Mr. Mark Neporent:

I thank the Chairman and the committee for inviting Cerberus to attend this meeting. My name is Mark Neporent. I am the chief operating officer and general counsel for Cerberus Capital Management. I appear before the committee today on behalf of that entity and also with the authority and permission of our affiliates, Cerberus European Investments and Cerberus European Capital Advisors. For today’s purposes, I will refer to all of those entities and their affiliates as Cerberus.

As stated in the committee's letter to me dated 17 October 2016, Cerberus was invited before the committee to assist it in its examination of the special report of the Comptroller and Auditor General with respect to the following matters: how Cerberus became involved in the Project Eagle sales process; the basis for Cerberus submitting its bid; Cerberus’s engagement of Brown Rudnick; and the context around the assurances that were provided to NAMA regarding Cerberus’s advisors and fee arrangements. Cerberus welcomes this opportunity to assist the committee in its work. I will start by reading this prepared statement that I hope will assist the committee in understanding our position on these matters and in respect of the Project Eagle sales process.

Cerberus is a private investment firm based in New York City and has been a leading investor in loan portfolios for over twenty years in the Americas, Asia and Europe. Our investment strategy often focuses on the acquisition of sub-performing or non-performing loans, which we refer to as NPLs, many of which are secured by real estate. Cerberus combines financial expertise with the infrastructure, capital and experience to service these NPLs, including the utilisation of our network of loan servicers. As the largest, or one of the largest, acquirers of NPLs in the world, we have engaged in over 80 transactions in many different countries, with more than 40 sellers since 2010, pursuant to which we have acquired over 1.2 million loans from over 1.2 million borrowers, which had an aggregate unpaid principal balance, UPB, of over $80 billion.

Cerberus first became aware of the opportunity to purchase the Project Eagle portfolio when it received an unsolicited approach from Lazard on behalf of NAMA on 6 February 2014. At that time, Cerberus had no knowledge of the transaction or any of the other bidders or advisers involved. We note that PIMCO's submission to this committee dated 8 November 2016 states that three potential bidders were contacted by Brown Rudnick in 2013. Cerberus was not one of those bidders. At no time prior or subsequent to our involvement in Project Eagle has Cerberus worked directly or indirectly with PIMCO or any other actual or prospective bidder in the Project Eagle process. Cerberus was formally admitted to the process on 14 February 2014. NAMA openly communicated at the outset that it had set an initial reserve price of £1.3 billion for the Project Eagle assets. That reserve price was later revised downward by NAMA to £1.23 billion to reflect interim asset sales or resolutions by NAMA and, again, this was openly communicated to Cerberus by Lazard on behalf of NAMA. Lazard, on behalf of NAMA, made it plain from the start that the timeline for the sale process would be condensed and that only limited information would be made available in the data room. Although this presented Cerberus with certain challenges, the process and the timeline was manageable given the depth of our team and our experience. Cerberus submitted its bid of £1.241 billion to NAMA on 1 April 2014.

The Cerberus preparation of its bid entailed the careful consideration of numerous factors, including the analysis of information made available to Cerberus in the data room. Although Cerberus did not know what competing bids would be made, we believed, based upon our discussions with Lazard, that other bidders were taking the process very seriously and that if we were to be successful, we would need to submit a competitively priced bid at or above the stated reserve price. Cerberus was informed on the evening of 3 April 2014 that its bid had been accepted by the board of NAMA. NAMA announced the sale on 4 April 2014. We have since learned that Cerberus submitted the highest bid. Our bid was approximately £141 million higher than the next highest bid. We were the only bidder to bid above the reserve price and to allocate the purchase price as requested by NAMA in its terms. The acquisition was formally closed on 20 June 2014, several months after the announcement of the award. The purchase price is as shown at figure 2.2 on page 28 of the Comptroller and Auditor General's report. We note that the Comptroller and Auditor General's report suggests that NAMA believes Cerberus owes it approximately £2.8 million under the applicable purchase documents, which, if my maths is correct, equates to 0.0023% of the purchase price. We do not agree with the figures cited and there is an ongoing reconciliation process which typically occurs with transactions of this size and complexity. We are engaged in an active and professional dialogue with NAMA on this matter and expect that a mutually satisfactory resolution will be reached very shortly which will result in an additional payment by Cerberus to NAMA.

Although Cerberus has extensive experience in acquiring and managing real estate portfolios in Europe, we had no investment history or experience in the Republic of Ireland or Northern Ireland prior to the acquisition of the Project Eagle portfolio. A decision by Cerberus to invest in a new jurisdiction is not undertaken lightly but only following careful research, investigation and due diligence to ensure we understand the local political, social and business concerns relating to the proposed investment. We recognised the added complexity with Project Eagle because the loans were under the ownership and control of NAMA, a Republic of Ireland governmental entity, while the portfolio was comprised primarily of Northern Ireland assets. The Project Eagle transaction was not a simple acquisition of assets, but as we anticipated, it has resulted in substantial ongoing involvement in the local markets, including detailed work-out activities and negotiations with borrowers. Cerberus was keen to understand whether there were local sensitivities associated with making an investment in Northern Ireland. Accordingly, we adhered to our long-standing practice of having senior Cerberus executives engage with representatives of the Northern Ireland Executive to explain our investment strategy and practice and to understand local political, social and business concerns relating to our proposed investment. As a global investment firm, we understand the need to be sensitive to such concerns and to engage as a good corporate citizen. We expended significant time, effort and money to ensure we developed a comprehensive understanding of the political, social and business issues relating to an investment in Project Eagle before we decided to commit this large amount of capital. The decision to bid in the Project Eagle process was taken only after these due diligence efforts.

It is common with acquisitions of this type for Cerberus to engage a number of lawyers and other professional advisers to assist it in the preparation of a bid. As stated above, the need for a wide range of advisory and support services was particularly acute in these circumstances. Cerberus engaged Brown Rudnick as one of its advisers to provide both legal and strategic services in connection with the proposed acquisition of the Project Eagle portfolio. Brown Rudnick was formally engaged on 24 March 2014. This engagement followed an unsolicited approach to Cerberus from Mr. Tuvi Keinan, a partner at Brown Rudnick, in mid-March 2014 offering his firm's services in connection with the Project Eagle portfolio. Brown Rudnick explained that it could assist Cerberus with its due diligence and evaluation of the Project Eagle portfolio. Brown Rudnick did not itself have a presence in Northern Ireland but advised Cerberus that it had been working with Tughans and its managing partner, Mr. Ian Coulter. We understood Tughans to be a well-regarded local law firm. Brown Rudnick provided Cerberus with due diligence material containing information and research relating to the portfolio's borrowers' guarantees, assets and potential business plans. Brown Rudnick directly advised Cerberus that Brown Rudnick was at liberty to share this information. Brown Rudnick also offered to provide legal and strategic advice relating to the bid process and to help Cerberus position itself effectively with key stakeholders.

As the timeframe for the submission of a bid was condensed and only limited data had been made available in the data room, Cerberus understood that there was potential value in the services Brown Rudnick, and through Brown Rudnick, Tughans, was offering. Brown Rudnick proposed from the outset to be paid a fee of £15 million for its services. It was agreed that Brown Rudnick would share half of the fee with Tughans, who would be engaged by Brown Rudnick, not by Cerberus, to supplement Brown Rudnick's work. The proposed fee was only payable in the event that Cerberus completed the deal and succeeded in acquiring the Project Eagle portfolio. Ultimately, Cerberus agreed to the fee on the basis that the services offered were expected to be especially useful under the circumstances and, when looked at as a percentage of the reserve price, the fee was approximately 1.1%, which we viewed as within a customary advisory fee range. Brown Rudnick also told Cerberus that if Cerberus did not wish to enter into this arrangement, it would offer its services to another prospective bidder.

Cerberus is committed to high ethical standards in the conduct of its business. This commitment is and always has been a paramount component of our culture and what we call our "tone at the top". Prior to engaging Brown Rudnick, the Cerberus legal and compliance team held discussions with Mr Keinan and a number of other partners at Brown Rudnick, including a partner based in London who had previously been the head of enforcement at the UK's Financial Services Authority.

Cerberus was formally assured that Brown Rudnick was able to enter into the proposed arrangement, provide the services being offered and share the information Cerberus was told had already been compiled by Brown Rudnick. The Cerberus legal and compliance team negotiating the terms of engagement with Brown Rudnick required Brown Rudnick to provide certifications, representations and warranties covering a number of issues, including compliance with anti-bribery and corruption laws. Cerberus also required Brown Rudnick to obtain the same representations and warranties from Tughans, which it did.

In advance of Cerberus being selected as the preferred bidder, NAMA sought and Cerberus provided information on the way in which it had agreed to compensate its advisers. Cerberus disclosed this information, including its engagement of Brown Rudnick, Brown Rudnick's engagement of Tughans and the existence of the success fee arrangement. This was known to NAMA in advance of its announcement on 4 April 2014 of Cerberus as its preferred bidder and well in advance of the closure of the transaction on 20 June 2014.

NAMA also requested certain assurances from Cerberus that no fee, commission or other remuneration or payment was payable to any current or former board member of NAMA, any current or former member of the executive of NAMA or any current or former member of an advisory committee of NAMA in connection with any aspect of Cerberus's participation in the tender process. Cerberus sought and obtained specific confirmations on the matters requested by NAMA directly from both Brown Rudnick and Tughans. Only after receiving these specific confirmations from Brown Rudnick and Tughans and in a reliance on them, did Cerberus respond to NAMA providing the assurances sought. Aside from seeking these assurances, NAMA did not express any concern or reservation about Cerberus having engaged Brown Rudnick, or Brown Rudnick's engagement of Tughans.

Cerberus is confident that no improper or illegal payments have been made by Cerberus or any of its affiliates in connection with the Project Eagle portfolio. Cerberus did not direct or authorise anyone to make any such payment on its behalf. Until it was informed by Brown Rudnick on 18 April 2015 of the Law Society of Northern Ireland's investigation into Mr. Ian Coulter's conduct, Cerberus had no knowledge of Mr. Coulter's alleged use of the Tughans fee or his alleged intentions. The terms of our engagement expressly prohibited Brown Rudnick from engaging any other person to work on this transaction. For the record, Cerberus had no contact or dealings with Mr. Frank Cushnahan at any point before, during or after the acquisition of the Project Eagle portfolio.

We invested in Project Eagle in good faith. We are confident that we behaved and acted appropriately at all times and that without a doubt our actions have been professional and correct. Project Eagle is the subject of the UK National Crime Agency's ongoing investigation and also investigations by the Securities and Exchange Commission and the Department of Justice in the United States. We are co-operating fully with these investigations. As they are ongoing, there are limits to what I will be able to discuss today. I am also restricted in discussing individual borrower cases and commercially sensitive information because of strict confidentiality rules and obligations owed to borrowers and investors. Where I can, I will seek to be as helpful as possible to the committee.

That completes the introductory remarks that I wish to make. Cerberus very much appreciates the committee's invitation to attend this meeting and allow us to share our perspective. I will happily take questions on the matters the committee has invited me to discuss and will answer the ones that I can.