Exhibit 78 — Case 1:20-cv-00658-LMB-IDD, Document 131-13, Filed 05/07/21 (Confidential)
What This Document Is
This is Exhibit 78 to the Burke declaration (Doc. 130/131) — a six-page excerpt (transcript pages 78-89) from the April 11, 2021 remote videotaped deposition of Joanna Williamson, identified in the testimony as Chain Bridge Bank's CFO, examined by Gregory Ketcham-Colwill of Schulte Roth & Zabel (Blue Flame's counsel), with Matthew Madden of Robbins Russell (Chain Bridge's counsel) objecting throughout.
Factual Summary
Williamson is questioned about a recorded phone call (played during the deposition but not itself part of this exhibit) in which she and Heather Schoeppe discussed an Insured Cash Sweep (ICS) account for the incoming Blue Flame funds. Williamson testifies the ICS program has a $150 million maximum limit, that Chain Bridge uses ICS accounts "fairly regularly," primarily to extend FDIC insurance beyond the standard $250,000 cap, and that funds placed in a "one-way sell position" move "off of the bank's balance sheet" while a "reciprocal position" keeps them on it as both assets and liabilities. She confirms Schoeppe asked, on the recording, "if the bank should say it didn't want the account," and that Williamson's response was that Schoeppe "would need to ask Mr. Brough about that." Williamson testifies her interest in moving the funds off balance sheet was "managing the bank's size" for leverage-ratio and liquidity monitoring purposes, explains that Chain Bridge's tier-1 capital consists of "common stock plus surplus for additional paid in capital plus retained earnings," and states she did not calculate any specific leverage-ratio impact from the transaction on March 25 or 26, 2020, because "everything unfolded so quickly." She testifies she has "no involvement in account opening" and therefore no opinion on whether Blue Flame's account should have been opened, and is not aware whether anyone else at the bank calculated the leverage-ratio impact.
Key Facts
- Confirms Chain Bridge's ICS shadow-account program has a $150 million cap — smaller than the disputed $450+ million wire, meaning the full amount could not have been moved off-balance-sheet via a single ICS placement.
- Corroborates, from the bank-officer side, the ICS/off-balance-sheet planning documented contemporaneously in the internal Chain Bridge emails at Exhibit 89 (Doc. 131-24), including Schoeppe's recorded question about whether the bank should decline the account.
- Williamson testifies she made no leverage-ratio calculations specific to this transaction and had "no involvement in account opening."
- Deposition taken April 11, 2021, five days after the O'Malley deposition excerpted at Exhibit 74 (Doc. 131-9).
- Filed May 6, 2021, docketed May 7, 2021, as Exhibit 78 (Docket Entry 131-13).
Source Caveats
- Use the linked source file for exact quotations, pagination, attachments, and any redacted or sealed material.
- This is a twelve-page excerpt (transcript pages 78-89) of a longer deposition; Williamson's testimony outside this range is not summarized here.
- The recorded phone call between Williamson and Schoeppe that is discussed extensively in this excerpt was played during the deposition but is not itself included in this filed exhibit.
- Marked CONFIDENTIAL in the original; extracted text contains minor OCR-level artifacts (e.g., "BLUE FLAME :MEDICAL LLC") that do not affect the substance quoted above.
- Date
- 2021-05-07
Cite this document
“Exhibit 78 — Case 1:20-cv-00658-LMB-IDD, Document 131-13, Filed 05/07/21 (Confidential).”
Original at ecf.vaed.uscourts.gov, dated 2021-05-07. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2021-05-07-n-a-v-third-party/
, SHA-256 d4ecd2ddbc1da10ac6a4fa4fcf2751836eebb8980a5e8f93d27aedcfa8381fb2.Full text
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EXHIBIT 78
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Page 1
1
2 IN THE UNITED STATES DISTRICT COURT
3 FOR THE EASTERN DISTRICT OF VIRGINIA
4 (Alexandria Division)
5 BLUE FLAME :MEDICAL LLC, )
Plaintiff, )
6 )
vs. ) Civil Action
7 )No.
CHAIN BRIDGE BANK, ) 1: 20-cv-00 658
8 N.A., JOHN BROUGH, and )
DAVID M. EVINGER, )
9 Defendants. )
)
10 CHAIN BRIDGE BANK, )
N.A., )
11 Third-Party )
Plaintiff, )
12 )
vs. )
13 )
JPMORGAN CHASE BANK, )
14 N.A., )
Third-Party )
15 Defendant. )
)
16
17
18 ***CONFIDENTIAL***
19 REMOTE VIDEOTAPED DEPOSITION OF
20 JOANNA WILLIAMSON
21 located in McLean, Virginia
22 Sunday, April 11, 2021
23
24 Reported By:
25 CATHI IRISH, RPR, CRR, CLVS
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1 1
2 2 APPEARANCES: (continued)
3 3
4 4 WILMER HALE LLP
5 5 Attorneys for Third-Party Defendant
6 6 JPMorgan Chase Bank
7 7 7 World Trade Center
8 April 11, 2021 8 250 Greenwich Street
9 9:34 a.m. 9 New York, New York 10007
10 10 BY: MARISSA MEDINE, ESQ.
11 Remote videotaped deposition of 11 TODD CLAYTON, ESQ.
12 JOANNA WILLIAMSON, with all 12
13 participants appearing via 13 ALSO PRESENT:
14 videoconference, before Cathi Irish, a 14 PHIL GLAUBERSON, videographer
15 Registered Professional Reporter, 15 ETHAN BEARMAN
16 Certified Realtime Reporter, and 16 BETSY SHARON
17 Notary Public of the State of 17
18 New York. 18
19 19
20 20
21 21
22 22
23 23
24 24
25 25
Page 3 Page 5
1 1
2 APPEARANCES: 2 THE VIDEOGRAPHER: Good morning.
3 3 We are going on the record at
4 SCHULTE ROTH & ZABEL LLP 4 9:34 a.m. Eastern time April 11, 2021.
5 Attorneys for Plaintiff 5 Please note that microphones are
6 919 Third Avenue 6 sensitive and may pick up whispering
7 New York, New York 10022 7 and private conversations. Please
8 BY: GREGORY J. KETCHAM-COLWILL, ESQ. 8 mute your microphone whenever
9 ANGELA GARCIA, ESQ. 9 possible. Audio and video recording
10 JASON T. MITCHELL, ESQ. 10 will continue to take place unless all
11 EKENDILICHUKWU E. UKABIALA, ESQ. 11 parties agree to go off the record.
12 NATHANIEL PALMER, ESQ. 12 This is media unit 1 of the video
13 13 recorded deposition of Joanna
14 ROBBINS RUSSELL ENGLERT ORSECK 14 Williamson in the matter of Blue Flame
15 & UNTEREINER 15 Medical LLC versus Chain Bridge Bank
16 Attorneys for Defendants and 16 N.A., et al. filed in the United
17 Third-Party Plaintiff 17 States District Court, Eastern
18 2000 K Street, N.W. 18 District of Virginia, 1:20-CV-00658.
19 Fourth Floor 19 This deposition is being held
20 Washington, D.C. 20006 20 remotely.
21 BY: MATTHEW M. MADDEN, ESQ. 21 My name is Phil Glauberson from
22 ZACHARY N. FERGUSON, ESQ. 22 the firm Veritext and I am the
23 23 videographer. The court reporter is
24 24 Cathi Irish from Veritext.
25 25 I am not authorized to administer
2 (Pages 2 - 5)
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2 are essentially buying deposits. 2 Regardless, I'm not the right person to
3 BY MR KETCHAM-COLWILL: 3 ask so someone else at the bank would need
4 Q. They are buying deposits, okay. 4 to be consulted.
5 And they would -- why would those banks 5 Q. Do you have an opinion one way or
6 buy deposits? 6 the other about whether Blue Flame's
7 MR MADDEN: Same objection. 7 account should have been opened?
8 THE WITNESS: If they needed 8 A. I have no involvement in account
9 liquidity they might buy those 9 opening so I don't have an opinion.
10 deposits. But there could be other 10 Q. I believe after that exchange in
11 reasons that I don't know because I 11 the recording that you brought up the
12 don't work for those banks. 12 possibility of an ICS account. One thing
13 BY MR KETCHAM-COLWILL: 13 we didn't touch on just now, what's the
14 Q. Do those receiving banks pay 14 maximum limit for an ICS account, how much
15 interest on the portion of the deposited 15 money can an ICS account hold?
16 funds that they hold? 16 A. 150 million dollars.
17 MR MADDEN: Same objection. 17 Q. And then I believe you said that
18 THE WITNESS: I don't know if 18 this would probably be too short-term to
19 interest is the correct term because 19 put into an ICS account; is that right?
20 again, how much they would pay into 20 A. I said that but again, I'm
21 IntraFi would be based on a rate 21 thinking out loud. I don't actually know
22 bridge. 22 about how ICS accounts are set up so I'm
23 BY MR KETCHAM-COLWILL: 23 really just talking out loud. And
24 Q. What's a rate bridge? 24 regardless, I tell her we'll do whatever
25 A. We're getting a little bit more 25 we need to do. So any notions that I have
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2 complex than I feel I'm equipped to 2 at that point in time aren't so
3 discuss. But my general understanding, 3 substantial that I don't think we'll
4 and I don't work for IntraFi, is that a 4 accept the wire.
5 rate bridge is the difference between the 5 Q. How often does Chain Bridge Bank
6 stated rate for deposit accounts and 6 use ICS accounts?
7 the -- with the customer versus the rate 7 A. Fairly regularly.
8 that another bank or any bank will pay for 8 Q. What is the typical reason for
9 the deposit. It is a very -- it is a very 9 using an ICS account?
10 complicated calculation and it varies for 10 MR MADDEN: Objection to form,
11 each customer. 11 foundation.
12 Q. Okay. Going back to the 12 THE WITNESS: The primary reason
13 recording, Ms. Schoeppe asked you if the 13 for ICS accounts is to allow FDIC
14 bank should say it didn't want the 14 insurance for customers that would
15 account. Do you recall that? 15 otherwise be uninsured.
16 MR MADDEN: Objection to the 16 BY MR KETCHAM-COLWILL:
17 form, misstates the recording. 17 Q. So if a customer had more than
18 THE WITNESS: I don't have a 18 $250,000 in an account, its account at
19 recollection of her saying that but I 19 Chain Bridge Bank would only be FDIC
20 do believe she did from the audio 20 insured up to that amount and if they want
21 recording you just played. 21 to be insured more than that, they
22 BY MR KETCHAM-COLWILL: 22 would -- the bank would put the money into
23 Q. And your response was she would 23 an ICS account?
24 need to ask Mr. Brough about that? 24 A. I don't work directly with
25 A. That was my response. 25 clients in determining whether or not they
21 (Pages 78 - 81)
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2 go into an ICS account, but that is my 2 speculation.
3 understanding about why a client would 3 THE WITNESS: If the funds were
4 generally want to. 4 kept on the bank's balance sheet, we
5 Q. And you said you are not 5 would have very high liquidity.
6 generally involved in setting up ICS 6 BY MR KETCHAM-COLWILL:
7 accounts? 7 Q. Because you'd have that much cash
8 A. No, I don't set up any accounts. 8 in your cash account?
9 Q. Did you have any experience with 9 A. Yes, which high liquidity is
10 ICS accounts from any of your jobs prior 10 favorable for banks.
11 to Chain Bridge Bank? 11 Q. What about the impact on the
12 A. Not that I recall, no. 12 leverage ratio, what would that have been
13 Q. You're not involved in setting up 13 if the funds had been kept on the bank's
14 ICS accounts but -- I'll strike that. 14 balance sheet?
15 We'll get there later. 15 MR MADDEN: Objection to the
16 You then say in the recording but 16 form, speculation.
17 it's a lot of money and that would enable 17 THE WITNESS: Well, in thinking
18 us to take it off the balance sheet. 18 just about the first -- so we were in
19 Was that an accurate statement? 19 the first quarter during this
20 A. Yes, putting money into an ICS 20 transaction, so thinking just through
21 account, when we do that we have the 21 the first quarter, the -- and as you
22 option of putting the funds into a one-way 22 know, the leverage ratio is calculated
23 sell position which would move the funds 23 as tier 1 equity divided by average
24 off of the bank's balance sheet. 24 assets, and so assets would have been
25 Q. And can you explain how that 25 elevated for the last I believe six or
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2 works from an accounting perspective? 2 so days of the first quarter if the
3 A. The deposits are not on the 3 full amount was kept on the bank's
4 balance sheet. They are then deposits of 4 balance sheet. Because of that
5 another bank's balance sheet. 5 averaging mechanism, it's okay to keep
6 Q. Why were you interested in taking 6 elevated assets for a day or a couple
7 these funds off the bank's balance sheet 7 of days or even a few weeks without
8 in this call with Ms. Schoeppe? 8 having a really significant impact on
9 MR MADDEN: Objection to the 9 your leverage ratio. So there would
10 form. 10 have likely been an impact but not a
11 THE WITNESS: Managing the bank's 11 very -- not a very substantial one.
12 size. 12 BY MR KETCHAM-COLWILL:
13 BY MR KETCHAM-COLWILL: 13 Q. So you said the assets of the
14 Q. That's something you do as CFO? 14 bank would have been elevated for those
15 A. I would say that I try to be 15 last six or so days of the first quarter,
16 generally aware of the bank size, yes. 16 but in calculating the average assets for
17 Q. For what purpose? 17 the bank, the denominator in that leverage
18 A. For monitoring the leverage ratio 18 ratio calculation, if the average is
19 and liquidity purposes and those are just 19 across the entire quarter?
20 the things that come to mind right now. 20 A. Exactly. And so since we were
21 There could be other reasons why. 21 already 80 some days into a 90- to 92-day
22 Q. What would be the effect on the 22 quarter, that reduces the possible impact.
23 bank's liquidity if it kept these funds on 23 Q. Did you calculate the potential
24 the balance sheet? 24 impact on the bank's leverage ratio on
25 MR MADDEN: Object to the form, 25 March 25th or March 26th?
22 (Pages 82 - 85)
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2 MR MADDEN: Objection to form. 2 BY MR KETCHAM-COLWILL:
3 THE WITNESS: I don't recall any 3 Q. Okay. What are some of those
4 calculations, no. 4 facts and circumstances that would bear on
5 BY MR KETCHAM-COLWILL: 5 your concern?
6 Q. Did you calculate the potential 6 MR MADDEN: Objection.
7 impact of California's wire transfer on 7 THE WITNESS: Well, if the bank
8 the bank's leverage ratio at any time? 8 has low capital levels but it
9 A. I don't recall making any 9 continues to be very liquid with few
10 calculations. Because everything unfolded 10 problematic assets, and is within its
11 so quickly, there didn't really seem to be 11 policies for interest rate risk in
12 a need for it that I can think of. I was 12 asset liability management figures,
13 not asked to. 13 that would be different. That would
14 Q. Do you know if anyone else at the 14 lead me to believe that it would be
15 bank made that calculation? 15 okay for longer.
16 A. I'm not aware. I really didn't 16 BY MR KETCHAM-COLWILL:
17 have much communication with the folks at 17 Q. Are funds -- funds held in the
18 the bank that were handling the 18 bank's Federal Reserve account aren't
19 transaction. 19 problematic assets, are they?
20 Q. Can you remind me what tier 1 20 A. They are not problematic assets,
21 capital consists of? 21 no.
22 A. For Chain Bridge Bank, that is 22 Q. And funds held in the ICS account
23 common stock plus surplus for additional 23 aren't assets at all of the bank?
24 paid in capital plus retained earnings. 24 A. They can be. It depends on how
25 Q. Why is having a leverage ratio 25 we place the funds into the ICS program.
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2 below 5 concerning? 2 But if we move them off of the balance
3 MR MADDEN: Objection to the 3 sheet, then no, they would not be assets
4 form. 4 at all.
5 THE WITNESS: Well, I would have 5 Q. What are the different ways the
6 to make assumptions about what the 6 banks can place money in an ICS account?
7 regulators who developed that 7 A. The bank can -- once the customer
8 benchmark were thinking. 8 establishes an ICS account, the bank can
9 BY MR KETCHAM-COLWILL: 9 select to either put the funds into a
10 Q. Would you be concerned if the 10 one-way sell position, thereby moving them
11 bank's leverage ratio dipped below 5? 11 off of the balances sheet, or they can
12 A. I think that the bank is -- takes 12 select a reciprocal position which means
13 so little risk and has such high 13 deposits that the bank puts out into the
14 risk-based capital ratios that dipping 14 network, they get reciprocal deposits
15 below 5 percent doesn't cause me great 15 back.
16 concern, especially if I think it's just 16 Q. And so in that second case, funds
17 for a short term. 17 in the ICS program would be reflected on
18 Q. How short-term would it need to 18 the bank's balance sheet?
19 be for you to remain unconcerned? 19 A. Yes.
20 MR MADDEN: Objection to the 20 Q. As assets? Or I suppose as
21 form, misstates the testimony. 21 assets and liabilities?
22 THE WITNESS: It's hard to say 22 A. Right.
23 because it would depend on likely many 23 Q. When is the leverage ratio
24 other facts and circumstances that 24 calculated for Chain Bridge Bank, how
25 aren't laid out here in this question. 25 frequently?
23 (Pages 86 - 89)
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