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BANCO URQUIJO, S.A. v. SIGNET BANK/MARYLAND

August 23, 1994

BANCO URQUIJO, S.A., formerly BANCO de PROGRESO, S.A., BANCO NATWEST ESPANA, S.A.,
v.
SIGNET BANK/MARYLAND, et al., Defendants



The opinion of the court was delivered by: MALCOLM MUIR

 August 23, 1994

 MUIR, District Judge.

 I. Introduction.

 This case involves a claim by two Spanish banks against three American banks and one Japanese bank stemming from substantial loans made by all six to Intershoe, Inc., a designer, importer, and wholesaler of ladies' shoes. When Intershoe filed a petition in bankruptcy the Spanish banks were unsecured creditors of Intershoe in the approximate amount of $ 1,500,000. The American banks had extended a credit line to Intershoe in the approximate amount of $ 40,000,000, fully secured by Intershoe's accounts receivable, inventory and cash plus a foreign exchange line of $ 75,000,000. The Japanese bank had lent Intershoe $ 2,500,000 originally unsecured but on the date of the bankruptcy similarly fully secured. The American and Japanese banks will probably suffer no loss. The Spanish banks will recover nothing on their loans to Intershoe.

 On January 6, 1993, Plaintiff Banco de Progreso, S.A. ("Progreso"), filed a complaint against Defendants Signet Bank/Maryland ("Signet Maryland"), Signet Bank/Virginia ("Signet Virginia"), Philadelphia National Bank ("PNB"), Corestates Bank, N.A. ("CoreStates"), and The Bank of Tokyo Trust Company ("Tokyo Trust"), alleging unjust enrichment, fraudulent misrepresentation, fraudulent concealment, and negligent misrepresentation. Subsequently, Progreso changed its name to Banco Urquijo, S.A., and Banco Natwest Espana, S.A. ("NatWest"), was added as a Plaintiff. We will enumerate the claims set forth in the complaint so as to illuminate the significance of certain of our findings of fact.

 Plaintiffs allege that the Defendants enjoyed a special relationship of confidence with Progreso which was the lead Spanish bank. Progreso had an account with Signet Virginia and Signet Maryland and Progreso shared common ownership and a common director with Signet Banking Corporation (Complaint P 47). It is claimed that Defendants on February 15, 1990, with Signet Maryland acting as agent and lead lender, lent to Intershoe, Inc. ("Intershoe"), a business engaged in designing and selling ladies' footwear, an aggregate amount in excess of $ 31,500,000 (Complaint PP 8 and 9); before making the loan, Defendants familiarized themselves with Intershoe's financial condition and operations (Complaint P 12); collateral for the loan included Intershoe's inventory, accounts receivable, and cash (Complaint P 11); and Intershoe purchased its inventory primarily from manufacturers in Spain (Complaint P 19). Intershoe on February 18, 1992, filed a petition under Chapter 11 of the Bankruptcy Code in the Middle District of Pennsylvania, Harrisburg Division, Case No. 1-92-00419 and on April 1, 1992, liquidated all of its assets (Complaint P 8).

 The Plaintiffs claim that the Defendants orchestrated the introduction of Progreso and Intershoe to arrange an unsecured line of credit for Intershoe with Progreso in Spain to enable Intershoe to make inventory purchases there (Complaint PP 13 through 17); on the basis of a favorable recommendation from Peter Godfrey, account executive employed by Signet Maryland to service Intershoe's loan account, a line of unsecured credit was opened between Progreso as lender and Intershoe as borrower under a Credit Facility Agreement dated September 6, 1990 (Complaint P 17); Intershoe subsequently drew money on its line of credit to purchase inventory from manufacturers in Spain (Complaint P 19); these purchases inured directly to Defendants' benefit by enhancing Intershoe's inventory, accounts receivable and cash in which Defendants enjoyed a first priority security interest (Complaint PP 19 and 34); Intershoe paid the revolving line of credit that it had with Plaintiffs without default prior to September 6, 1991, the month in which the line of credit was scheduled to expire (Complaint PP 19 and 20); when the line of credit was being considered for renewal Progreso contacted Mr. Godfrey requesting Defendants' updated opinion of Intershoe's financial condition (Complaint P 20); Progreso received a facsimile telecopy on May 9, 1991, stating that the Defendants continued to have a "favorable opinion" of Intershoe (Complaint P 22); this was a misrepresentation and the Defendants did not notify Progreso at any time thereafter that Defendants' opinion of Intershoe had changed (Complaint PP 49 and 52); in reliance on the Defendants' favorable opinion of Intershoe, Progreso renewed the line of credit on September 6, 1991 (Complaint P 23); Progreso advanced Intershoe $ 1,450,934.03 during the period November 14 through December 20, 1991 (Complaint P 24); this amount was used by Intershoe to purchase shoes from Spanish manufacturers (Complaint P 24); Progreso's $ 1,450,934.03 in advances to Intershoe remain outstanding (Complaint P 48); in the course of Intershoe's liquidation, Defendants have recovered the proceeds of their collateral and applied such proceeds to the indebtedness owed them by Intershoe (Complaint P 31). NatWest joined Progreso in the original loan, advanced half of it, and agreed to assume one-half of the risk (Amended Complaint P 2b).

 A non-jury trial was held on June 13 through 17, July 6 through 8, July 11 through 15, July 18 through 22, July 25 through 29, and August 1, 1994, a total of 24 trial days. The parties submitted 703 proposed findings of fact, 204 of which were undisputed. The following are the Court's findings of fact, discussion, and conclusions of law.

 II. Findings of Fact.

 A. THE PARTIES

 1. Prior to March 1993 and at all times material hereto, Progreso was a merchant bank (also known as a "wholesale bank") located in Spain. (Undisputed, hereafter referred to as "U")

 2. Progreso was founded in 1979 in Mallorca, Spain with one branch and a main office. (U)

 3. By 1990, Progreso had five branches in Spain -- Madrid, Barcelona, Zaragosa, Sevilla and Valencia. (U)

 4. Progreso's Board of Directors consisted of seven or eight individuals. (U)

 5. Progreso's clientele consisted of high net worth individuals and corporations. (U)

 6. Approximately 95% to 98% of its loans were unsecured. (U)

 7. The March Group consists of two brothers and two sisters, Juan March Delgado (hereafter referred sometimes in the undisputed findings as "March" or "Mr. March"), Jose Carlos March Delgado, Leonor March Delgado and Gloria March. Delgado (the "March Family"), and the corporations which they control. (U)

 8. Juan March together with his brother, Carlos, has acted as the leader of the March Group and has directed their banking interests. (U)

 9. March served as chairman of Progreso's board of directors until 1993 when Banco Urquijo, S.A. merged into Progreso. (U)

 10. From 1988 through March 1993, the March Family controlled more than 59% of the issued and outstanding shares of capital stock of Progreso and elected its Board of Directors. (U)

 11. In March 1993, Banco Urquijo, S.A. merged into Progreso as the surviving corporation. Progreso then changed its name to Banco Urquijo, S.A. (U)

 12. Banca March, S.A. ("Banca March") also is part of the March Group. (U)

 13. Plaintiff NatWest is a Spanish bank. (U)

 14. Defendant Signet Maryland is a Maryland bank whose headquarters are located in Baltimore, Maryland. (U)

 15. Defendant Signet Virginia is a Virginia bank whose headquarters are located in Richmond, Virginia. (U)

 16. Signet Virginia and Signet Maryland are wholly owned subsidiaries of Signet Banking Corporation which is the successor to Bank of Virginia Company. Signet Virginia is the successor to Bank of Virginia. (U)

 17. Signet Investment Banking Corporation is a wholly owned subsidiary of Signet Banking Corporation. (U)

 18. Defendant PNB was a Pennsylvania bank whose headquarters were located in Philadelphia, Pennsylvania. (U)

 19. Defendant CoreStates is a national bank whose headquarters are located in Philadelphia, Pennsylvania. CoreStates is a successor in interest to PNB. (U)

 20. Defendant Tokyo Trust is a bank maintaining offices at 100 Broadway, New York, New York. (U)

 21. Signet Maryland was agent and lead lender for Signet Virginia, PNB/CoreStates and Tokyo Trust. (U)

 22. Progreso is part of the March Group of business interests in Spain. Those interests include banking, shipping, chemicals, building materials, cement and real estate. Progreso is a bank, not a wholesaler or retailer of shoes. At all relevant times a majority of the Progreso shares were owned by the March Group. (U)

 23. Progreso had correspondent banking relationships with many banks in the United States, going back to 1976. (U)

 24. A correspondent banking relationship facilitates certain activities between foreign banks such as letter of credit transactions and currency exchange.

 25. During the time period relevant to this case, Progreso had correspondent banking relationships with Signet Virginia and Signet Maryland. It maintained two bank accounts, one with Signet Virginia in Richmond, Virginia and the other with Signet Maryland in Baltimore, Maryland. (U)

 B. THE MARCH GROUP INVESTMENT IN SIGNET BANK

 26. In 1978, the March Group decided to invest in a bank in the United States. (U)

 27. Banca March did not intend to control the bank where the investment was to be made. (U)

 28. March desired that the board of directors of the bank or bank holding company where the investment was to be made accept Banca March unanimously to avoid dissension. (U)

 29. The board of directors of the initial candidate for the investment, Virginia National Bank (later Sovran Bank), did not accept Banca March unanimously; therefore, the search continued. (U)

 30. The March Group chose Bank of Virginia Company because it thought that it would be a good investment. Before making the investment, the March Group employed lawyers and investment bankers and did research and analysis to determine whether the investment was a sound one. The March Group also required four years' audited financial statements of the Bank of Virginia Company and demanded numerous representations and warranties, including a representation that there had been no material changes in the Bank of Virginia Company's financial condition.

 31. The Bank of Virginia Company and Banca March, for itself and its subsidiaries and affiliates as the Purchaser, entered into a Stock Purchase Agreement as of June 30, 1979. That agreement without the exhibits thereto is Exhibit P93. (U)

 
The purchaser [Banca March, S.A. and/or any of its subsidiaries or affiliates] has full confidence in the company's present management [Bank of Virginia Company and Bank of Virginia]. The purchaser has no wish to interfere with, and will not attempt to control, the management policy or affairs of the company. . . .

 Stock Purchase Agreement 15.10, Exhibit P93.

 33. The initial investment was approximately $ 20,000,000.00 in cash, which Banca March paid to Bank of Virginia Company in exchange for approximately 15% of its issued and outstanding shares of common capital stock. (U)

 34. Leopoldo Caravantes worked for Banca March from 1969 until 1985. His responsibilities included developing "foreign business with clients of the bank or potential clients." From 1985 to the present he has been employed by NatWest.

 35. In 1985, Mr. Caravantes became General Manager of the International Division of NatWest which at that time was a part of the March Group. (U)

 36. Mr. Jose Leva, who then was Mr. Caravantes' deputy in the International Department of Banca March, purchased the dollars with pesetas in order to make the investment. (U)

 37. The March Group agreed to a number of restrictions imposed by the Federal Reserve Board. Pursuant to these restrictions, the March Group, through Banca March, did not control the Bank of Virginia Company. (U)

 38. The purposes of the investment were to achieve capital appreciation, diversify the March Group's investments, and enable the banks' employees to learn about American banking.

 39. Due to the restrictions imposed by the Federal Reserve Board, the March Group could have only one director on the board of the Bank of Virginia Company. (U)

 40. March agreed to the restrictions imposed by the Federal Reserve Board because he did not want any of the March Group entities to be classified as a bank holding company. The restrictions included limits on owning shares in other American financial institutions, restrictions on banking transactions between the March Group and Signet Banking Corporation, and restrictions on interfering with or controlling the management, policies, or affairs of Signet Banking Corporation. By agreeing to these restrictions, the March Group satisfied the Federal Reserve Board that it would not control the bank.

 41. After closing on the transaction, Mr. March was designated a director of Bank of Virginia Company, later Signet Banking Corporation, and Bank of Virginia, later Signet Virginia. (U)

 42. March remained a director on those boards of directors until April 1991, when Alfredo Lafita replaced him as director. (U)

 43. Mr. Lafita is Juan March's second cousin and Juan March selected him as the March Group's nominee. (U)

 44. Mr. Lafita served as director for one year as the nominee of the March Group until its investment was sold in spring 1992. (U)

 45. During 1990 and until April 1991, Mr. Lafita was not on Progreso's Board of Directors. (U)

 46. In 1986, Bank of Virginia Company acquired Union Trust Company of Maryland. (U)

 47. Thereafter, Bank of Virginia Company changed its name to Signet Banking Corporation, Bank of Virginia changed its name to Signet Virginia and Union Trust Company of Maryland changed its name to Signet Maryland. (U)

 48. In 1986, Banca March made an additional investment in Bank of Virginia Company in order to maintain its 15.22% investment. (U)

 49. Until spring 1992, when its investment was sold, the March Group's total investment remained approximately 16% (U)

 51. Juan March never told anyone at Signet Banking Corporation or its subsidiaries ("Signet") that he had expectations about how Signet should act towards Progreso.

 52. After the investment by the March Group in the Bank of Virginia and before and after Progreso's loan to Intershoe, more than 10 but less than 30 Progreso employees traveled to Signet Virginia in Richmond to study American banking. Juan Cazalla in October and November 1990 traveled to Signet Maryland in Baltimore to study American banking. Prior to June 1991, Mr. Cazalla was assistant manager of correspondent banking for Progreso. After June 1991, Mr. Cazalla was head manager of international investments for Progreso. (U)

 53. Cazalla visited Signet Maryland in October-November 1990 to find out who Signet Maryland's customers were and how Signet Maryland's International Division did business. (U)

 54. During his training visit in October and November, 1990, Mr. Cazalla met Jeanne Derderian who then was an assistant vice president of Signet Maryland in its International Department. (U)

 55. Ms. Derderian had a farewell party for Mr. Cazalla at her home on the last day of his training visit. (U)

 56. These 10 to 30 people who visited Signet Virginia were junior level employees, generally 25-26 years old. (U)

 57. These training visits lasted from several weeks to several months.

 58. Korean bankers also visited Signet Maryland for training.

 59. It is not unusual for foreign banks to send representatives to American banks to receive training and gain a better understanding of American banking.

 60. Wallace B. Millner, an officer of Signet Banking Corporation, Signet Virginia, Signet Maryland, Signet Bank, N.A. and Signet Investment Banking Corporation, traveled to Spain in 1980 to learn about the March Group and ways of doing business with it. He visited Spain again in 1988 or 1989. Between 1980 and 1989 Mr. Millner met Jose Leva Rios ("Leva"), head of Progreso's International Division, and also Claudio Boada Palleras ("Boada"), Progreso's General Manager. (U)

 61. Sanfjord B. Teu III is an Executive Vice President of Signet Virginia in charge of its money center and reports to Wallace B. Millner, the Chief Financial Officer. (U)

 62. Millner had previously met Leopoldo Caravantes, then an employee of Banca March, when the investment by the March Group (through Banca March, S.A.) was first made in 1979. (U)

 C. LOAN TO INTERSHOE BY SIGNET, ET AL.

 63. Intershoe was a Delaware corporation which at all times material hereto maintained its administrative offices at Pine and Church Streets in Millersburg, Pennsylvania.

 64. Intershoe was a designer, importer and wholesale distributor of quality brand name women's dress shoes with a distribution warehouse in Harrisburg, Pennsylvania. Intershoe imported shoes from foreign countries -- primarily Italy, Yugoslavia and Spain -- for sale to retailers in the United States. (U)

 65. In 1988, Intershoe obtained a revolving line of credit through Signet Maryland to finance its working capital needs in the United States. The line of credit, and all subsequent modifications and renewals, are hereinafter referred to as the "Revolver". (U)

 66. The Revolver was established as a $ 30,000,000 line of credit. PNB and First Pennsylvania Bank participated with Signet Maryland in the credit, forming a bank group in which Signet Maryland acted as lead lender. (U)

 67. On May 3, 1988, Signet Maryland modified the Revolver to consent to the leveraged buyout of Intershoe by one of its executives, Ivan Rempel. (U)

 69. Signet Virginia and PNB also provided Intershoe with a foreign exchange line of credit facility (the "FX Line of Credit") in 1988. (U)

 70. The collateral securing Intershoe's obligations to Signet Virginia and PNB under the FX Line of Credit included Intershoe's inventory, accounts receivable, which included cash. (U)

 71. Thomas Reymann, a Vice President in Signet Maryland's Commercial Finance Division, was the original account officer for the Revolver. He remained the account officer until late 1989 or 1990. (U)

 72. Intershoe purchased foreign exchange contracts from Signet Virginia and PNB/Corestates. (U)

 73. Sometime in late 1989 or early 1990, the Revolver was transferred within the commercial finance division to Peter Godfrey, a Vice President of Signet Maryland, and Noel Lassise, an Assistant Vice President of Signet Maryland. Ms. Lassise was the account officer for the Intershoe loan. (U)

 74. Mr. Godfrey was also an account officer for the Revolver. He supervised Ms. Lassise. (U)

 75. In the late summer of 1991, the Intershoe loan was transferred to Thomas Reymann, Vice President of Signet Maryland, and Timothy Lewis, Assistant Vice President of Signet Maryland. After the transfer, Mr. Lewis was the account officer for the Intershoe loan. (U)

 76. Linda Douglas was a Vice President of PNB/CoreStates and one of its account officers for the Intershoe loan. (U)

  77. By July 1990, after PNB and First Pennsylvania merged, the bank group consisted of Signet Maryland, PNB, and also Tokyo Trust ("Bank Group"). (U)

  78. In the Bank Group, Signet Maryland acted as lead lender for Signet Virginia, PNB and Tokyo Trust. (U)

  79. Signet Maryland used a risk rating system to assign risk categories to its loans. These categories were used to calculate the risk exposure.

  80. The Intershoe loan was designated a "management attention" account which required the Commercial Finance Division of Signet Maryland to submit a quarterly report to the Senior Loan Committee of the bank on the status of the credit. Management attention reports were submitted in June 1990, January 1991, April 1991, and July 1991.

  81. A management attention account was designated in 1989 by a rating of "4*." At some point in 1990, because of a change in the rating scale, the "4*" designation was eliminated and management attention accounts were rated "5." The change in Intershoe's risk rating from 4* to 5 reflected a shift in rating scales, not any perceived increase in risk. The ratings of 4* and 5 were no worse than "OAEM" (Other Assets Especially Mentioned) or "OLEM" (other Loans Especially Mentioned) on the federal rating scale. OAEM/OLEM loans were commonly referred to as "honorable mention" and were not considered problem loans. The ratings of 4* and 5 could have been equal to the highest federal rating, "Pass."

  82. PNB/CoreStates had the following categories for rating loans: 1) pass; 2) pass EWOC (Especially Worthy Of Comment); 3) OAEM (Other Assets Especially Mentioned); 4) substandard; 5) doubtful; 6) loss. (U)

  83. The Revolver received a risk rating of "pass" as of May 1988 from PNB/CoreStates. (U)

  84. The Revolver received a risk rating of "substandard" from PNB/CoreStates as of February 1, 1991. (U).

  85. PNB/CoreStates rated the Intershoe account as "substandard" as of February 1, 1991, because in the view of its credit department there was a deterioration in Intershoe's liquidity, excessive leverage in overtrading, negative cash flow, high rates of advance given the level of dilution, seven million dollars in advances by Intershoe to its affiliates which were financially weak and these advances exceeded Intershoe's net worth. (U)

  86. Linda Douglas, the PNB account officer at the time, has no recollection of telling Signet Maryland of the classification change. (U)

  87. Signet Maryland was unaware of CoreStates' risk rating of the Intershoe loan.

  88. Signet and CoreStates had different opinions about the Intershoe loan. Signet had a more positive and optimistic view than CoreStates.

  89. It is common to have different perceptions of a loan within a bank group.

  90. Intershoe was a seasonal business and was subject to fashion and industry risk. (U)

  91. The Intershoe loan was a large one and was termed a highly leveraged transaction --a loan made to a company with substantial debt resulting from a leveraged buyout. Highly leveraged transactions were automatically rated "management attention" according to Signet Maryland policy.

  92. The Intershoe loan was an asset-based loan, meaning that the bank group looked to the collateral as its primary source of repayment. Asset-based loans at Signet Maryland typically were highly leveraged. In Signet Maryland's asset-based loans, covenant defaults, advance rates fluctuation, overlines and overadvances were not unusual. By definition, asset-based borrowers were short on cash because their cash needs were funded by bank debt and trade debt.

  93. Asset-based loans had been profitable and successful for Signet Maryland.

  94. As a management attention account the Intershoe loan was an acceptable credit and not considered substandard; the management attention rating meant that as a large, highly leveraged account, the Intershoe loan was monitored by top management at the bank.

  95. The loan risk rating for Intershoe at Signet Maryland did not change until December 1991 when Intershoe was placed on the watch list.

  96. Most of the accounts during the 1990-1991 time period for Signet Maryland's Asset Based Lending Department or Commercial Finance Division were management attention accounts requiring quarterly reports to Senior Loan Committee. (U)

  97. As of July 1990, the structure of the credit extended by the Bank Group included the Revolver of $ 40,000,000 and the FX Line. Signet Maryland approved a $ 3,000,000 overline, until September 30, 1990. (U)

  98. An overline is an additional approved extension of credit, beyond the Revolver cap. (U)

  99. As of September 1990, the structure of the credit extended by the Bank Group, including the Revolver, the FX Line of Credit, and a $ 3,000,000 overline provided by Signet Maryland, is explained in Exhibits P157 and 155. (U)

  100. As of September 1990, availability of loan advances under the Revolver was calculated at a total of 80% of eligible accounts receivable and 50% of inventory.

  101. The Credit Memorandum of September 10, 1990, indicates that through July 31, 1990, Intershoe earned a gross profit of $ 622,000. Sales for August were reported in excess of $ 22 million, $ 6 million higher than for August 1989. Net profit for the fiscal year ending on August 31, 1990, was expected to be greater than $ 2 million.

  102. As of September 1990, Signet Maryland was a 45% participant in the Revolver, PNB/CoreStates had 45% and Tokyo Trust had 10%. (U)

  103. As of September 1990, PNB was a 45% participant in the FX Line of Credit, and Signet Virginia was a 55% participant. (U)

  104. In September 1990, Intershoe requested an increase in the $ 3,000,000 overline to $ 5,000,000 and an extension of the September 30, 1990 maturity date to October 31, 1990. Signet Maryland granted this request with the understanding that the overline would reduce to $ 3,000,000 by October 31, 1990 and expire on November 30, 1990. (U)

  106. The increase to the temporary overline was approved on or about September 13, 1990.

  107. The $ 5,000,000 overline was not reduced on October 31, 1990 and was not eliminated by November 30, 1990. (U)

  108. Westinghouse Credit Corporation had made a subordinated secured term loan to Intershoe originally in the amount of $ 10,000,000. In the fall of 1990, the Defendants (Bank Group), Intershoe and Westinghouse Credit Corporation entered into an agreement wherein certain payments required to be made by Intershoe to Westinghouse Credit Corporation would be deferred with payments (approximately $ 1.25 million) due by March 1, 1991. The agreement provided that if payments were not made by March 1, 1991, that this would constitute a default. The agreement also provided that past payments that were not made would not constitute a default. (U)

  109. On September 28, 1990, Paul H. Hawkins, an Assistant Vice President of Signet Maryland in the Credit Department, performed a credit analysis of the Intershoe loan. The analysis by Mr. Hawkins is Exhibit P158. (U)

  110. Mr. Hawkins' chief concerns were (a) the recent abrupt shift in Intershoe's top management; (b) an industry stalled by a weak retail environment with no immediate prospects for rejuvenation; (c) a concentration of sales to a limited number of major accounts some of which had questionable credit quality; (d) an illiquid and highly leveraged balance sheet; (e) a highly seasonal business, which caused Intershoe to experience large swings in gross and net profit margins during the course of a particular year. (U)

  111. Hawkins stated that Intershoe was in a "precarious position." (U)

  112. Mr. Hawkins further stated that:

  
These weaknesses are particularly worrisome considering that the company is highly leveraged. Mounting losses have virtually wiped out equity and on a tangible net worth basis equity is sharply negative. Even without subtracting intangibles, at 5/31/90 the debt to worth ratio was 205.8x indicating that the bank is acting more as an investor than a lender. Given the illiquidity of the company, and the bank's exposure to this risk, a glitch in the trading asset turnover of Intershoe will jeopardize the bank's position.

  (U)

  113. Mr. Hawkins concluded that "as a result of these concerns, it is recommended that the bank begin to work out of this exposure." (U)

  114. Hawkins' observations were partly correct and partly incorrect.

  115. Hawkins's conclusions were evident to anyone possessing Intershoe's financial statements and publicly available information.

  116. Hawkins' analysis was performed and filed in the Intershoe file while Lassise was on maternity leave. It was not discovered by the members of the Commercial Finance Division until months later.

  117. No one in the Commercial Finance Division agreed with Hawkins' analysis. Also, Hawkins' supervisor in the Credit Department, Tom Schmidt, did not agree with the analysis.

  118. On February 12, 1991, Noel Lassise wrote a response to Hawkins' analysis. Lassise's response is Exhibit P203. (U)

  119. Lassise's response reflected the thinking of Signet Maryland about Intershoe except for Hawkins who is no longer employed at Signet.

  120. Lassise's analysis concluded: "While it is true that Intershoe is highly dependent on seasonal sales volume to cover fixed expenses, it is recognized as a risk that ...


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