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Sterling), in New York City, to assist in the proposed
transaction with CDR.
Mr. Lerner testified that “When our conversation began with
Rene Claude [Jouannet] about acquiring MGM Holdings, I already
knew from the due diligence exercise before that there were, I
would say, complex tax issues arising from the acquisition of
that company”, including tax basis and NOL issues. He testified
that he asked Shearman & Sterling to give him “an analysis of the
ways in which a transaction could be organized involving MGM
Holdings so that any tax attributes that might have existed could
be preserved.” Shearman & Sterling prepared two memoranda
summarizing the anticipated U.S. tax consequences of certain
hypothetical transactions involving MGM Holdings.
On November 1, 1996, Alvin D. Knott of Shearman & Sterling
sent a letter to William Wofford, an associate at White & Case,
requesting documentation of obligations that MGM Group Holdings
owed; balance sheets and income statements of MGM Group Holdings,
MGM, and Generale Bank; documentation of the loans from CLBN to
Pathe; documentation of the transactions in which MGM Group
Holdings acquired Sealion’s 1.5-percent interest in MGM Group
Holdings; and documentation of the liquidation of MGM Holdings.
On November 6 and 8, 1996, Mr. Wofford sent two letters to Mr.
Knott providing the requested information and documentation. On
December 3, 1996, Mr. Knott sent a letter to Mr. Lerner enclosing
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