The full text on this page is automatically extracted from the file linked above and may contain errors and inconsistencies.
SIMPSON THACHER & BARTLETT LLP
425 LEXINGTON AVENUE
NEW YORK, NY 10017-3954
(212) 455-2000
FACSIMILE (212) 455-2502
E-MAIL ADDRESS
mchepiga@stblaw.com
DIRECT DIAL NUMBER
(212) 455-2598
December 17, 2010
BYE-MAIL
Re:
Commission Letter to E. Stanley O'Neal
re: Potential Use of Quotes
Gary J. Cohen, Esq.
General Counsel
Financial Crisis Inquiry Commission
1717 Pennsylvania Avenue, NW
Suite 800
Washington, DC 20006-4614
Dear Mr. Cohen:
I write in response to the Commission's December 15,2010 letter to Mr. E. Stanley
O'Neal. Mr. O'Neal objects to the use of quotes from his September 16, 2010 interview
with Commission staff to the extent these quotes are not placed in the appropriate context.
The Commission's letter provides no information regarding how it may use Mr.
O'Neal's statements in its Report. Without providing the necessary context in which the
quotes will be used, the selected quotes are potentially misleading. For example, with
respect to the first statement in the Commission's letter, 1 the audio-tape recording of the
interview reflects that Mr. O'Neal made this statement in the context of his experience as
CFO ofMerrill Lynch during the 1998 financial crisis and not the recent financial and
economic crisis being examined by the Commission.
"For Stanley O'Neal, then Merrill's CFO, the experience was 'indelible.' He
remarked to the FCIC, 'I took away from it that had the market seizure and panic
lasted longer, there would have been a lot of firms that would have been irrevocably
harmed. Merrill would have been one ofthem.'"
BEDING
HONG KONG
LONDON
LOS ANGELES
PALO ALTO
SAO PAULO
TOKYO
WASHINGTON, D.C.
SIMPSON THACHER & BARTLETT LLP
Gary J. Cohen, Esq.
-2-
December 17, 201 0
The second statement in the Commission's letter,2 should also be placed in context.
Mr. O'Neal during his interview recalled that a July 2007 presentation to the Finance
Committee of Merrill's Board provided estimates of potential ABS/CDO losses that were
"relatively small" and "modest" and therefore did not sound any "alarm bells." To the
extent the Report does not relate Mr. O'Neal's comments to that July 2007 presentation or
suggests that Mr. O'Neal stated (or suggested) that this presentation was not based on the
best information available to the company at that time, this would be both inaccurate and
misleading.
Mr. O'Neal also objects to the third statement in the Commission's letter that he
"told the FCIC that the losses increased over the three months following the July
presentation." 3 Mr. O'Neal explained to Commission staff that the company's estimates of
losses, based on assumptions in models, grew during this time and, as a result, the company
decided to pre-announce its estimated write-down before the end of the quarter. As the
assumptions underlying these models changed and became more negative given market
disruptions, the estimates grew.
To the extent that the Commission includes these direct quotes or paraphrases any of
these quotes in its Report, Mr. O'Neal objects to any use in a manner that is inaccurate or
misleading or does not adequately describe the context in which these statements were
made.
2
"O'Neal said he was surprised about the retained positions but stated that the
presentation, analyses, and estimation of potential losses were not sufficient to sound
'alarm bells."'
3
Mr. O'Neal further objects to the following quotation in the Commission's letter, "I
had a dawning awareness over the course of the summer and through September as
the size of the losses were being estimated." As reflected in the audio-tape recording
of the interview, Mr. O'Neal's statement was, "It was a dawning awareness over the
course of the summer and through September as the size of the losses that were being
estimated grew."
SIMPSON THACHER & BARTLETT LLP
Gary J. Cohen, Esq.
-3-
December 17, 2010
Very truly yours,
.
II
~!l{t:/~
Michael Chepiga
cc:
Cassidy Waskowicz
Sarah Knaus
Sarah Zuckerman
@FedFRASER