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Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 1 of 29

EXHIBIT B-1

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 2 of 29

u.s. Depa~:~it of Justice

Tax Division

Please reply to: Court of Fedeal Clams Section

P.O. Box 26
Ben Frankl Stati
Washingt, D.C. 20044

November 16, 2006

.

Facimile No. (202) 307-0054
Tri Attey: Davi N. Geier
Attey's Direct Line: (202) 616-3448
~J()' ~:I)(J:SJì~~(Jeier
1 54-2457 ~
~MN 2006103503

Also via Facsimile (312) 706-9187

Thomas ~. I)urham, Esquire
MA YER, BR()WN, R()WE & MAW LLP
71 South Wacker Drive
~hicago, Ilinois 60606

Re: ~onsolidated Edison ~ompany of~ew York, Inc. & Subsidiares

v. United States

Fed. ~l. ~o. 06-305 T

Dear Mr. Durham:

concern regarding the privilege log. In many cases, in the context of

We have reviewed plaintiffs responses and objections to our request for production. Whle
we are stil reviewing the documents and objections made to our request, we have several intial
the communcations, we were
not able to discern the basis of the privilege clai because the redactions appear broader than
necessar to protect trly privileged material. We would appreciate any fuer clarfication
the languge redacted from the identified documents. To the extent
any of the redactions could be narowed to provide fuer context to plaitiffs privilege clais,
without revealing the claied privileged material itself, of course, such naowig would be of the
utmost help in discerng the basis for the privilege.

regarding the specific natue of

Business ~ommuncations with ~on-Lawyers

In several instaces, plaitiff

has witheld documents, although the communcations appear
to be internal business communcations and not communcations with counsel. (~~003786-87,
~~004706-07, ~E012094, ~~007915, ~~01 1957-63, ~~01 1952-53, ~~011965-72). AsIamsure
you are awar, if these communcations do not actully reflect privileged communcations with
counsel, they may not be entitled to protection. From the context of these documents we canot
conf whether all of the redactions meet ths criteria and would appreciate any assistace you
could provide in makng such a determation.

For example, the November 20, 1997 memorandum wrtten by Con Ed's vice-president Brian
l)ePlautt (~~ 003786-87) appears on its face to provide a factu update "regarding cert
accounting and tax aspects of the transaction." In fact, the description of the document on the

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 3 of 29

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(CE004706-07), purorts only to provide a status "on some issues of

privilege log indicates that it does not discuss substative legal advice, but rather the statu of
Shearan & Sterling's work. Simlarly, another l)ePlautt memorandum, dated ~ovember 21, 1997
the EZH Lease" as well as
certn timing issues. The unedacted portion of the memorandum does not indicate that any legal
advice is discussed in the memorandum, and does not provide sufficient context for the redacted
portion of the memo to evaluate the claim of privilege.

Additionaly, a Febru 11, 1998 memoranda from Mr. DePlautt (CE 011954-56), conta
both a sumar and a detailed response; however redactions are made only to the section contag
the detaled response. Agai, we are not able to discern the basis for the privilege clai. The same
is tre for the memoranda dated Jìebru 9, 1998 (C~011957-63) and Februar 13, 1998

I 1952-53), which again do not provide the context for assessing the privilege.

(CEO

Any fuer inormation regarding these internal ~on Ed communcations that would fuer

ilumnate the basis for ~on Ed's assertion of

privilege would be appreciated.

Legal ()pinions

We understand from the privilege log that plaintiff

has withheld the entirety of certin legal

006789. Ciiven the disclosure of

opinions (dated~ovember 20, 1997, ~ovember 21, 1997, December 15, 1997, and Jìebru 28,
1998). Jìrom the documents we have received, it appears that a draf opinon was disclosed. See CE
the opinion, albeit in draf form, we request
that Con Ed disclose the remaining opinions on the same subject matter, all communcations
regarding the subject matter and any drafts. To the extent any other identified opinions have been
shared with thd paries, such as the financial institutions involved in the transaction, we request that
those opinions and any underlying drafts and communcations be produced.

the subject matter of

Identification of Documents

Upon review of the bates numbers for the last document listed on your privilege log
(CEOI 1965-72/PJì004525-58), it does not appear that the numbers accurately reflect the document
in question. We would appreciate a clarfication of the specific location of the internal Con ~ison
memorandum so that we may appropriately evaluate the privilege asserted.

Redactions in ~on-Identified I)ocuments

Jìinally, our initial review of

the documents produced by ~on ~d reveals several instaces
of redactions without any assertion of privilege. See, e.g., C~003532, ~~003726, ~E0040I5,
C~004755, ~~007887, ~~007888, and C~00794i. If ~on ~d is asserting a privilege to any
documents we would request that they be added to the privilege log with a description of the basis
for such assertion or that unedacted versions of the documents be produced.

Is

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 4 of 29

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We would appreciate your

the privilege lines have
been drawn where they have, and whether ~on ~d will release additional documents or portons
thereof to us to fuer such understading. Please also let us know whether you will be updating
your privilege log to address the other issues raised herein.

responding to permt us to understad why

Enclosure

cc: Caren Baerga, Esq.

Is

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 5 of 29

EXHIBIT B-2

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 6 of 29

December 1, 2006

VIA COURIER

David N. Geier
U.S. Deparent of Justice
Tax Division
555 Fourth Street, N.W.
Room 7919
Washington, D.C. 20001

MAYER
-- ---- ---
BROWN
~ - ~~--
ROW E
--~ ----
& MAW

Mayer, Brown, Rowe & Maw LLP
71 South Wacker Drive
Chicago, Illinois 606-37

Main Tel (312) 782-0
Main Fax (312) 701-771
ww.mayerbrorow.co

Thomas C. Durham
Direct Tel (312) 701-7216
Direct Fax (312) 7069187
tdurhamimayeiblQlOwe.co

Re: Consolidated Edison Co. v. United States. Docket

No. 06-305 T

Dear Mr. Geier:

Weare in receipt of your correspondence dated November 16, 2006, requesting further

information regarding certain redacted documents and documents identified on the privilege log
provided in connection with the Plaintiffs Response to the United States' First Request for
Production. This letter follows the strcture of your correspondence.

Con Edison is fully cognizant of its obligation to provide all responsive documents with
the exception of privileged communications. Con Edison intends to comply with this obligation
and wil supplement its production as necessar.

Business Communications with Non-Lawvers:

The documents identified by the United States as business communications with non-

lawyers discussed requests for legal advice from counsel and/or legal advice received from
counseL. These communications are protected by the attorney-client privilege. See Shriver v.
Baskin-Robbins Ice Cream Co.. Inc., et al., 145 F.R.D. 112 (D. Co!. 1992) ("An otherise
privileged communcation by a lawyer to a corporate agent does not lose its protected status
simply because the agent then conveys the attorney's opinion to a corporate commttee charged
with acting on such issues."). Con Edison's privilege log wil be revised to clarfy that witheld
or redacted communications with non-lawyers convey confidential requests for legal advice or
legal advice.

The memorandum from Brian DeP1autt to Rober Ste1ben and Hyman Schoenblum, dated

November 20, 1997 (CE003786-87), conveys communications with Sheaan & Sterling
their legal advice. In paricular, the memorandum

regarding the anticipated substance of

discusses the legal advice included in the Tax Risk Letter and the Tax Change Letter. A revised
this memorandum (CE004704-05) disclosing the portions discussing the status

redacted copy of

Berlin Brussels Charlotte Chicago Cologne Frankfurt Houston Londn Los Angeles New York Palo Alto Paris Washington, D.C.

. Independent Mexico Cit Correspondent: Jauregui, Navarrete y Nader S.C.

Mayer, Brown, Rowe & Maw LLP oprates in combination with our associated English limited liabilit partnership in Ihe office listed abve.

T"

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 7 of 29

David N. Geier
December 1, 2006
Page 2

of the letters, but not the portions discussing the information to be included in the letters, is
attached. Electronic copies of all documents attached to this letter wil be included in the
Plaintiffs Second Supplement to its Response to the United States' First Request for Production.

The memorandum from Brian DePlautt to Mar Jane McCarney, dated November 21,

1997 (CE004706-07), describes a request for legal advice made to Con Edison's in-house
counsel, including the information provided to counsel in connection with such request, and
summarzes legal advice received from Shearman & Sterling. A revised redacted copy ofthis
letter is attached.

The memorandum from Brian DePlautt to Mar Jane McCarey, dated November 21,
the Sheanan &

1997 (CE012094), is being produced. This memorandum transmits a copy of

Sterling Tax Change Letter but does not discuss the legal advice provided in the letter.

The email correspondence dated December 11 and 12, 1997 (CE007915) is not

responsive to the United States' First Set of

Interrogatories or its First Request for Production.

The emaIl correspondence discusses legal advice regarding an unrelated issue. These
communications were inadverently included on the privilege log and are being removed.

The redacted portion ofthe email from Brian DePlautt to Mar Jane McCarney, dated

Februar 9, 1998 (CEOl1957-63), transmits legal advice received.

The redacted portion of

the memorandum from Charles Muoio to Mar Jane McCarney,

et aI., dated Februar 13, 1998 (CEO

1 1952-53), describes legal advice received.

The redacted portion ofthe memorandum entitled Leasing White Paper (ENECO 4)

(CE011965 -72) transmits legal advice received.

Lef;al Opinions:

A draft of the Sheanan & Sterling legal opinion was shared with Pricewaterhouse on
other

legal opinion nor any

December 10, 1997. To Con Edison's knowledge, neither the final

related communications were provided to Pricewaterhouse. The draft verion was dated
December 1, 1997, approximately two weeks before the final opinion was provided, and was not
complete.

The disclosure ofthis draft to Pricewaterhouse did not result in a subject-matter waiver of

the attorney-client privilege, because the disclosure was not made in the context of a judicial
proceeding and did not provide Con Edison with any tactical advantage. See Yankee Atomic

Elec. Co. v. United States, 54 Fed. CI. 306, 315 (2002) ("subject matter waiver (of

the attorney-

client privilege) is inapplicable where the disclosure is not made in the context of a judicial
proceeding and did not afford the client an adversaral gain"). The disclosure occurred before

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 8 of 29

David N. Geier
December 1, 2006
Page 3

Con Edison entered into the transaction. Con Edison has not relied upon, and does not intend to
rely upon, the legal advice received from Sheanan & Sterlíng or any other counsel in the
this litigation. There is, as a result, no unfairness to the governent. See In re:

context of

Commercial Fin. Svcs.. Inc. & CF/SPC NGU, Inc., 247 B.R. 828,848 (Ban. N.D. Okla. 2000)
("The doctrine of subject matter waiver is narowly constred and should only be employed
when unfairness (i.e., a tactical or strategic advantage) is implicated - otherwise, the doctrne of
subject matter waiver serves no useful purose.").

In addition, the draft legal opinion was prepared in anticipation of litigation and

constitutes work-product. Pricewaterhouse was not an adversar to Con Edison, and thus, the

production of

the opinion to Pricewaterhouse did not waive the work-product protection.

Regardless, there is no subject matter waiver for work-product protection. Any waiver is limited
in scope to the document disclosed. See In re: United Mine Workers of Am. Employee Benefit
Plans Litig.: 159 F.R.D. 307, 311 (D.D.C. 1994) ("The subject matter waiver doctrne applies
only to attorney-client privilege claim and not to work product immunity claims.. .."). Thus, any

waiver of

the work-product protection for the draft legal opinion did not constitute a subject

matter waiver of other documents protected by the work-product protection.

To Con Edison's knowledge, none of

were shared with any third paries.

the legal opinions identified on the privilege log

Con Edison has identified two additional pnvileged documents which have been added to

the privilege log.

Identification of Documents

The document identified as CEOl1965-72 was inadvertently not produced and is attached

to this letter.

Redactions in Non-Identified Documents

Certain documents, not identified on the privilege log, were originally redacted for

relevance when produced to the Intemal Revenue Serce durng the audit. These redactions

were completed by Con Edison's legal counsel prior to Mayer Brown's receipt of

the documents.

Mayer Brown requested unedacted versions of these documents which were not received until
after Con Edison provided its responses to the United States' First Set of Interrogatories and First
Request for Production. We have reviewed all documents for responsiveness, and unedacted
responsive documents wil be produced in the Plaintiffs Second Supplement to its
Response to the United States' First Request for Production and Plaintiffs Second Supplement

versions of

to its Rule 26(a) Disclosures. Many of

United States in unredacted form.

these documents have already been produced to the

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 9 of 29

David N. Geier
December 1, 2006
Page 4

The Gramercy Development, Inc. agenda, dated September 25, 1997 (CE003532), is

produced at CE017779.

The board minutes of

October 29, 1997 are produced at CE014323-24. The portion of

the minutes on CE003726 are from the meeting of

September 25, 1997, which were produced to

the United States in unedacted form at PF0055 1 4-17.

The February 1 998 report to the Board of

unredacted form at PF006293-94.

Directors (CE004015-l6) was produced in

CE004755 and CE007887-88 are excerpts from a draft of

the Leasing White Paper which

is produced at CE016913-20. Other versions ofthe White Paper, previously produced, include
PF004350-55 and 7327-33. In producing these drafts, cerain privileged and protected
information was inadvertently not redacted. In particular, on page PF0004354 (CE012022), the

second paragraph under number 3, "Pending U.S. Tax Regulations," and portions of

paragraph under number 4, "U.S. Tax Audits," should have been redacted as confidential
attorney-client communications and work product. On page PF007332 (CEOII962), portions of
the first paragraph under number 4, "U.S. Tax Audits," also should have been redacted as a
confidential attorney-client communication and work product. Revised redacted copies of these
documents are attached. Con Edison notes that, pursuant to its General Objections to the United
States' First Set ofInterogatories, "(t)he inadverent disclosure by Con Edison of any
information protected by the attorney-client privilege, the work-product protection or any other

the first

privilege shall not constitute a waiver of

the applicable privilege or protection as to that

information or any other related information." Con Edison requests that the United States

destroy all paper and electronic copies of

the previously provided documents.

We have not been able to obtain an unedacted copy of the December 10, 1997 agenda

(CE00794l). We have produced resolutions from the December 10, 1997 meeting at PF003011-
the meeting at PF005671. Legal counsel for Con Edison is continuing to

3018 and a summar of

search for the agenda, and we wil provide an unedacted copy if it is located.

cc: A. Scher

Con Edison

Very trly yours,~BJ~'

Thomas C. Durham
Nicole M. Bielawski

'.--r

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 10 of 29

EXHIBIT B-3

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 11 of 29

u.s. Depam it of Justice

Tax Division

Please reply to: Court of Fedeal Clams Section

P.O. Box 26
Ben FrankUn Station
Washingt, D.C. 20044

December 12, 2006

New York, Inc. & Subsidiares

.

Facimile No. (202) 307-0054
Tril Atty: David N. Geier
Attey's'Direct Line: (202) 616-3448
~J()' C:I)Ci: SF :DNCieier
I54-2457~,
CMN 2006103503

Also via Facsimile (312) 706-9187

Thomas C. Durham, Esquire
MA YER, BROWN, ROWE & MAW LLP
71 South Wacker Drive
Chicago, Ilinois 60606

Re: Consolidated Edison Company of

v. United States

Fed. Cl. No. 06-305 T

Dear Mr. Durham:

I am writing in fuherance of our effort to resolve certin outstading issues arising from
Plaintiffs responses to wrtten discovery which remain prior to seeking assistace from the Cour.
I)espite the exchange of correspondence, your most recent response,

Interroeatories

(i) Interrogatory No. 1 - identif individuals with knowledge

In the final paragraph of

individuals listed in our letter of

()ctober 13,2006 constitutes a list of

not have "complete information regarding their knowledge of

Plaintiff s response to Interrogatory ~o. I Plaintiff indicates that the
the individuals that Plaintiff
would expect to have information pertining to the RoCa3 shelter transaction, but then declines to
provide any fuher information with respect to these individuals, citing the fact that Plaintiff does
has an obligation
to respond with whatever information it may have regarding the knowledge these identified
individuals may have pertnig to the facts of the RoCa3 shelter trsaction. Ths is tre whether
or not such a response may be a complete recitation of all of the facts known by these individuals.
Plaintiff canot hide behind an assertion that it does not have "complete information" regarding
these respective individuas' knowledge and simply refuse to provide any information.

the facts." Plaintiff

(U) Interrogatory No. 2 - listed transactions

With respect to Plaintiffs response to Interrogatory No.2, followig our volunta narowig
of the Interrogatory by provision of specific listed transactions, you first indicated in your ~ ovember

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 12 of 29

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13, 2006 correspondence that you anticipated Plaintiff would supplement its response to indicate that
Plaintiff did not enter into or consider any such listed transactions except those already identified in
response to Interrogatory No.2. However, by your ~ovember 17, 2006 correspondence, Plaintiff
supplemented its response to indicate that Plaintiff did not enter into any listed transactions durng
the years 1996 through 1998, and that Plaintiff could not respond as to whether any of the listed
transactions were considered because it could not locate anyone that would commit to such a
statement under oath. Such a position is paricularly troubling given the Plaintiffs representation
in the final paragraph of its response to Interrogatory No.2, that the Plaintiffs documents identify
other LIL() transactions considered by Plaintiff. Please let us know whether Plaintiff intends to
respond to ths portion of Interrogatory ~o. 2, or whether Plaintiff intends to rely on the statement
in your November 17, 2006 correspondence as the reason for failing to respond to this portion of the
interrogatory .

(ii) Interrogatory No.3 - pricing information

In regards to Plaintiff s response to Interrogatory No.3, in which the Ciovernent requested
information about how the rent and option prices were negotiated, calculated and allocated, while
the recent citation to PF003241-PF003246 does provide some information regarding assumptions
Con Ed purortedly relied upon in submitting the "proposal" included in cited documents, it does
not indicate how the specific amounts were negotiated or allocated between the paries. Becausethe
reference to PF003241-PF003246 does not provide a suffcient response to Interrogatory ~o. 3, we
request that Plaintiff supplement the information contained in that document to provide a complete
response to this interrogatory. Finally, your recent attempt to object that the interrogatory is vague
and unclear ignores the fact that no such objection was asserted in Plaintiffs initial response to the
interrogatory. Your claim that we must now ask Plaintiff more specific questions concerning how
the varous rent obligations and option prices were negotiated, calculated, and allocated is specious
has more specific information regarding the requested negotiations, calculations,
and allocations, it is Plaintiffs obligation to provide such information where responsive to the
request. For example, an oblique reference to "computer softare" is insuffcient to describe the
negotiation process. We request that Plaintiff supplement its response to identify the specific
softare and to describe how the softare was utilzed the instat case. Please let us know whether
or not Plaintiff intends to supplement its response to Interrogatory ~o. 3 to provide a complete
response thereto.

at best. If

Plaintiff

(iv) Interrogatory No. 12 - tax indemnity agreement

In your December 1, 2006 correspondence, you have represented that there are no documents
detailng Plaintiffs reasons for entering into the tax indemnty agreement. Whle Plaintiff may
desire to reference documents in lieu of providing a wrtten response, the apparent absence of a
document does not alleviate Plaintiff of its obligation to answer the interrogatory. Therefore,
Plaintiff must state its reasons for entering into the tax indemnty agreement.

(v) Interrogatory No. 14 - identity of outside consultants

In your explanation of Plaintiffs response to Interrogatory ~o. 14, in which we asked

Is

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 13 of 29

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Plaintiff

Plaintiff to identify the outside consultats it communcated with to locate potential international
energy infastrctue investment opportties as it had pled in its ~omplait, it appears that Plaitiff
has improperly and unlaterally limited its response to identifying only what it deems to be "key"
advisors for the RoCa3 shelter transaction, namely Cornerstone Financial Advisors, LP. Furer,
has indicated that all "relevant" documents relating to that advisory relationship have been
produced. This explanation indicates that Plaintiff has failed to identify "all" advisors and
consultats with respect to potential international energy infastructue investment opportties,
including all advisors consulted with respect to the RoCa3 shelter transaction. The stated objections
of relevance and immateriality are paricularly inappropriate in response to this interrogatory given
the allegations in Plaintiffs Complaint. Jìurher, because the "over breadth" objection, which we
do not believe to be applicable in any event, only relates to the production of documents, Plaintiff
has not ariculated a valid objection to the identification of the requested consultants and advisors.
Therefore, we request that Plaintiff immediately supplement its response to identify all such
consultants and to identify and produce all responsive documents, not simply those Plaintiff and its
counsel deems relevant.

(vi) Interrogatory No. 15 - communications re Lease Transaction

Plaintiff s response to Interrogatory ~o. 15, in which the Ciovernent requested that Plaintiff
identify all individuals and entities, including employees, board members and third paries, that it
communicated with about the Lease Transaction prior to entering the transaction, including the
contents of such communcations, is also troubling. Plaintiff taes a position directly contrar to the
law by asserting that Plaintiff canot be required to ask its own employees for responsive
information. In fact, Rule 33 requires that Plaintiff conduct an investigation, and inquire of the
employees and representatives likely to have relevant information in order to respond to the
interrogatory. Plaintiffs objection that a response would improperly require it to depose its own
employees to ascertn the requested information has no basis in the law. Furher, a review of
pertinent documents previously produced by Plaintiff indicates that the number of Plaintiffs
employees that purortedly paricipated in the RoCa3 shelter transaction is not so great a number that
inquiring of them would be burdensome, much less unduly burdensome.. -.

Furer, to the extent that Plaintiffs response relies on documents produced in discovery,
such reliance is faulty for several reasons. First, the reliance ignores that oral communcations as
well as written communcations have been requested. Second, the document production is far from
complete given that the United States is aware of addit ional documents responsive to. this
interrogatory that have yet to be produced by Plaintiff. For example the United States is aware of
several emaIls between officers and directors of Con ~d discussing or referrng to the Roca3
transaction which have not been produced or identified by Plaintiff.

In addition, your I)ecember 1,2006 correspondence purorts to belatedly assert an attorney-
client privilege when heretofore none had been timely or properly raised. Failure to raise the
privilege constitutes a waiver.

As a final note, while I am sure you are aware the scope of discoverable inormation goes
well beyond the simple notions of relevancy, Plaintiff s continued insistence to claim that much of

Is

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 14 of 29

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transaction is misplaced. For example, Plaintiff

the inormation sought from Plaintiff is not relevant to the ta treatment of the Ro~a3 shelter
ignores the fact that it made numerous allegations
in its Complaint pertining to the purose of the RoCa3 transaction as it related to Con Ed's
purorted overall business plan, thus entitling the United States to discover information pertining
to Con Ed's paricipation and consideration of other transactions. Furher, the "routine business
communcations" of Con Ed employees regarding the RoCa3 shelter transaction are highly relevant
to Con Ed's subjective view of the transaction, an importt consideration in the instant matter.
Therefore, Plaintifts continued insistence to rely on relevancy objections lacks a valid basis here
where the requested information goes directly to the allegations in the Complaint and the elements
of the claims at issue.

Privilege Log

correspondence of

Several issues remain with respect to the updated privilege log and the documents produced
in conjunction with your December I, 2006 correspondence. First, while you stated in your
wil produce
non-redacted copies of documents not included on the privilege log, we have not yet received any
such production and there has been no indication when we can expect to receive additional
documents. Because you did not assert a privilege pertining to any of these documents originally,
I see no reason for the delay in producing the unedacted documents.

November 17,2006 and again on December 1,2006, that Plaintiff

In light of your explanation of the substace of the communications contained in the
~ovember 20, 1997 memo found at PF005618-19 and CE004704-05, even if a privilege were
applicable, that privilege has been waived by production of other documents to the United States
regarding the "anticipated substance" of the legal advice of Shearan & Sterling. Similarly, to the
extent any of the other identified documents contain or discuss the advice of Shearan & Sterling,
it appears that any privilege that may have applied to those documents has been waived by the
production of documents actually containing or referring to such advice.

In addition, to the extent that you are asserting a work product tp shield documents from
production, please state the basis for that assertion, including a specific identification of the basis
for your claim that these documents were prepared "in anticipation of litigation," as you have
claimed with respect to the draft legal opinion of Shearan & Sterling produced in discovery.

Please confrm whether or not Plaintiff is withdrawing its claim of privilege with respect to

Interrogatory ~o. 12.

Rule 26(a) Disclosures

You have represented for some time that Plaintiff

disclosures. Ifthis is stil your intention, and given the press of deadlines, please let us know if

will be makng any additional disclosures, and if so, when.

intends to fuer supplement its Rule 26( a)
you

Is

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 15 of 29

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We would appreciate a prompt response to the issues raised herein.

Sincerely yours,

iLRTrial Attorney, Tax i)ivision

Enclosure

cc: Caren Baerga, Esq.

Is

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 16 of 29

EXHIBIT B-4

VCL 14 '~b 14- ¿b r~ M~~~M LL~

P. 01/04
Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 17 of 29

202 TO 93070054

Mayer, Brown, Rowe & Maw LLP

1909 K Street. N.W.

Washington, D.C. 20006-1101

Main phone: (202) 263-3000

Main falc; (202) 263-3300

FACSIMILE COVER SHEET

MAYER
BROWN
ROW E
& MAW

FROM:
Direct Tel:

Direct Fax:

Nicole M. Bielawski
(202) 263-3452
(202) 762-4242

Date/time:
Pages:

12/14/2006 - 02:00 PM
4 ALL PAGES MUST Be NUMBERED

TO THE FOLLOWING:
Name
David N. Geier

MESSAGE:

Please see attached.

Company
U.S. Departent of
Justice

Fax

#

(202) 307-0054

Telephone #

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IF nlE REAER OF

IF YOU HAVE AN TRSMISSION DIffCULTY,

PLEsr CONTACTTIE FACSIMILE DEPARTMENT AT (20) 26-3

Berlin Brussels Ch8l0le Chica Cologne Frankfurt Houon Londn Loa Angeles New Voi Pa Alto Pa Washing D.C.

Indepnden Mii Ci Condent: Jaurøgui, Nava y Nader S.C.

Mayr, Bro, Row & Maw lLP operates In combinatlon wi our aad Erh limll8d Rabßl pal3hip in the ofce listd abi.

uc.\. .l't . lab .l't. ¿b rl" L'IJ:l"LSI'1 LLl-

¿k1¿ I U ':..k1?121254

P. 122/124

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 18 of 29

TvAYfR
13"R(JV\N
RCJWE
& Tvi A VV

Mayer, Bro, Rowe & Maw LL
71 South Wacker Dri
Chicago. illinois 606

Main Tel (312) 782.06
Maìn Fax (312) 701-771
l'.mayeilIOWIro.i

Thomas C. Durham
Dil8ct Tel (312) 701-7216
Direct Fax (312) 706-9187
1dui1am Omiyerbril'.com

December 14,2006

VIA FACSIMILE
(202) 307-0054

David N. Geier
Joseph A. Sergi
U.S. Deparent of Justice
Tax Division
555 Four Street, N.W.
Room 7919
Washington, D.C. 20001

Re: Conslidated Edson (~o. v. United Sta. Docket

No. 06-305 T

Dear David and Joe:

Ths letter responds to the United States' correspondence of

requestig additiona informaiion regardin two docuents which Con Edison identified as
conta inadverent discio~nires of communcations protecte by both the attmey-client
privilege and the work produtt production.

December 11,2006,

On Decber t, 2006. Con Edson

notified the United State tht excets of

two drft

However, as explained in COIl Edion's corrondence of

the Leing Whte Paper produce to the United States contaed conuuncaons which were

of
indvertly not rected in 1\.11. The fi docuent. PF0043S0-55, was prduce on
September 25,2006, as par ofeon Edison's Rule 26(a) Disclosues. The secnd document,
PF007327-33, was produce on November 3~ 2006, in resonse to the Uiute Staes" Fir
Reques for Pruction ofDoouments. Th latter docuent (pF997327-33) was redcted in par.
Deoember 1, 2006, ce privileged

and protected inormation wa'i inadverently not redted in both docunents. In parcuar, on
page PF00043S4 (CE012022), the second pargrph under number 3, "Pendi U.S. Tax
Reguatons," and portons of the fi pargrph under number 4, "U.S. Tax Audts:" should
have bee rected as confdential attorney-client commUlcations and work prduct. On page
PF007332 (CE011962), porClns of the fist pargrh under number 4, "U.S. Tax Audts," al
should have bee redcted as ¡i confdential attrney-client oommuncaon and work product.

BerUl' Biis Chrlot Chicao Cologne Frart Houa Lonon lo Angeles New Yor Pao Alo Pañs WasIngn, D.C.

Independent Mexi Clly ColTepnclnt Jauregui, Niivlll'te y Nader S.C.

Mayor, Brown, Rowe & Maw LLP operalllsln conation wi our assDcìd Enfish fimll8d UabB pahip in th offce li abo.

..L-_..-l t:U.1... c.o 11' I.

l- . ~")/114
Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 19 of 29

IO"'OCL. I L-L-r

¿~¿ I U ';..~. (~~:;4

David N. Geier
December 14, 2006
Page 2

Con Edison provided revised redcted copies of these documents on December 1, 2006,

and requested tht the United States destroy all paper and electronic copies of

the docuents

prevously provided. The facts and circumstaces establish that the production of

the protected
portons of the documents was inadverent and did not constitute a waiver of either the attomey-
client privilege or the work product protection.

In the event of an inadvertent waiver, the document does not lose its protected status. See

Alaska Pulp Corp., Inc. v. United States, 44 Fed. Cl. 734, 735 (1999) (fiding that because
"plaintiffs production of the ... documents was inadverent... it has not lost its privileged
charcter"); see also Telephollics Corp. v. United States, 32 Fed. Cl. 360,361 (1994) ("There are
many factual circumstances in which the privilege can be kept despite inadverent disclosure. n).
In Alaska Pulp, the Cour otTederal Claims, in upholding privilege, charactered the production
of the privileged docwent as "an oversight" and noted that "the screeg proceures employed
to protect privileged materals were not so lax as to dee plaintiff indifferent to disclosure of the
documents." ¡d. at 736. The same conclusions should be reached with respect to Con Edison's

disclosure of

discrete portion... of

two dr of

the Leasing Wlte Paper.

,

The Court of

Federal Clai applies a two-par test to detenine whether an inverent

disclosure results in waiver. See National Helium Corp. v. United States, 219 Cl Cl. 612 (1979).-
see also International Business Machines Corp. v. United States, 37 Fed. Cl. 599,603 (1997)
(fiding that the two prong test outled in National Helium remains the applicable staard in
Feder Clais). Puant to National Helium, Con Edison need only demonstrte

the Cour of

that "it did not intend to discIiise the privíleged docuents and that, desite the indverent
disclosure, plaintiff took adeq uae steps, given the cicumstance, to prevent the disclosue. ,.
IBM, 37 Fed. ct. at 603; see also National Helium, 37 Fed. Cl. 612, at *2.

Con Edison produced 7,842 pages of documents in its Rule 26(a) Disclosues and Firt

Supplement thereof and its re~'Pnse to the Unite Staes' First Requet for Production and its
Firt Supplement therf. Th~ Rule 26(a) Disclosues were cafuly revewed for priviege,
sever times, by Thomas C. i luram, a parer at Mayer, Brown, Rowe & Maw LLP. The
resonse to the United States' Fir Request for Producon and First Supplement therto and the
First Suplement to the Rule ~6(a) Disclosues were fit reviewed for privilege by Nicole M.
Bielawski, a senor associate at Mayer, Brown, Rowe & Maw LLP. Ms. Bielawski reviewed all
docuents eleconicaly for privilege on two separate occions. The documents were
subsequetly reviewed by Mr. Durham for privilege. Ms. Bielawsk conduct a fi review of
all docuents produc, in hard copy, before the protion. The prence oftbs prcedur
estalishes th Con Edson .'wished to retai its privilege as to all attmey-cent docuents."
National Helium, 219 Ct. Cl. 612, at *2 (emphasis in orial) (fidig proceure for review of
privieged materal demonsated plaitiffs intent to ret privilege). Fwer, Con Edson's
Gener Objecton No, i to th~ United States' Firt Request for Pructon on the basis of
attorney-client priviege and work pruct protecon reirces that Con Edison did not intend
to produce any privileged ma1 erals.

lJt:L 14 'lib 14:¿"( i-i. Ml:i.~M LLI-

P.04/04
Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 20 of 29

202 TO '33070054

David N. Geier
December 14, 2006
Page 3

The procedure employed by Mayer, Brown, Rowe & Maw LLP constituted a "good fath,

suffciently caeful, effort." National Helium, 219 Ct. Cl. 612, at *2. The numerous reactions
of inormation protected by tJ ie attorney-client prvilege, the work product protection and/or both
demonstrates the careful revi.;w widertaken: The inadverent disclosue of thee pargrphs is

small in the context ora production of

7,842 pages.

Con Edison identified the inadvertent disclosure in the process of re-reviewig

documents in response to the United States' correspondence of

additional information regarding documents identified on Con Edison's privilege log. Con
Edison promptly notified the United States of the inadverent disclosue in its response to this
request for additional infoImlLtion on December 1, 2006.

November 16,2006, requestig

Regardless ofwhethei the previously produced docwnents are destroyed, the inverent

production of

these docuems did not effect a waiver of either the attomey-client privilege or

the work product protecton. Con Edison clealy stated in General Objection No. 1 to the United
States' First Set of Interogatories tht "(t)he inverent disclosue by Con Edison of any
inormation protected by the attorney-client priviege, the work product protection or any other

privilege shall not constitute a waiver of

information or any other related inormation."

the applicable privilege or

protection as to tht

Based upon the factual inormation and legal analysis set fort in ths letter, Con Edison's
the dr Leaing Whte

reques that the United States destroy the previously produced copies of

Paper is approprate.

'your,

Ver try

~ 1Jtú~ r

cc: A. Scher

Con Edison

Thomas C. Duam
Nicole M. Bielawski

** TOTAL PAGE. 04 **

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 21 of 29

EXHIBIT B-5

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 22 of 29

u.s. Departt of Justice

Tax Division

Please reply to: Court of Federal Clams Section

P.O. Box 26
Ben Franklin Station
Washingt, D.C. 20044

I)ecember 19, 2006

New York, Inc. & Subsidiaries

.

Fdcimile No. (202) 307-0054
Tril Attorey: David N. Geier

Attoey's Direct Line: (202) 616-3448
EJ()' C :DCi:SF:DNCieier
154-2457
CMN 2006103503

Also via Facsimile (312) 706 9187

Thomas C. Durham, Esquire
Nicole M. Bielawski, Esquire
MA YER, BR()WN, R()WE & MAW LLP
71 South Wacker Drive
Chicago, Ilinois 60606

Re: Consolidated Edison Company of

v. United States

Fed. Cl. No. 06-305 T

I)ear Tom and Nicole:

This letter is in response to your letter of I)ecember 14, 2006. That letter set forth

Plaintiffs explanation why its production of certain relevant information was "inadvertent." For
the reasons set forth herein, as well as for those reasons in our prior correspondence, we do not
agree and our position remains as set fort in our letter of December 11, 2006.

Because we did not find support for Plaitiffs position in our review of controllng law,

we asked Plaintiff to provide its authority for its position in its December 1, 2006 letter regarding
documents PF004354 and PF007332 and the subject matter ofthóse documents. To date,
Plaintiff has either failed or refued to identify support for its position that the destrction of
records is required prior to such a determination by the Cour, or that there has not been a subject
matter waiver of any privilege that may have attached to the material contained in those two
documents.

More significantly, Plaintiff has failed to address the fact that it had already produced

simlar information to the IRS, as we pointed out in our letter dated I)ecember 7, 2006. Wht is
more, on December 13, 2006, a mere twelve days afer first contending it had "inadvertently
produced" matenal, Plaintiff provided documents contaning information substatially similar to

the items you request we destroy. For example, Plaintiff

the
LeaSing White Paper or drafs thereof, at PJì008614-8620; PJì008645-8651; PF008652-8658;

produced unedacted copies of

PJì0093

16-93 20; PF00862I-8628; PF008629-8636; PF00863 7-8644; PF009307 -9314;

PF008790-8794. Plaintiff

has also produced an unedacted memorandum at PF007852-7853
discussing legal advice from Shearan & Sterling, as well as an unedacted email from Mr.

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 23 of 29

- 2-

l)ePlautt to Ms. McCarey and Mr. Muoio discussing fuer legal advice from Shearan &
Sterling at PF008570-8572. Although Plaintiff identified these documents on its most recent
privilege log, each document was produced in unedacted form. This production, especially
following the previous disclosure discllssed in our December 11, 2006 letter, indicates that ary
applicable privilege has been waived.

Plaintiff s approach to the turning over of information is, at a minimum, inconsistent with

the positions taken in your letters of December i and 14, and raises serious concerns about
whether the Plaintiff is fulfillng its obligation to turn over discoverable information about its tax
shelter scheme. Not only is the Ciovernent entitled to discover relevant information, but the
repeated production of the information contained in the leasing white paper in unredacted form
constitutes a subject matter waiver for which the Ciovernent is entitled to obtain the opinions,
correspondence and drafts of the documents pertaining to the matters discussed therein that have
yet to be produced.

Please promptly advise us whether additional related documents regarding the legal

advice requested from Shearan & Sterling and the substance of that advice wil be produced.

~SinCereiY yours, ~

v

~ ID N. R
o PH A.~I
Trial Attorneys, Tax Division

cc: Caren Baerga, Esq.

Is

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 24 of 29

EXHIBIT B-6

-:.

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 25 of 29

u.s. Departei'if Justice

Tax Division

Please reply' to: Court of Federal Ckiims Section

P.O. Box 26
Ben FrankUn Station
Wa.~hingtm, D.C. 20044

December 20, 2006

New York, Inc. & Subsidiaries

Facsimile No. (202) 307-0054
Tril Attorey: David N. Geier

Attoey's Direct Line: (202) 616,3448
~J()'C:D. Ci:SYJiCieier
154-2457 ~
CMN 2006103503

Also via Facsimile (312) 7069187

Thomas C. Durham, Esquire
Nicole M. Bielawski, Esquire
MA YER, BR()WN, R()WE & MAW LLP
71 South Wacker Drive
Chicago, Ilinois 60606

Re: Consolidated Edison Company of

v. United States

Fed. Cl. No. 06-305 T

Dear Tom and Nicole:

In keeping with the spirit of the discovery rules governing this case, and in furtherance of

. .

yesterday's correspondence, we wanted to inform you of additional problems with your most
recent production of documents. ()ur continuing review of the materials produced with your
I)ecember 13,2006 transmittl, demonstrates that Plaintiff continues to assert positions
inconsistent with its claim that it has not waived any privileges and request that we destroy the
documents you have produced.

First, with regar to the two documents that your I)ecember 1, 2006 letter requests be

destroyed, the documents have once again been produced to us in unredacted form on I)ecember
13. See CEOII957-63 (PF007327-33) and ~EOI20l8-23 (PF004350-55) produced as PF008258-
64 and PF008275-80, respectively.

Second, we are awar of two additional documents listed on the most recent version of

your privilege log that also have new identifying numbers that do not appear on the privilege log
and which were produced to us in unredacted form. Thus, ~E004706-7 (PF005647-8) and
C~OI 1965-72 (erroneously listed as PF004525-58) have now been produced as PF007854-5 and
PF008265- 72, respectively.

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 26 of 29

- 2-

Weare continuing to review the information provided.

Sincerely yours,

V N.~~
()S PH A.)å~;

Tria Attorneys, Tax Division

cc: Carmen Baerga, Esq.

Is

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 27 of 29

EXHIBIT B-7

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 28 of 29

MAYER
BROWN

ROW E_.~-

& MAW

December 21, 2006

VIA COURIER

Joseph A. Sergi, Esq.
U.S. Deparent of Justice
Tax Division
555 Fourth Street, N.W.
Washington, D.C. 20001

Re: Consolidated Edison Company of

New

York. Inc. & Subsidiares v. United States.
Fed. Cl. No. 06-305 T

Dear Joe:

Mayer, Brown, Rowe & Maw LLP
71 South Wacker Drive
Chicago, Illnois 60637

Main Tel (312) 762-(
Main Fax (312) 701.771
WN.mayeitrorowe.com

Thomas C. Durham
Direct Tel (312) 701-216
Direct Fax (312) 706.9167
tdurtm Omayerbv.rowe.com

As a result of

your letter of

December 19, 2006, it has come to our attention that there

was an error in the production of

the CD Rom associated with Plaintiffs Second Supplement to

Responses to United States' First Request for Production (December 13,2006) ("Second

Supplement"). As a result of

this error, material marked for redaction in our electronic database

was inadvertently not redacted in the CD Rom provided to the United States.

In connection with this production, counsel for Plaintiff, using the Concordance database,
carefully reviewed the documents and marked a number of documents for redaction on the basis
of attorney-client privilege and work product protection. These redactions were noted on the
privilege log produced to the United States, as you have acknowledged. Furtherore, in our
letter dated December i, 2006, Con Edison produced hard copies of several documents in

redacted form. As noted in our December 1,2006, letter, electronic copies of

were included in the Second Supplement.

these documents

As a result of

your letter of

December 19,2006, it has now come to our attention that the

passages marked for redaction in the Concordance database were inadvertently not redacted as
the result of an error in producing the CD Rom provided on December 13,2006.

For the reasons stated above, and applying the legal standards described in our letter of

December 14,2006, it is clear that the error in production of

inadvertent waiver. Plaintiff clearly did not intend to produce the documents in unedacted form,
as it included them on a privílege log. The documents were reviewed and redacted for attorney-

the CD Rom constituted an

client privilege and work product protection. Hard copies of

some of

the documents were

Berlin Brussels Charlotte Chicago Cologne Frankfrt Houston London Los Angeles New York Palo Alto Paris Washington, D.C.

Independent Mexico City Corrspondent: Jauregui, Navarrete y Nader S.C.

Mayer, Brown, Rowe & Maw LLP operates in combination with our associated English limited liabilit partnership in the offices listed above.

Case 1:06-cv-00305-MBH Document 21-4 Filed 04/03/2007 Page 29 of 29

Joseph A. Sergi, Esq.
December 22, 2006
Page 2

produced in a redacted roim. The eror in producing the documents in unedacted roim resulted

solely from an error in the production of

the CD Rom.

We have enclosed a new CD Rom, which contain the redactions as originally marked for

the December 13, 2006 production.

Our letter of

December 14,2006 explains the applicable law in the Court of

Claims with respect to an inadvertent waiver. Your letter of

any contrary authority. Accordingly, it is our position that the eroneous production of

December 19,2006 did not set forth

Federal

the

material included in the CD Roms for the Second Supplement constituted an inadverent waiver,
as Plaintiff inspected this material for privilege and work product, redacted relevant materials,
produced redacted hard copies, and noted its redactions in the privilege logs. Thus, the
documents remain protected by the applicable privilege and/or protection identified on the
privilege log. In addition, as described in our December 1, 2006 letter, the material in question
was, as is evident from the material itself, prepared in anticipation of litigation and therefore
does not result in a subject matter waiver.

Finally, as stated in General Objection No.1 of

the response to United States First

Request for Production of Documents and incorporated by reference into the Second
Supplement, any inadvertent disclosure of privileged or protected material does not result in a
subject matter waiver.

Very truly yours,~Mti~

Thomas C. Durham
Nicole M. Bielawski