)...................................................   492

 26. GKPMG email, March 2001, re: Friday's Stratecon Call (Due to 
  the significant push for year-end revenue, all West Regional 
  Federal tax partners have been invited to join us on this call 
  and we will discuss our ``Quick Hit'' strategies and targeting 
  criteria.).....................................................   494

 27. GKPMG email, April 2001, re: Friday's Stratecon Call (The 
  [tax] strategies have a quick revenue hit for us, . . .).......   495

 28. GKPMG email, May 1999, re: Marketing BLIPS (One does not 
  need to understand how the program is structured to determine 
  whether someone has sufficient gain and has the tax risk 
  appetite to do an OPIS/BLIPS type strategy.)...................   496

 29. GKPMG email, September 1999, re: BLIPS--managing deal flow 
  (As you know, we have until 10/15 at the latest to close loans 
  and 10/22 to activate the FX trading etc. (the 60 day 
  countdown).)...................................................   499

 30. GKPMG email, October 1999, re: BLIPS (18 OPIS ``slots'' were 
  reserved for the intended BLIPS participants noted in the third 
  paragraph below.)..............................................   500

 31. GKPMG email, November 1999, re: BLIPS (It occurs to me that 
  it would be useful to know something about the investment 
  performance as we call these clients to discuss their go 
  forward strategy. . . . * * * As you may be aware, the 60-day 
  anniversary of your client's participation in the Strategic 
  Investment Fund is November 22nd. As a reminder for you and 
  your client, we have summarized certain procedures that may be 
  of interest.)..................................................   503

 32. GGenerating Capital Losses, A Presentation for ------, KPMG 
  Peat Marwick LLP, ------, 1996.................................   505

 33. GKPMG Memorandum, June 1998, re: June 11 OPIS Conference 
  Call (Use of Nondisclosure Agreements and Outside Advisors)....   517

 34. GEmail, July 1999, re: BLIPS--Economic Substance Issue 
  (Gentlemen, we have completed our review of the BLIPS loan 
  documents. In general, these documents indicate that the loan 
  proceeds will be invested in very safe investments (e.g., money 
  market instruments). Thus it seems very unlikely that the rate 
  of return on the investments purchased with the loan proceeds 
  will equal or exceed the interest charged on the loan and the 
  fees incurred by the borrower to secure the loan. * * * Before 
  any fees are considered, the client would have to generate a 
  240% annual rate of return on the $2.5 million foreign 
  currencies investment in order to break even. If fees are 
  considered, the necessary rate of return to break even will be 
  even greater.).................................................   521

 35. GKPMG email, May 2000, re: Brown & Wood BLIPS Opinion 
  letters (As we discussed, the B&W opinion letters touch all the 
  necessary bases. The fact and representation sections are 
  almost identical to the ones in our Opinion and many analysis 
  sections are exact copies of our Opinion. Please let me know if 
  you want further details about the ``non-critical'' typos.)....   522

 36. GKPMG email, July 1999, re: brown&wood (If you have a KPMG 
  opinion, you should also have a B&W opinion. We do ours and 
  they use it as a factual template for their opinion, usually 
  within 48 hours.)..............................................   524

 37. GInternal Revenue Bulletin No. 2000-36, September 5, 2000, 
  Notice 2000-44, Tax avoidance using artificially high basis--
  describing a BLIPS-type transaction............................   525

 38. GKPMG Document, PFP Practice Reorganization, Innovative 
  Strategies Business Plan--DRAFT (May 18, 2001).................   528

 39. GKPMG email, May 1999, re: BLIPS Update (Larry [DeLap], I 
  don't like this product and would prefer not to be associated 
  with it.)......................................................   532

 40. GKPMG email, December 2000, re: Weekly Tax Solutions Call 
  (Larry [DeLap]--Are you suggesting that we stop marketing the 
  solution, or that you just don't want a public discussion of 
  the solution in light of the IRS focus?).......................   533

 41. GKPMG's Personal Financial Planning Presentation, BLIPS AND 
  TRACT, Carol Warley, June 1999 (BLIPS Benefit: --Avoid All Of 
  The Capital Gains And Ordinary Income Tax; --Net Benefit To 
  Client --Effective Tax Rate Less After Tax Cost of Transaction 
  of Approximately 5%)...........................................   536

 42. GKPMG email, April 1999, re: BLIPS (The underlying tax 
  planning is such that the investor is likely to bail out after 
  Stage 1; i.e., after about 60 days.)...........................   543

 43. GKPMG email, March 2000, re: S-corp Product (No, we don't 
  disclose all risks in all engagement letters. * * * . . . I 
  definately (sic) agree on disclosing the risks upfront and 
  would prefer to have the separate memo that states the risks 
  involved. . . . is there a way to make the risk memo be covered 
  under 7525?)...................................................   545

 44. GSutherland Asbill & Brennan LLP correspondence, July 2002, 
  re: Representations of BLIPS client............................   555

 45. GKPMG correspondence to Sutherland, Asbill & Brennan LLP, 
  September 2002, re: Contract with KPMG for tax assessment for 
  BLIPS client...................................................   557

 46. GKPMG email, November 2002, re: Script (Attached is a list 
  of law firms that are handling FLIP/OPIS cases. * * * Attached 
  is the script . . . waiver language and list of attorneys to 
  follow.).......................................................   560

 47. GKPMG email, March 2002, re: SC2 (Given the current state of 
  affairs relative to the IRS and accounting firms, I think we 
  should not be discussing SC2 on the Monday night call at this 
  time.).........................................................   563

 48. GKPMG email, August 1999, re: BLIPS Engagement Letter 
  (Attached is the engagement letter approved by Larry [DeLap].).   566

 49. GKPMG email, March 2000, re: S-corp Product (1. This appears 
  to be little more than a old give stock to charity and then 
  redeem it play . . . * * * Our preference is that the client 
  donate stock to a local 401(a), . . .).........................   574

 50. GKPMG email, April 2000, re: S-Corporation Charitable 
  Contribution Strategy (SC2) (This is a relatively high risk 
  strategy.).....................................................   584

 51. GKPMG email, August 2001, re: New Solutions-WNT [Washington 
  National Tax] (Beginning in December . . . The shareholders 
  will most likely want access to the cash (especially if we 
  could get it to them tax-free).)...............................   585

 52. GKPMG email, October 2001, re: SC2 Client (His ownership is 
  so minute, he is concerned about it being reduced any further 
  by the charitable contribution. We know that this reduction is 
  only temporary, . . .).........................................   587

 53. GKPMG Document, Tax Innovation Center, Product Idea 
  Submission Form and KPMG Tax Solution Alert, April 24, 2000, S-
  Corporation Charitable Contribution Strategy...................   589

 54. GKPMG document, undated, Draft PDC Talk Points 6/19, S-
  Corporation Charitable Contribution Strategy (Cold call 
  script.).......................................................   595

 55. GKPMG email, March 2001, re: Florida S corporation search 
  (Request to utilize database on tax return information to 
  identify potential SC2 clients.)...............................   597

 56. GKPMG email, March 2001, re: South Florida SC2 Year End Push   599

 57. GKPMG email, March 2001, re: SC2--Client Base Expansion.....   601

 58. GKPMG email, December 2001, re: SC2 (. . . working on a 
  back-end solution to be approved by WNT [Washington National 
  Tax] that will provide S-corp shareholders additional basis in 
  their stock which will allow for the cash built-up inside of 
  the S-corporation to be distributed tax-free to the 
  shareholders.).................................................   602

 59. GKPMG email, January 2002, re: SC2 (Shelly Nance is in Fort 
  Wayne, which is ``cold call central''. How can she (or he) be 
  involved in sending out messages about SC2 if it is not being 
  mass marketed.)................................................   604

 60. GPermanent Subcommittee on Investigations correspondence to 
  KPMG, LLP, November 2003, re: November hearing testimony.......   609

 61. GKPMG Presentation excerpts: Tax Innovation Center Solution 
  and Idea Development--Year-End Results, May 30, 2001; and Goal: 
  Deposit 150 New Ideas in Tax Service Idea Bank.................   612

 62. GKPMG Presentation excerpts: Innovative Tax Solutions, July 
  19, 2001; Tax Practice Update; and Tax Practice Growth Gross 
  Revenue........................................................   614

 63. GKPMG Presentation, S-Corporation Charitable Contribution 
  Strategy (SC2 Update), June 18, 2001, showing SC\2\ Revenues...   617

 64. GKPMG email, May 1999, re: BLIPS--More Likely Than Not? (. . 
  . while I am comfortable that WNT [Washington National Tax] did 
  its job reviewing and analyzing the technical issues associated 
  with BLIPS, based on the BLIPS meeting I attended on April 30 
  and May 1, I am not comfortable issuing a more-likely-than-not 
  opinion letter wrt (sic) this product . . .)...................   621

 65. GKPMG email, May 1999, re: BLIPS (The real ``rubber meets 
  the road'' will happen when the transaction is sold to 
  investors, what the investors' actual motive for investing the 
  transaction is and how the transaction actually unfolds. * * * 
  My own recommendation is that we should be paid a lot of money 
  here for our opinion since the transaction is clearly one that 
  the IRS would review as falling squarely within the tax shelter 
  orbit.)........................................................   623

 66. GKPMG email, August 1999, re: BLIPS involvement in the NE--
  BDMs (KPMG's fee is 1.25% (125 basis points) of the gain to be 
  mitigated. This fee is included as part of the 7% investment in 
  strategy.).....................................................   628

 67. GDeutsche Bank email, July 1999, re: Risk and Resources 
  Committee Paper (BLIPS Summary--The 7.7% will cover market 
  risks, transaction costs, and DBSI fees.)......................   632

 68. GEmail, September 1999, re: West (Larry [DeLap], just to 
  clarify, even if we have five or more investors in a single 
  BLIPS transaction, you don't think we need to register the 
  transaction as a tax shelter. Is this correct? * * * No, that 
  is not correct, Mark Ely has concluded there is a reasonable 
  basis not to register.)........................................   641

 69. GDeutsche Bank/Presidio Advisors, LLC Memorandum, April 
  1999, re: BLIPS friction costs (On day 60, Investor exits 
  partnership and unwinds all trades in partnership.)............   644

 70. GDeutsche Bank New Product Committee Overview Memo: BLIPS 
  Transaction (It is imperative that the transaction be wound up 
  after 45-60 days and the loan repaid due to the fact that the 
  HNW individual will not receive his/her capital loss (or tax 
  benefit) until the transaction is wound up and the loan 
  repaid.).......................................................   646

 71. GFirst Union (Wachovia) Capital Management Group Enhanced 
  Investment Strategy Release, February 2, 1999..................   651

 72. GKPMG Foreign Leveraged Investment Program, Issue and Hazard 
  Summary (Taxpayer not sufficiently ``at risk'' under section 
  465) (preliminary and final versions)..........................   652

 73. GKPMG email, February 1999, re: BLIPS (. . . status of the 
  BLIPS as an OPIS replacement strategy. . . . I would think we 
  can reasonably anticipate ``approval'' in another month or so. 
  * * * Given the marketplace potential of BLIPS, I think a month 
  is far too long-- . . .).......................................   654

 74. GEmail, February 1999, re: BLIPS Progress Report (I don't 
  like this pressure . . .)......................................   655

 75. GKPMG MEETING SUMMARY, February 1999, re: Determine if BLIPS 
  is viable......................................................   656

 76. GEmail, April 1999, re: BLIPS (I would not characterize my 
  assessment of the economic substances of the ``premium 
  borrowing'' in the BLIPS transaction as ``positive.'').........   660

 77. GEmail, April 1999, re: BLIPS Analysis......................   661

 78. GEmail, May 1999, re: Who is the Borrower in the BLIPS 
  transaction....................................................   662

 79. GEmail, August 1999, re: BLIPS Documents--Acceptance of 
  Recommended Language...........................................   663

 80. GEmail, May 1999, re: BLIPS (According to Presidio, the 
  probability of making a profit from this strategy is remove 
  (possible, but remote).).......................................   664

 81. GKPMG email, May 1999, re: BLIPS (. . . my change in heart 
  about BLIPS was based on information Presidio disclosed to me 
  at a meeting on May 1. This information raised serious concerns 
  in my mind about the viability of the transaction, and 
  indicated that WNT [Washington National Tax] had not been given 
  complete information about how the transaction would be 
  structured . . .)..............................................   665

 82. GEmail, August 1999, re: BLIPS (. . . before engagement 
  letters are signed and revenue is collected, I feel it is 
  important to again note that I and several other WNT 
  [Washington National Tax] partners remain skeptical that the 
  tax results . . . would actually be sustained by a court if 
  challenged by the IRS.)........................................   666

 83. GEmail, January 2000, re: BLIPS 2000 (The PFP guys really 
  need your help on the BLIPS 2000 strategy. . . . so we can take 
  this to market.)...............................................   667

 84. GEmail, March 2000, re: Blips I, Grandfathered Blips, and 
  Blips 2000 (. . . I do not believe KPMG can reasonably issue a 
  more-likely-than-not opinion on the economic substance issues 
  for the Blips . . .)...........................................   668

 85. GKPMG Memoranda, February 1999, re: BLIPS...................   669

 86. GKPMG Memoranda, March 2000, re: Talking points on 
  significant tax issues for BLIPS 2000..........................   670

 87. GKPMG Memoranda, S Corporation Charitable Contribution 
  Strategy, Summary of Certain Risks (The opinion also much be 
  based on all pertinent facts and the law as it relates to those 
  facts; must not be based upon inaccurate legal or factual 
  assumptions; and must not unreasonably rely upon the 
  representations, statements, findings, or agreements of the 
  taxpayer or any other person.).................................   675

 88. GEmail, May 1999, re: BLIPS (It was not until I heard 
  conflicting information that I questioned the original facts. 
  In the future, I will question everything Presidio and Randy 
  Bickham represent to me.]......................................   677

 89. GKPMG Tax Leadership, 2003; KPMG Tax Practice Organization, 
  2002, 2001 and 2000............................................   680

 90. a. GKPMG Tax Opinion Letter (Signed Final), December 1999. 
  [Redacted by the Permanent Subcommittee on Investigations].....   684

     b. GBrown & Wood Tax Opinion Letter (Signed Final), December 
  1999. [Redacted by the Permanent Subcommittee on 
  Investigations]................................................   781

     c. GSEALED EXHIBIT: Unredacted copies of Exhibit No. 90a. 
  and 90b (above)................................................     *

 91. GKPMG Memoranda, August 1998, re: Tax Products Practice (I 
  was responsible for KPMG's position that we should not register 
  OPIS as a tax shelter and insisted that we make the business 
  case with DPP. This was of significant benefit in marketing the 
  OPIS product and will establish the direction with respect to 
  KPMG's position on future tax products.).......................   857

 92. GKPMG email, September 1998, re: OPIS (These fees relate to 
  approximately $1.2 billion in notional losses for approximately 
  25 clients.)...................................................   865

 93. GEmail, June 1998, re: OPIS (Not only will this unduely 
  (sic) harm our ability to keep the product confidential, it 
  will DESTROY any chance the client may have to avoid the step 
  transaction doctrine.).........................................   866

                                Volume 2

 94. a.-ggg. GDocuments relating to FLIP/OPIS....................   869

 95. a.-BBB. GDocuments relating to BLIPS........................  1240

 96. a.-ll. GDocuments relating to SC2...........................  1692

                                Volume 3

 97. a.-pp. GDocuments relating to development/marketing of tax 
  products.......................................................  1951

 98. a.-ppp. GDocuments relating to registering, reporting and 
  filing with Internal Revenue Service...........................  2225

 99. Documents relating to investment advisory firms:

     a.-f. Quadra/Quellos........................................  2473

     g.-t. Presido...............................................  2485

100. Documents relating to law firms:

     a.-u. Sidley Austin Brown & Wood............................  2540

     v.-gg. Sutherland Asbill & Brennan..........................  2576

101. GQuadra Capital Management, LP. facsimile, August 1996, 
  attaching Memorandum on UBS' involvement in U.S. Capital Loss 
  Generation Scheme (the ``CLG Scheme'') (As I mentioned, KPMG 
  approached us as to whether we could affect the security trades 
  necessary to achieve the desired tax results.).................  2607

102. GDeutsche Bank Memorandum, July 1999, re: GCI Risk and 
  Resources Committee--BLIPS Transaction.........................  2612

103. GDeutsche Bank email, July 1999, re: Risk & Resources 
  Committee Paper--BLIPS and Comments on Blips Collateral and 
  Credit Terms (I would have thought you could still ensure that 
  the issues are highlighted by ensuring that the papers are 
  prepared, and all discussion held, in a way which makes them 
  legally privileged.)...........................................  2615

104. GDeutsche Bank email, July 1999, re: Risk & Resources 
  Committee Paper--BLIPS (Our approach is as follows: STRUCTURE: 
  . . . Priviledge (sic): This is not easy to achieve and 
  therefore a more detailed description of the tax issues is not 
  advisable. REPUTATION RISK: . . . we have been asked by the Tax 
  Department not to create an audit trail in respect of the 
  Bank's tax affaires.)..........................................  2618

105. GDeutsche Bank email, February 2002, re: Updated Presidio/
  KPMG trades (I understand that we based our limitations on 
  concerns regarding reputational risk which were heightened, in 
  part, on the proportion of deals we have executed relative to 
  the other banks. * * * . . . we would like to lend an amount of 
  money to Hypovereinsbank equal to the amount of money 
  Hypovereinsbank lends to the client.)..........................  2619

106. GDeutsche Bank email, April 2002, re: US GROUP 1 Pres, 
  attaching Structured Transactions Group North America 
  Presentation, November 15, 1999................................  2622

107. GHVB Document, undated, re: Presidio (7% -> fee (equity) 
  paid by investor for tax sheltering)...........................  2646

108. GHVB email, September 1999, re: Presidio....................  2647

109. GDeutsche Bank email, April 1999, re: presidio--w. revisions 
  (. . . The holding period/life of the LLC will typically be 45 
  to 60 days. At the end of this time period, the LLC will unwind 
  all transactions, repay the loan par amount and premium amount. 
  For tax and accounting purposes, repaying the premium amount 
  will ``count'' like a loss for tax and accounting purposes.)...  2649

110. GKPMG email, March 2000, re: Bank representation (The bank 
  has pushed back the loan again and said they simply will not 
  represent that the large premium loan is consistent with 
  industry standards.)...........................................  2657

111. GHVB credit request for BLIPS transaction by Presidio 
  personnel, September 1999. (HVB will earn a very attractive 
  return if the deal runs to term. If, however, the advances are 
  prepaid within 60 days (and there is a reasonable prospect that 
  they will be), HVB will earn a return of 2.84% p.a. on the 
  average balance of funds advanced.)............................  2660

112. GKPMG Memoranda, March 1998, re: OPIS (The attached went to 
  the entire working group. . . . I believe that the OPIS product 
  (``Son of Flip'') is a stripped down version of the LLC 
  (partnership) structure.)......................................  2678

113. GDeutsche Bank email, October 1999, re: BLIPS (PKS reports 
  that a meeting with John Ross was held on August 3, 1999 in 
  order to discuss the BLIPS product. PKS represented PB 
  Management's views on reputational risk and client suitability. 
  John Ross approved the product, however insisted that any 
  customer found to be in litigation be excluded from the 
  product, the product be limited to 25 customers and that a low 
  profile be kept on these transactions.)........................  2679

114. GDeutsche Bank New Product Committee Overview Memo: BLIPS 
  Transaction (11-DB will have the right to approve/disapprove 
  all trading activity in the Company. This will allow DB to 
  effectively force the closure of the company and repayment of 
  its loan to DB.) [Note: An alternative version of this document 
  was previously entered into the Permanent Subcommittee on 
  Investigations' hearing record as Exhibit No. 70.].............  2681

115. GKPMG Minutes of Assurance/Tax Professional Practice 
  Meeting, September 28, 1998....................................  2686

116. GBrown & Wood email, December 1997, re: joint projects (This 
  morning my managing partner, Tom Smith, approved Brown & Wood 
  LLP working with the newly conformed tax products group at KPMG 
  on a joint basis in which we would jointly develop and market 
  tax products and jointly share in the fees, as you and I have 
  discussed.)....................................................  2691

117. GKPMG email, September 1997, re: Flip Tax Opinion (ALSO, OUR 
  DEAL WITH BROWN AND WOOD IS THAT IF THERE NAME IS USED IN 
  SELLING THE STRATEGY, THEY WILL GET A FEE.)....................  2692

118. GKPMG Memorandum, March 1998, re: B&W Meeting (What should 
  be the profit-split between KPMG, B&W and the tax products 
  group/implementor for jointly-developed products?).............  2693

119. GKPMG Memorandum, December 1997, re: Business Model--Brown & 
  Wood Strategic Alliance........................................  2696

120. GBrown & Wood email, December 1997, re: Confidential Matters 
  (On another point, as I have been mentioning with you, I do 
  work for a number of people who have potentially complementary 
  tax advantaged products. Let me state up front, I am not trying 
  to push any of these on KPMG, but it might be useful if you are 
  trying to get a repitoire of products jump started to talk to 
  some or all of them. In addition, each of them has a 
  relationship with one or more financial institutions who 
  provide credit, derivatives trades, etc. necessary to execute 
  the product.)..................................................  2699

121. GKPMG email, May 2000, re: BLIPS--7 percent (The breakout 
  for a typical deal is as follows: . . . Trading Loss 70 * * * 
  Attached is Kerry's breakout of the 7 percent. [Redacted] gets 
  30 bpts from the Mgt. Fee. Is this detailed enough?)...........  2701

122. GKPMG email, September 1999, re: BLIPS--managing deal flow 
  (As you know, we have until 10/15 at the latest to close loans 
  and 10/22 to activate the FX trading, etc. (the 60 day 
  countdown).)...................................................  2702

123. GHVB Memorandum, October 1999, re: Presidio Credit Request 
  Dated September 14, 1999 (To summarize the above, the increased 
  limits will now permit the full amount of our facility to be 
  invested in EUR deposits and do related forwards.).............  2703

124. GHVB Document, Back-End Process.............................  2705

125. GHVB Document, Transaction Timeline (Exchange USD Amount to 
  EUR Amount * * * USD 181,300,000)..............................  2711

126. GPRESIDIO ADVISORY SERVICES, LLC Memorandum, April 2002, re: 
  Year 2000 Strategic Plan. (Over the past two years because of 
  delays in obtaining the requisite approvals to market the OPIS 
  and BLIPS products, we did not begin closing deals until 
  September of 1998 and 1999, respectively. * * * Both Deutsche 
  Bank and KPMG have requested that we replace our existing BLIPS 
  product with a new product in 2000.)...........................  2712

127. GKPMG/Presidio Advisors email, October 1999, re: Couple of 
  quick questions--Liquidating distributions (Upon distribution 
  (at the end of the 60 day period), can the client designate 
  where the funds go?)...........................................  2719

128. GHandwritten notes, March 1998, re: Brown & Wood (Confirm w/
  Presidio that they will register.).............................  2720

129. GPRESIDIO ADVISORY SERVICES, LLC Memorandum, September 1999, 
  re: BLIPS loan test case (Four special purpose, single member 
  Delaware LLC, owned by four trusts: D. Amir Makov revocable 
  trust (1/3), JL capital trust (1/3), RP capital trust (1/6), 
  pointe du Hoc irrevocable trust (1/6)).........................  2721

130. GKPMG/Presidio Advisors email, December 1998, re: BLIPS 
  meeting (Second, the tax analyses and opinion writing needs to 
  go into high gear.)............................................  2722

131. GKPMG/Presidio Advisors/Brown & Wood email, December 1998, 
  re: BLIPS meeting (I spoke with R.J. this morning about a 
  ``tax-focused'' meeting next week. As a first step before 
  scheduling a meeting, we thought that we should first draft the 
  base of an opinion letter in an outline format which will be 
  circulated for comment before getting everyone together for a 
  ``all-hands'' meeting. We are currently working on the document 
  and expect to circulate it next week.).........................  2723

132. GKPMG email, February 2000, re: Brown & Wood opinion 
  letter--BLIPS (Jeff Eischeid has promised the Brown & Wood 
  opinion template ready in two weeks and we need your analysis.)  2724

133. GKPMG email, January 2001, re: blips (We're still working 
  with Moore & Van Allen. They've declined to write a concurring 
  opinion--their firm doesn't write such opinions as a matter of 
  policy. They are considering, this week, whether they will 
  write [redacted] a MLTN [More Likely than Not] penalty 
  opinion.)......................................................  2726

134. GIRS Form 8264, Application for Registration of a Tax 
  Shelter, QA Investments, LLC registration of FLIP..............  2727

135. GKPMG/Quadra Fax and Memoranda, October 1997, re: 
  Registration of FLIP...........................................  2729

136. GDeutsche Bank email, July 1999, re: hi bill..presidio (i 
  informed him that you are point man on the deal and that all 
  comments should go through you)................................  2734

137. GKPMG email and Memorandum, July 1997, re: Revised 
  Memorandum ((I) KPMG's Tax Advantaged Transaction Practice; 
  (II) Presidio's Relationship with KPMG; (III) Transition 
  Issues.).......................................................  2735

138. GHVB Document, August 2000, Presidio--Plafond (Investors 
  have, so far, chosen to liquidate before the second (180 day) 
  phase. ie after 60 days.)......................................  2745

139. a.-t. GDocuments relating to Ernst & Young..................  2746

140. a.-o. GDocuments relating to PriceWaterhouseCoopers.........  2803

141. a.-k. GDocuments relating to First Union....................  2848

142. a. GWNT Solutions by Primary Functional Group--FYI 2001-
  2002, November 26, 2002, reprinting first three pages of 
  document (other pages sealed, see Exhibit 139b.)...............  2871

     b. GSEALED EXHIBIT: WNT Solutions by Primary Functional 
  Group--FYI 2001-2002, dated November 26, 2002..................     *

143. GSEALED EXHIBIT: StrateconWest email, December 2001, re: 
  StrateconWest/FSG Solution (Please find attached the latest and 
  greatest list of strategies for StrateconWest and FSG).........     *

144. GSEALED EXHIBIT: Correspondence between Brown & Wood LLP and 
  Presidio Advisors LLC, dated October 1998 and February 1999, 
  regarding billing and document preparation for tax opinion.....     *

145. GOrganizational Chart, KPMG Tax Practice Organization, 
  produced by KPMG LLP in response to request made by Senator 
  Levin at the November 18, 2003, hearing........................  2874

146. GStatement for the Hearing Record of Reuven S. Avi-Yonah, 
  Irwin I. Cohn Professor of Law and Director of the 
  International Tax Master of Law Program at the University of 
  Michigan Law School............................................  2875

147. a.-b. GSupplemental questions and answers for the record of 
  KPMG. [Note: Exhibit 147a has been redacted, full document has 
  been made a SEALED EXHIBIT.]...................................  2878

148. GSupplemental questions and answers for the record of 
  Deutsche Bank..................................................  2939

149. GSupplemental questions and answers for the record of HVB 
  America, Inc...................................................  2949

150. GSupplemental questions and answers for the record of 
  Quellos Group, LLC.............................................  2982

151. GSupplemental questions and answers for the record of 
  Sutherland Asbill & Brennan LLP [Note: Submission has been 
  redacted, full document has been made a SEALED EXHIBIT.].......  2984

152. GSupplemental questions and answers for the record of Sidley 
  Austin Brown & Wood............................................  2999

153. GStatement for the Record and supplemental questions and 
  answers for the record of the Los Angeles Department of Fire & 
  Police Pensions System.........................................  3016

154. GSupplemental questions and answers for the record of the 
  Internal Revenue Service.......................................  3025

                                Volume 4

155. GDocuments relating to Footnotes found in U.S. Tax Shelter 
  Industry: The Role of Accountants, Lawyers, and Financial 
  Professionals--Four KPMG Case Studies: FLIP, OPIS, BLIPS, and 
  SC2, a Report prepared by the Minority Staff of the Permanent 
  Subcommittee on Investigations in conjunction with the 
  Subcommittee hearings held November 18 and 20, 2003: [Note: 
  Footnotes not listed are explanative, reference Subcommittee 
  interviews for which records are not available to the public, 
  or reference a widely available public document.]

      Footnote No. 1, SEALED EXHIBIT.............................     *

      Footnote No. 3, See Hearing Exhibit No. 38 (above).........   528

      Footnote No. 4, See Hearing Exhibit No. 16 (above).........   453

      Footnote No. 10, See Attachments (2)...................3027, 3036

      Footnote No. 11, See Attachment............................  3045

      Footnote Nos. 15-16, See Hearing Exhibit No. 106 (above)...  2622

      Footnote No. 47, See Hearing Exhibit No. 62 (above)........   614

      Footnote No. 48, See Attachment............................  3047

      Footnote No. 49, See Hearing Exhibit No. 38 (above)........   528

      Footnote No. 50, See Attachment............................  3053

      Footnote No. 52, See Attachment............................  3054

      Footnote No. 55, See Footnote No. 52 (above)...............   587

      Footnote No. 56, SEALED EXHIBIT............................     *

      Footnote No. 57, See Attachment............................  3244

      Footnote Nos. 58-59, See Footnote No. 57 (above)...........   601

      Footnote No. 65, See Attachment............................  3245

      Footnote No. 66, See Hearing Exhibit No. 14 (above)........   451

      Footnote No. 68, See Attachment............................  3248

      Footnote No. 69, See Attachment............................  3351

      Footnote No. 70, See Footnote 69 (above)...................   644

      Footnote No. 71, See Hearing Exhibit No. 61 (above)........   612

      Footnote No. 72, See Footnote No. 52 (above)...............   587

      Footnote Nos. 73-74, See Footnote No. 69 (above)...........   644

      Footnote Nos. 76-77, 79-81, See Footnote No. 52 (above)....   587

      Footnote No. 82, See Footnote No. 69 (above)...............   644

      Footnote No. 83, See Footnote No. 52 (above)...............   587

      Footnote No. 84, See Attachment, Footnote No. 52 and 
        Hearing Exhibit Nos. 96ff, 96hh, and 96kk (above3375, 587, 1692

      Footnote No. 87, See Hearing Exhibit No. 73 (above)........   654

      Footnote No. 88, See Hearing Exhibit Nos. 73 and 85 (abov654, 669

      Footnote No. 89, See Hearing Exhibit No. 74 (above)........   655

      Footnote No. 90, See Hearing Exhibit No. 75 (above)........   656

      Footnote Nos. 92-93, See Hearing Exhibit No. 64 (above)....   621

      Footnote No. 94, See Hearing Exhibit Nos. 64, and 76-79 
        (above)............................................621, 660-663

      Footnote Nos. 95-96, See Hearing Exhibit No. 65 (above)....   623

      Footnote No. 97, See Hearing Exhibit No. 12 (above)........   448

      Footnote No. 98, See Attachment............................  3468

      Footnote No. 99, See Attachment and Hearing Exhibit No. 65 
        (above)...............................................3469, 623

      Footnote No. 100, See Hearing Exhibit No. 65 (above).......   623

      Footnote No. 101, See Hearing Exhibit No. 81 (above).......   665

      Footnote No. 102, See Hearing Exhibit No. 39 (above).......   532

      Footnote No. 103, See Attachment...........................  3472

      Footnote No. 107, See Attachment...........................  3474

      Footnote Nos. 108-109, See Hearing Exhibit No. 13 (above)..   450

      Footnote No. 110, See Hearing Exhibit No. 83 (above).......   667

      Footnote No. 111, See Hearing Exhibit Nos. 84 and 86 
        (above)................................................668, 670

      Footnote No. 113, See Hearing Exhibit No. 41 (above).......   538

      Footnote No. 115, See Hearing Exhibit No. 38 (above).......   528

      Footnote No. 116, See Hearing Exhibit No. 2 (above)........   386

      Footnote No. 117, See Attachment...........................  3475

      Footnote No. 121, See Attachment...........................  3482

      Footnote No. 122, See Attachment...........................  3492

      Footnote No. 123, See Hearing Exhibit No. 87 (above).......   675

      Footnote No. 124, See Hearing Exhibit No. 49 (above).......   574

      Footnote No. 125, See Attachments (2) and Hearing Exhibit 
        No. 49 (above)........................................3495, 574

      Footnote No. 126, See Attachments (3) and Hearing Exhibit 
        No. 49 (above)........................................3506, 574

      Footnote No. 127, See Hearing Exhibit No. 59 (above).......   604

      Footnote Nos. 128-129, See Footnote No. 52 (above).........   587

      Footnote No. 130, See Attachment and Hearing Exhibit No. 54 
        (above)...............................................3517, 595

      Footnote No. 131, See Hearing Exhibit No. 23 (above).......   488

      Footnote No. 132, See Attachment...........................  3519

      Footnote No. 133, See Hearing Exhibit No. 6 (above)........   412

      Footnote No. 134, See Hearing Exhibit No. 20 (above).......   463

      Footnote No. 135, See Attachment...........................  3520

      Footnote No. 136, See Hearing Exhibit No. 25 (above).......   492

      Footnote No. 137, See Hearing Exhibit No. 8 (above)........   423

      Footnote No. 138, See Attachment...........................  3522

      Footnote No. 139, See Hearing Exhibit No. 27 (above).......   495

      Footnote No. 140, See Hearing Exhibit No. 19 (above).......   460

      Footnote No. 141, See Attachment...........................  3523

      Footnote Nos. 142-143, See Hearing Exhibit No. 55 (above)..   597

      Footnote No. 144, See Attachment...........................  3530

      Footnote Nos. 145-148, See Footnote No. 144 (above)........  3530

      Footnote No. 149, See Attachment (Partial document 
        reprinted, full document SEALED EXHIBIT).................  3557

      Footnote No. 150, See Attachment (Partial document 
        reprinted, full document SEALED EXHIBIT).................  3568

      Footnote No. 151, See Attachment...........................  3572

      Footnote No. 152, See Attachment...........................  3573

      Footnote No. 154, See Attachments (2)......................  3575

      Footnote No. 155, See Footnote No. 135 (above).............  2729

      Footnote No. 156, See Attachment...........................  3579

      Footnote No. 157, See Attachments (3), Footnote No. 156 and 
        Hearing Exhibit No. 56 (above)..................3581, 3579, 599

      Footnote No. 158, See Hearing Exhibit No. 55 (above).......   597

      Footnote No. 159, See Hearing Exhibit No. 24 (above).......   490

      Footnote No. 160, See Attachments (2)......................  3591

      Footnote Nos. 161-162, See Footnote No. 157 (above)........  3581

      Footnote No. 163, See Attachment...........................  3596

      Footnote Nos. 166-167, See Hearing Exhibit No. 21 (above)..   464

      Footnote No. 168, See Attachment, Footnote No. 156 and 
        Hearing Exhibit Nos. 21 and 139m (above)..3606, 3579, 464, 2746

      Footnote Nos. 169 and 171, See Hearing Exhibit No. 21 
        (above)..................................................   464

      Footnote No. 174, See Footnote No. 152 (above).............  3573

      Footnote No. 176, See Hearing Exhibit No. 63 (above).......   617

      Footnote No. 177, See Hearing Exhibit No. 62 (above).......   614

      Footnote No. 178, See Hearing Exhibit No. 23 (above).......   488

      Footnote No. 179, See Attachment...........................  3607

      Footnote No. 180, See Footnote No. 57 (above)..............  3244

      Footnote No. 181, See Footnote No. 151 (above).............  3572

      Footnote No. 183, See Attachment...........................  3620

      Footnote Nos. 184-185, See Footnote No. 57 (above).........  3244

      Footnote No. 186, See Attachment (Partial document 
        reprinted, full document SEALED EXHIBIT).................  3621

      Footnote Nos. 187-188, See Footnote 186 (above)............  3621

      Footnote No. 189, See Footnote No. 56 (above) SEALED 
        EXHIBIT..................................................     *

      Footnote Nos. 190-191, See Hearing Exhibit No. 38 (above)..   528

      Footnote No. 192, See Attachment and Hearing Exhibit No. 38 
        (above)...............................................3623, 528

      Footnote Nos. 193-194, See Hearing Exhibit No. 38 (above)..   528

      Footnote No. 200, See Hearing Exhibit No. 137 (above)......  2735

      Footnote No. 201, See Attachment (Partial document 
        reprinted, full document SEALED EXHIBIT).................  3929

      Footnote No. 203, See Attachment and Hearing Exhibit No.3632, 623

      Footnote No. 204, See Hearing Exhibit No. 21 (above).......   464

      Footnote No. 205, See Hearing Exhibit No. 8 (above)........   423

      Footnote No. 208, See Hearing Exhibit No. 21 (above).......   464

      Footnote No. 211, See Hearing Exhibit Nos. 51 and 58 
        (above)................................................585, 602

      Footnote No. 213, See Footnote No. 84 (above)..............  3375

      Footnote No. 214, See Hearing Exhibit No. 110 (above)......  2657

      Footnote No. 217, See Footnote No. 84 (above)..............  3375

      Footnote No. 218, See Hearing Exhibit No. 64 (above).......   621

      Footnote No. 220, See Hearing Exhibit No. 5 (above)........   408

      Footnote No. 221, See Hearing Exhibit No. 7 (above)........   415

      Footnote No. 222, See Hearing Exhibit Nos. 38 and 64 
        (above)................................................528, 621

      Footnote No. 223, See Attachments (2) and Hearing Exhibit 
        No. 15 (above)........................................3635, 452

      Footnote No. 227, See Attachment...........................  3641

      Footnote No. 228, See Footnote No. 223.....................  3635

      Footnote No. 230, See Hearing Exhibit No. 105 (above)......  2619

      Footnote No. 231, See Footnote Nos. 157 and 163 (above)3581, 3596

      Footnote No. 232, See Attachment...........................  3643

      Footnote No. 234, See Hearing Exhibit No. 105 (above)......  2619

      Footnote No. 235, See Attachments (4)......................  3644

      Footnote No. 236, See Hearing Exhibit No. 105 (above)......  2619

      Footnote No. 238, See Footnote No. 117.....................  3475

      Footnote No. 239, See Attachments (2) and Hearing Exhibit 
        Nos. 111 and 129 (above); two addition items for this 
        footnote are SEALED EXHIBITS...................3660, 2660, 2721

      Footnote No. 240, See Attachment and Hearing Exhibit No. 70 
        (above)...............................................3665, 646

      Footnote No. 241, See Footnote No. 235 and Hearing Exhibit 
        No. 138 (above)......................................3644, 2745

      Footnote No. 242, See Hearing Exhibit Nos. 103 and 104 
        (above)..............................................2615, 2618

      Footnote No. 243, See Hearing Exhibit No. 70 (above).......   646

      Footnote No. 244, See Attachment...........................  3668

      Footnote Nos. 245-246, See Hearing Exhibit No. 113 (above).  2679

      Footnote Nos. 248-250, See Hearing Exhibit No. 110 (above).  2657

      Footnote No. 251, See Footnote No. 84......................  3375

      Footnote No. 252, See Hearing Exhibit No. 105 (above)......  2619

      Footnote Nos. 253-255, See Hearing Exhibit No. 106 (above).  2622

      Footnote No. 256, See Attachment...........................  3670

      Footnote No. 257, See Attachment and Hearing Exhibit No. 
        106 (above)..........................................3671, 2622

      Footnote No. 258, See Hearing Exhibit No. 106 (above)......  2622

      Footnote No. 261, See Footnote No. 201 (above).............  3929

      Footnote No. 262, See Attachment...........................  3672

      Footnote No. 263, See Attachment...........................  3678

      Footnote No. 265, See Attachment, Footnote No. 244 and 
        Hearing Exhibit Nos. 70 and 108 (above)...3679, 3668, 646, 2647

      Footnote No. 266, See Attachments (2) (One document 
        partially reprinted, full document is (SEALED EXHIBIT)...  3681

      Footnote No. 267, See Footnote No. 266 (above).............  3681

      Footnote No. 268, See Attachment...........................  3687

      Footnote No. 270, See Footnote No. 154 (above).............  3575

      Footnote No. 271, See Footnote No. 237 (above) (Found in 
        the files of the Subcommittee)...........................     *

      Footnote No. 272, See Attachment...........................  3690

      Footnote No. 273, See Footnote No. 272 (above).............  3690

      Footnote No. 274, See Attachment...........................  3697

      Footnote No. 275, See Attachments (5)......................  3703

      Footnote No. 276, See Footnote No. 275 (above).............  3703

      Footnote No. 278, See Hearing Exhibit No. 101 (above)......  2607

      Footnote No. 279, See Attachment...........................  3711

      Footnote No. 280, See Attachment...........................  3712

      Footnote No. 281, See Footnote No. 117 and Hearing Exhibit 
        No. 112 (above)......................................3475, 2678

      Footnote No. 282, See Hearing Exhibit Nos. 64, 69 and 81 
        (above)...........................................621, 644, 665

      Footnote No. 283, See Hearing Exhibit No. 81 (above).......   665

      Footnote No. 284. See Attachment...........................  3714

      Footnote No. 285, See Attachment...........................  3717

      Footnote No. 286, See Attachment (Four additional items for 
        this footnote are SEALED EXHIBITS).......................  3718

      Footnote No. 293, See Hearing Exhibit No. 120 (above)......  2699

      Footnote No. 294, See Hearing Exhibit No. 119 (above)......  2696

      Footnote No. 295, See Attachment...........................  3719

      Footnote No. 296, See Footnote No. 117 and Hearing Exhibit 
        Nos. 42 and 112 (above).........................3475, 543, 2678

      Footnote No. 299, See Footnote No. 156 (above).............  3579

      Footnote No. 301, See Attachment...........................  3722

      Footnote No. 302, See Attachment...........................  3754

      Footnote No. 303, See Hearing Exhibit No. 21 (above).......   464

      Footnote No. 306, See Attachment...........................  3756

      Footnote No. 307, See Attachment...........................  3757

      Footnote No. 308, See Footnote No. 307 (above).............  3757

      Footnote No. 310, See Hearing Exhibit No. 128 (above)......  2720

      Footnote No. 312, See Footnote No. 52 (above)..............  3054

      Footnote No. 313, See Attachments (3)......................  3767

      Footnote No. 314, See Hearing Exhibit No. 38 (above).......   528

      Footnote No. 319, See Attachments (2)......................  3775

      Footnote No. 320, See Attachment...........................  3779

      Footnote No. 321, See Attachments (2)......................  3795

      Footnote Nos. 322-323, See Footnote No. 320 (above)........  3779

      Footnote No. 324, See Attachment and Footnote No. 320..3801, 3779

      Footnote No. 327, See Attachment...........................  3812

       Footnote No. 328, See Attachment..........................  3813

       Footnote No. 329, See Attachments (2).....................  3814

       Footnote No. 330, See Footnote No. 329 (above)............  3814

       Footnote No. 331, See Attachments (3).....................  3816

       Footnote No. 332, See Attachments (3).....................  3822

       Footnote No. 333, See Hearing Exhibit No. 21 (above)......   464

       Footnote Nos. 335-336, See Hearing Exhibit No. 43 (above).   545

       Footnote No. 337, See Hearing Exhibit No. 128 (above).....  2720

       Footnote No. 338, See Hearing Exhibit No. 103 (above).....  2615

       Footnote No. 339, See Hearing Exhibit No. 104 (above).....  2618

       Footnote No. 340, See Footnote No. 154 (above)............  3575

       Footnote No. 341, See Attachment..........................  3830

       Footnote No. 342, See Attachments (2).....................  3831

       Footnote No. 343, See Footnote No. 203 (above)............  3632

       Footnote Nos. 344 and 346, See Hearing Exhibit No. 28 
        (above)..................................................   496

       Footnote No. 347, See Footnote No. 122 (above)............  3492

       Footnote No. 348, See Hearing Exhibit No. 28 (above)......   496

       Footnote Nos. 349-350, See Footnote No. 163 (above).......  3596

       Footnote No. 351, See Footnote No. 117 (above)............  3475

       Footnote No. 352, See Footnote No. 52 (above).............  3054

       Footnote No. 355, See Attachment..........................  3835

       Footnote No. 356, See Footnote No. 355 (above)............  3835

       Footnote No. 359, See Attachment and Footnote No. 203 
        (above)..................................................  3840

       Footnote No. 360, See Hearing Exhibit No. 121 (above).....  3482

       Footnote No. 361, See Attachment and Hearing Exhibit No. 
        58 (above)............................................3842, 602

       Footnote No. 362, See Footnote No. 361 (above)............  3842

       Footnote No. 363, See Attachment..........................  3847

       Footnote No. 364, See Attachment..........................  3848

       Footnote No. 367, See Footnote No. 154 (above)............  3575

       Footnote Nos. 368-369, See Footnote No. 52 (above)........  3054

       Footnote No. 370, See Hearing Exhibit No. 115 (above).....  2686

       Footnote No. 371, See Footnote No. 52 (above).............  3054

       Footnote No. 372, See Hearing Exhibit No. 114 (above).....  2681

       Footnote No. 373, See Attachments (2) and Footnote Nos. 
        154 and 203 (above)............................3850, 3575, 3632

       Footnote No. 374, See Footnote No. 373 (above)............  3850

       Footnote No. 375, See Footnote No. 144 (above)............  3530

       Footnote No. 376, See Footnote No. 150 (above)............  3568

       Footnote No. 377, See Footnote No. 151 (above)............  3572

       Footnote No. 378, See Footnote No. 355 (above)............  3835

       Footnote Nos. 379-382, See Hearing Exhibit No. 115 (above)  2686

       Footnote No. 383, See Attachment and Hearing Exhibit No. 
        46 (above)............................................3853, 560

       Footnote No. 384, See Hearing Exhibit No. 44 (above)......   555

       Footnote No. 385, See Attachment..........................  3854

       Footnote No. 386, See Hearing Exhibit No. 38 (above)......   528