Adriana Gianturco 
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Re: “A Disaster Waiting to Happen

Mr. Gammon, you've created a very well written summary of all that is going on at Oak Knoll. Only one point of clarification.

I look at the Santa Ana bankruptcy court docket daily, to keep track of what is going on in the Lehman/SunCal case, 8:08-bk-17206-ES, out of concern that the horrific conditions at Oak Knoll will cause a disaster before the judge forces an abatement of the fire hazards.

As of 10/7/09 it was not true that, "In recent days, numerous cities have flooded the court with similar motions, demanding action on the two-dozen or so problem properties created by the SunCal-Lehman implosion." Oakland is the only city (or county) aggressively pursuing resolution by way of court filings which actually ask the judge do something to crack the whip over Lehman and SunCal.

A few other cities have filed monetary claims, but they have not yet joined Oakland in attacking the actions of the trustee, Lehman or SunCal.

The unreported but fascinating part of the Oak Knoll story is the claim, under penalty of perjury, by SunCal's owner Bruce Elieff, that as to 4 Lehman/SunCal projects (Oak Knoll, Century City, Torrance and Palm Springs Village) Lehman Brothers Real Estate Partners II was supposed to have contributed $600 Million to one Lehman/SunCal partnership fund project design, demolition and construction on those properties, but the money never showed up.

Lehman Brothers Real Estate Partners II, L.P. was an investment vehicle marketed in the mid 2000's by Lehman to institutional investors. Lehman Brothers Real Estate Partners II is 90% owned by investors like the Pennsylvania State Employees Pension fund, and 10% owned by 20+ top employees of the Lehman hierarchy with a tiny share owned by a not-bankrupt Lehman entity.

The bottom line is that $600 Million of Lehman Brothers Real Estate Investors II, L.P.'s owners money, which should have gone into the Lehman/SunCal entity, to avoid these problems at Oak Knoll, simply vaporized when in the hands of Lehman's employees. The irony is that most of them are still employed by Lehman's Chief Restructuring Officer, Bryan Marsal, running Lehman's debtor in possession real estate operation.

Despite the fact that $600 Million of the Lehman Brothers Real Estate Partners II's investors' cash has disappeared, when it was contractually obligated to be deposited into the Lehman/SunCal entity which owns Oak Knoll, there is so much fracas in the main Lehman bankruptcy case in New York about other missing assets, missing securities, wire transfers ripping off European creditors' money, and other issues making the securities and banking industry unhappy with Lehman's prior and current management in Chapter 11, that the court appointed Examiner in the case, Anton R. Valukas, (who acts as the bankruptcy judge's personal investigator free from bias,) hasn't even gotten close to looking at all of the mysterious dealings of Lehman's real estate operation, called GREG (Global Real Estate Group).

And no, the missing $600 Million was not spent to buy Lehman/SunCal's Oak Knoll, Palm Springs Village and Torrance projects. Another not-bankrupt Lehman entity, called Lehman ALI, Inc., provided 100%+ cash mortgage financing for each of those land purchases.

These comments should not be construed as demonstrating sympathy for SunCal or its owners and employees. In their bankruptcy court filings in Santa Ana, on the Lehman/SunCal cases, they have been playing "hide the ball", filing documents with all of their exhibits missing, and otherwise not telling the true story of their participation in the Oak Knoll disaster. In the exhibits to his declaration under penalty of perjury, Mr. Elieff illustrates that his company was supposed to pay $66 Million into the Lehman/SunCal entity which owns the Oak Knoll, Torrance, Palm Springs Village and Century City projects. He's never provided proof to the Santa Ana bankruptcy court that he put in his money either.

I just hope the Alameda County District Attorney never has to file criminally negligent homicide cases against the PEOPLE in possession of the money and the real estate related to Oak Knoll. All the liability insurance polices in the world will not keep them out of jail if disaster strikes.

Posted by Evangeline Shaw on 10/07/2009 at 12:56 PM

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