John Schultes is quite smart and very precise in his use of language.? Even 
though he speaks with an accent, he is easy to understand and he is very 
careful with his words.? I thought he acquitted himself reasonably well under 
difficult conditions.? However, Schultes' natural demeanor is somewhat formal 
and aloof; I don't think a jury is going to like him.? At best they'll be 
neutral; they won't warm up to him. 

Schultes has sued McDonald and SDI in Cleveland, Ohio--apparently some sort 
of defamation and wrongful termination.? I am getting the complaint, will 
have it sent to you.? Schultes was deposed for three days a few weeks ago in 
that case.? We will try to get the transcript.

Schultes is unemployed.? His defense is being paid for by AIG under a D&O 
policy. 

Kathy spent a lot of time on Schultes' response in 9/98 to Bob Walters 8/98 
memo.? In his response Schultes acknowledged a number of shortcomings at NSM 
but took the position that everyone knew all about them at the time of the 
offering.

KPMG wrote management letters in connection with NSM financial statements for 
the year ended 12/31/96 and the quarters ended 3/31/97 and 6/30/97--probably 
for later periods as well, like 12/31/97.? KPMG has produced documents.? We 
are getting them this week.? E&Y also did a special report for McDonald in 
the second half of 1997; McDonald has produced a copy.? E&Y is still fighting 
about producing its documents.? Schultes says he never saw the E&Y report.

Enron came up twice today, not with much emphasis--both times dealing with 
events after the closing.? A memo of Brian's dated 7/28/98 relating to a 
Management Company meeting was discussed briefly.? The report or review that 
the Enron team prepared in August 1998 was discussed at a little more 
length.? Nothing harmful.? To date there has been virtually no testimony 
about any role of Enron or ECT in the underwriting process--just about all 
testimony has been about post-closing events.

Kathy also pressed Schultes to admit that NSM's actual production of steel 
before the offering was quite limited.? Schultes quarreled with her a bit on 
this.

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