American court hearing recordings and interviews - QVC Group - Listen to the bankruptcy hearing held June 8, 2026 starting 12:46 pm

Episode Date: June 10, 2026

--

Sleeping hot, waking up sweaty at 2 a.m. It's not you, it's your sheets, and Keraloha is your answer. They're the original for bamboo sheets that are naturally breathable, moisture wicking, and luxuriously soft, designed to keep hot sleepers cool and comfortable all night long. You can feel the difference in how much cooler you sleep. Keraloja's innovative bamboo fabric pulls heat away from your body, so you fall asleep faster and stay asleep longer without cranking the AC. Improve your sleep tonight.

Shop Kara Aloha Bambo sheets now at Karaloha.com. That's C-A-R-I-L-O-H-A.com. Cooler sleep starts with Keraloha. All right, good afternoon. It is 1245 on Monday, June 8. We're back on the record in case number 26-90447. Good afternoon. Hi, good afternoon, Your Honor.

Your Honor, my name is Stephen Cobrey. Nice to meet you. I'm of the firm Cobre and Kim, and I'm here on behalf of the Special Committee of the Board of Directors of QVC Group, Inc. Your Honor, I'm going to be calling Mr. Meltzer and inquiring. I'm going to have a few exhibits to show him, and then they ask if it be okay if we distribute those exhibits. Absolutely. Thank you. And why are we doing that, Your Honor?

May I call Mr. Meltzer? Yes. Okay. Thank you. Mr. Meltzer, would you raise your right hand? Do you solemnly, sir, affirmed to tell the truth, the whole truth and nothing with the truth? All right. And then, as I, you have to kind of talk into the microphone.

Can you hear you? Okay. I can hear you fine, yes. Thank you. And Mr. Melcher, why don't you just slide forward if he can so that this way you don't have to lean forward into the microphone. Great. Okay. Okay.

Your Honor, may I inquire? Yes. Thank you. Mr. Meltzer, I'd like to cover today with you five topics. First, your own professional background. Second, your appointment as a disinterested director and the initial phase of work that was done. The intercompany claims investigation. The intercompany claims settlement between QVC group, which, for now, if I will,

I'm going to refer to QVC group as Topco or Group. And then with QVC, Inc. or if it's okay with your, I don't know likely be if you're referring to them as ink. And then the fifth topic is the assessment of the preferred alternative proposal. First, Mr. Meltzer, can you please state your name for the record? Roger Meltzer. And what is your role with respect to the QVC debtors? I'm a member of the Copco board.

I serve as chairman of the Compensation Committee of QVC Topco Board as well as a member of the audit committee. And at the same time, I'm a member of the special committee that was formulated with Carol Flayton. Okay. And we're going to come to that in a second. Can you describe for the court your educational background, please? I graduated from Harvard College in 1973 and NYU Law School in 1977. And briefly, can you explain what your professional experience is? For a long time, I was associated with Cahill, Gordon, and Rindell, ultimately became a partner and a member of the executive committee. Thereafter, I left Cahill to go to DLA Piper, where I ran the corporate and finance practice for a long time,

and then ultimately became chairman of the firm in the Americas and ultimately global chairman. And you were chairman of DLA from 2011 to 2015, is that right? In the U.S. and then globally 2015 to 21. Okay. Outside of the restructuring space, can you just give us some examples of the charitable boards that you serve on? I served on the board. I'm a member of the board of trustees of NYU Law School. I was a member of the board of the legal aid.

Society in New York. I was a member of the corporate advisory group in the Business School of Johns Hopkins. And we were also associated with Harvard's law school? Yes. I was, I have been for a long time associated with the evolution of the legal profession, which is a separate entity at Harvard Law School. Okay. Could you tell the court a little bit about, more specifically, about your restructuring experience and work that you've done with distressed companies? So over the last six plus years, I've been exclusively, almost exclusively, focused on restructuring activities, principally as a disinterested director's director in situations where companies were highly distressed. They could have been highly distressed because of their financial performance or an inappropriate balance sheet.

They could have been highly distressed because they were subject to a very significant litigation overhang or other regulatory infirmities. And you meant, actually, approximately how many instances have you served as a disinterested director? 20. Okay. And you mentioned the name Carol Flayton as being a member of the special committee. Is that right? That's correct. Okay.

Who is Ms. Flayton? Carol Flayton is my co-member of the special committee and also a member of the compensation committee as well as the audit committee of QVC. Ms. Flayton has a long history in the restructuring business. She is not a lawyer, but she's had significant experience. I believe she was a partner at Alex Partners. She has very significant restructuring experience over, my guess, is a third. a year period.

And are you aware of the fact that she served as a chief restructuring officer previously? Not relating to you, not relating to you. I wasn't, but I have no reason to doubt it. I want to move on to the appointment of the special committee itself. Now I want to turn to the period beginning with the formation of the special committee. When was the special committee of Topco formed? June 25. June 20, June 20, 25.

June 20. Okay. And what was the scope of the special committee's authority? The scope of the special committee's authority was to investigate conflict matters. Starting in June, during the summer of 2025, in your capacity as just a member of the board and the various committees that you've described, did you begin to learn about the business of QBC? We, Ms. Flayton and I attended every board meeting and we were subject to every presentation done by senior management of QVC, as well as, obviously, as well as their financial performance, as well as some of the challenges that QVC was facing, not only in its principal businesses, but also in its more far-flung entities like,

for example, the JV in Japan, and we'll get to it, I'm sure, a cornerstone. And during this period, we're as a board member, were you also, were you focused on other aspects at the company, like, for instance, retention plans and the like? Because QVC was considering a restructuring in a form that was not yet determined in any respect. And because of the complicated corporate structure of QBC, we were very, very focused, and also because the business was not performing well, we were very focused. and also because the business was not performing well. We were very focused on a retention plan that would allow the senior management to continue to operate freely

without concern in their activities. You mentioned also Cornerstone. Did you become familiar with Cornerstone on the challenges that it was facing? Yes. And what were some of the challenges that Cornerstone was facing? Cornerstone was facing a low-margin very low margin business. It was suffering from the tariff on certainty. It was focused on the fact that

it did not necessarily have sufficient capital to run its business. It was focused on the fact that it had during the COVID period had experienced a blip and then a very significant almost on a precipice downturn. Now I want to move forward from that mid-2020 period towards the end in October of 2025. Did there come a time when the special committee retained counsel? Yes, I believe it was in October 2025. Okay.

And why did the special committee bring on? Actually, let me ask you, who did they bring on? Cobre and Kim. Okay. And why did the special committee bring on Cobre and Kim? We brought on Cobrey and Kim for a number of reasons. First, each of Ms. Flayton and I had had prior experiences with Cobury and Kim. I think mine a little more extensive.

We knew that Cobrey and Kim was a very highly regarded investigative firm as well as a litigation firm. And we also knew that Cobrey and Kim had a very substantial restructuring practice. Now, as part of, you asked Cobury. Kim to conduct an investigation, is that right? Correct. And as part of that investigation, did the special committee ask Cobre and Kim to investigate potential intercompany claims by and against Topko? Yes. What, if any, constraints that the special committee put on Cobury and Kim in their investigation? I believe as a disinterested director, the whole purpose is, the whole purpose of having independent

counsel is to put virtually no constraints on them. And to your understanding, what types of information did Kobri and Kim review in its investigation? Just the types. They conducted interviews. They reviewed thousands and thousands and thousands of pages of documents. They reviewed various analytics, analytic pieces as to various parts of things, of issues that might confront Topko. Okay.

And did the special committee receive the information from Coburn Kim? Every week. Okay. And in what form did the updates take? Were they in meetings? They were at weekly meetings and they were very often privileged deliverables. Okay. Was the, during those meetings, did you and Ms. Flayton ask questions of Coburn

Kim? I would characterize it as an extremely iterative process. Now, in connection with the investigation, did the special committee also retain other counsel? We did because one of the issues, as has been discussed here today and undoubtedly in other sessions, there's a very significant deferred tax liability and the tax position, of the QVC entities was very much on everybody's mind. And so as a result of that, and to Kobri and Kim's credit, they believe that they did not necessarily have the embedded expertise

to be able to adequately advise the special committee, and they suggested to us that we engage a special counsel for these efforts. Was, you recall the name, the person's name, the lawyer? Yes, David Warner. And is Mr. Warner from the firm of Holtz-Slappett? I believe so. Okay. And what's your understanding of Mr. Warner's background that made him particularly appropriate for this matter?

So Mr. Warner, first of all, came from the IRS. Secondly, he was an IRS prosecutor. Thirdly, not only was he an IRS prosecutor, but he was an IRS supervisor of prosecutors. And he, I believe, and someone could correct me, that he also had a relationship with the Department of Justice associated with being the person that was often the go-to person from the Department of Justice's point of view to pursue what would. I would characterize as IRS claims. Did the special committee investigate money flows to determine whether Topco might have claims against it? Yes. About claims that it could bring?

Yes. To your knowledge, did the special committee look at dividend flows between Inc. and Topco? Yes. How would you describe the magnitude of the difference between money that was going from Topco to Inc.? to ink versus ink to top go? The magnitude of the money that was going from ink to top go was large. The money that was going from top go to ink was very considerably smaller. And when you say large, you have a ballpark as to just how much money was going from ink to top go?

Over a billion dollars. Did the special committee reach a view about whether ink has whether Inc. had potential claims against Topco? We certainly were aware of it as a possibility and we believe that it needed to be investigated. Was one of those types of claims a fraudulent transfer or excuse me, withdrawn? Was one of those types of claims fraudulent transfer claims? Yes. Without telling us what they said, did Coburn Kim provide advice on the fraudulent transfer claims? They did. And did that include advice relating to potential fraudulent transfer claims is against the

preferred as subsequent transferees as well? Yes. What were the special committee's two primary considerations in assessing the fraudulent transfer claim? What are the two elements that they focused on? Well, we focused, we focused principally on an analysis of the time, time, extent, and expense of what it would take to either defend against those claims or, in the case that we had any, to bring those claims. We also focus very much on the magnitude of those claims. I would say that in the context of at that point, that's what we were principally focused on and the various elements of those claims potentially. And in relation

Was insolvency one of those elements? Yes. Okay. What was the special committee's assessment of Inks ability to show insolvency in support of its potential claim as a litigable issue? Well, it was clearly a litigable issue. I think we all understood, particularly because Ms. Flayton and I are not babes in the woods as far as the analysis of claims that there would be a very strong likelihood that if Inc. decided that they were actually going to bring claims, that it would be, we might have defenses, but it would be certainly a battle of the experts.

It would be very fact intensive. It would have a long duration with honestly an uncertain outcome. And did you also become aware of information that at least tended towards insolvency or at least supported views of insolvency? There were items, as reported to us by COBRAE, that would indicate that there were elements of insolvency. Well, were you specifically or is there data or information you had seen that supported that? There was, at various points in our analysis, there were various data points that were not solvency opinions in any respect. Those data points were things like as the performance of QVC continued to deteriorate and honestly continues to deteriorate in some respects, they were,

things like market prices of outstanding public securities as well as the analysis done by rating agencies as to where various of these public debt securities actually would stand in their rating scenarios. And you mentioned magnitude before. How did the issue of magnitude impact the special committee's assessment of the claim? It was very high. I don't know what else to say about it. It was not of a magnitude where one could turn a blind eye to it.

We had to address it because it was essentially a level of a claim that if it turned out to be true, would completely wipe out the company. And the special committee also concerned, consider that same consideration magnitude as it relates to claims against the preferred to subsequent transferees also? Yes. Yes. We analyzed consistent with our advice from Cobre and Kim.

Don't get and don't obviously tell the advice. I won't say anything about privilege. Go ahead. One thing for sure, Mr. Cobre, I know about privilege. as well as anybody knows about privilege. We analyzed the fact that there was a risk that claims could be brought against the preferred holders who had received dividends.

Did you remember ballpark approximately how much they had received? $456 million. Now, was another potential claim that the special committee considered related to the deferred tax liability? Yes. Now, you testified earlier that it engaged a tax specialist lawyer named David Warner of the IRS, right? Correct.

Okay, and without telling us what Mr. Warner said, did he give advice to the special committee relating to the deferred tax liability claim? Yes. I'm sorry? Yes. Sorry. It's okay. Did the special committee have a view as to the magnitude of the deferred tax claim? liability claim facing Topco?

Anywhere between one and three billion dollars at that time. And now even if you had succeeded on the fraudulent transfer claim if you had litigated it, would that have affected the potential exposure to the deferred tax liability? No. I want to take you now just to settlement discussions. After the special committee performed or or withdrawn. After the special committee had commenced its investigation,

did there come a time that Inc. itself advised that Inc. had potential claims against Topco. Yes. Okay. And was that at a meeting between council, between Inc. and Topco? Yes. And do you remember approximately when that meeting was? I believe. Again, excuse my voice, February 13th.

Okay. And what was your understanding of the purpose of that February 13th meeting? My understanding of the purpose of that February 13th meeting was for each side to provide their best arguments as to a, not necessarily a framework, but their best arguments as to what the two and fro might have been about the various claims and other issues. Okay. Now I'm going to ask Mr. Meltzer if you could please look there's a binder in front of you and turn to the first tab.

And for the record, your honor, it's DX-043. It's tab one in the binder. You have that in front of you, Mr. Meltzer? I do. Oh, yeah. Do you take a flip through it? Yep. Yes, I see it.

You're familiar with that document? I am. Okay. And was this a presentation that was a presentation that was a point? prepared in anticipation of the February 13th meeting? Yes. And what was your understanding of the nature of the presentation that was put together? For the exact reason that we hired Cobre and Kim in connection with this,

the purpose of this presentation was in a very aggressive position as to what our defenses might be against any claims that were ultimately could ultimately have been brought by ink. And in discussions with Coburn and Kim beforehand, did you have a view as to whether what was being presented was an extremely aggressive position? As someone who's been involved in various of these kinds of things throughout a long career, it was a very aggressive position.

And I want to ask you to turn, ask you to turn to page two of the document. Same document. Same document. Do you see in the first line it says clawback claims by QVC Inc. against Topco are not likely to be viable? Do you see that? I do.

Is that language consistent with what you wanted Cobre and Kim to convey, which was Topko's aggressive positions? Yes. And same thing for the last. line who did not believe QVC Inc can make the requisite showing uninsolvency. Is that also consistent with it? Yes. And to save the court's time, is it fair to say that the entire document was created for the

purpose of conveying a very aggressive position to Inc.? Correct. Incidentally, was you your understanding that by conveying this document at that Topco was telling Inc. that it values the claimant zero? I think we were saying that there was low likelihood, I think as an aggressive matter, we were saying that there was low likelihood

of them achieving any result on the merits. And are you aware at all of any expression at that meeting on February 13th of your lawyers of Topco, telling the lawyers at Eding, that the position of Topco is, the claims are worth zero. After the February 13th meeting, did there come a time that you received a letter from Stephen Reesman at the Caton Lawroom on behalf of the disinterested directors of Inc.?

Yes. Okay. I'm going to ask you now to turn to the second tab. And for the record, Your Honor, DX-121. Take a look at it, Mr. Meltzer. Yes, sir. Okay. You're familiar with the letter, right?

I am. Okay. in the letter I'll ask you to turn to the page 2 of 20 at the top is there an expression by ink as to the total amount approximate amount of its claims as a really the second page right mr. yeah it's at the bottom 1.99 is the bates page two yep is there an expression in this letter by ink of what it viewed, at least this is what it expressed, what it viewed was the value of the dividend claim in there? Yes.

And how much was expressed? Almost a billion one. And I'll ask you to turn to the third page at the top of the page. Is there an expression on behalf of ink as to what it was said, how much it says its claims could be relating to the deferred tax liability. Yes. And how much was it? Up to $2 billion. Incidentally, did you take this letter seriously? Yes. Did the letter also attach a term sheet?

It attached a proposed term sheet? Yes, it's attached to, I would say, a proposed term sheet. Okay. Incidentally, was the description of the claims that were raised, that being the dividend claims and the deferred tax claims, was that a surprise to the special committee to see that those two types of claims were in the letter? No. Why not?

Because we had had Cobury and Kim do an investigation. from the minute they had been engaged towards the end of October. And so we had a understanding of what the magnitude of the universe might be. And those included those two claims? Yes. And do they also include just the potential size of the claim? Correct. I mentioned the proposed term sheet.

What was the special committee's reaction to the proposal? Well, I think that there was a variety of reactions as to the level of the claims. We were pleasantly surprised. And when you say the level of the claims, you talk about the proposed, the proposal? Yes. Okay, when you say on the level of the claims, what do you mean exactly? Well, I believe in this, maybe I'm wrong, but in this letter they discussed having the claims at $400 million. Okay.

So in other words, an allowed claim of $400 million. That's what you were pleasantly surprised about. Yes. And why were you pleasantly surprised that it was $400 million? Well, because of the, we were looking at a claim that was, two and a half times larger and they were willing to discount their claim down to 400 million it struck us as a very reasonable starting point in the course of that of Coburn and Kim's investigation had don't tell me what they said but had

Coburn and Kim discussed with the special committee the strengths and weaknesses of the fraudulent transfer claim yes had they discussed the strength and weaknesses of the deferred tax liability claim? Yes. Did the special committee assess the strengths and weaknesses of the fraudulent transfer claim? With the advice of counsel. As well as the deferred tax liability claim? With the advice of counsel.

And did they also assess the strengths and weaknesses of the potential claim as it relates to the preferred? Yes. Okay. Do the special committee determine a specific percentage of probability of success? probability of success of Inks claims against Topco? No. Why not? Because the evaluation of probabilities of success is not fact-based.

It's art. So whatever we said would have been a guess, a pure and unadulterated guess. And how did the aspect of magnitude come into play? Well, as I stated before, the magnitude of the claim put us in a position where an analysis, I guess, could have suggested what Inc. thought as opposed to what we might have thought as to the value of the claims. Did the special committee discuss this letter in term sheet with its counsel covering Kim? Yes. Did it simply accept what was in the term sheet? No.

Okay. So was there a virtual meeting the next day on February 23rd with the disinterested directors, their count and their council regarding settlement terms? I believe you're referring to the virtual meeting. Yes. Yes, there was. Okay. So council was there and actually disinterested directors were there as well?

Correct. And Ms. Clayton attended as well as you? Yes. Okay. What's your best recollection of what happened at the 23rd meeting? It was, I think, a continuation of earlier meetings in which various of the councils, excuse me, Your Honor, various of the counsels set forth their positions.

Nothing was resolved. It was kind of, okay, here's where everybody is, and go back to your own corners. Okay. And then was there a follow-on meeting on the 24th? Excuse me on the 24th. Yes, there was. And there was a meeting that you and Ms. Flayton attended. Yes.

Who else attended from Inc? Mr. Keglovak by Zoom and Ms. Frisley in person. And were there lawyers there? As well as Caton lawyers. Okay. Were there people from Evochor there? No. At the 24th meeting, where you, well, did you see anybody from EFECOR?

We saw people from EFECOR. Corps who were available to make give us factual answers as well as Alex partners okay and can you tell the court what happened just generally at that meeting again there was a a conversation I come a very civil conversation as to the various positions the co-brae the I would say the ink participants were more in listen mode. We were more in projecting what our position was mode. And there was an iterative conversation about the various points of view.

Did Topko present a counterproposal? Yes. And what did they propose? We proposed. that there would be a $25 million payment to the preferreds. And we proposed a reduction in the allowed claim to $350 million. We proposed a number of other things that had been, I don't want to be disparaging, but we're offending from a term sheet point of view

in terms of a limitation on. on the amount of the general unsecured creditors that could be paid, as well as a limitation on a distributable cash, the use of cash to below a certain level, as well as certain discussions about various releases. When you say certain discussions, did Topco say that they were interested in releases? Topco believed that there was extreme value in releases in various of these iterative things. Like, for example, I'm happy Mr. Cova to go further.

Topco was very interested in limiting the level of potential liability that it could suffer as a result of contractual arrangements it had, as well as indemnities, as well as the potential clawback of the fraudulent transfers. And we were also very, very focused on getting releases for those preferred shareholders that had actually been recipients of the $455 million. Let's start with the $255 million. Did Inc. accept the, oh, which one, you just testified that Topco sought a $25 million payment for prefers? Is that right?

Correct. Okay. What was Inks' reaction to the request for $25 million for the Preferts? They said it was a non-starter. And did they explain why the $25 million was a non-starter? Well, they explained it from their point of view as well as their stakeholders point of view. From their point of view, they didn't see a reason to provide the preferred holders with an additional $25 million after they had received $456 million. And from the information that they were getting from their lender group, they also, the lender group was quite,

quite firm about the fact that they were taking a meaningful discount on their debt, and under no circumstances were they going to approve a settlement in which any additional money went to the preferred holders? Now, did – Withdrawing. Coming out of that meeting, did Inks position on the $25 million, dollars. Does that, was that resolved? In other words, Inc. said it was a non-starter, and coming out of it was the $25 million part of a framework?

Well, once they told us it was a non-starter, and once they told us what the reasons for a non-starter, we didn't feel like it was worth continuing to pursue. Was there a general framework for a deal coming out of that February 24th meeting? There was not an agreed term sheet, but there was a general framework. And how about was there an agreement on Cornerstone? Excuse me with John. Was there an agreement on what to do about Topko's 62% interest in Cornerstone? 62% interest in Cornerstone?

No, there was not. And what was the reason there was no agreement on Cornerstone? Cornerstone is a very troubled company for all the reasons that I previously testified earlier today. And there were uncertainty as to funding needs. There was uncertainty given the relationship, the very, very important internecine relationship that it had with QVC. And it was pretty clear to us and actually expressed to us directly that or through counsel that Linta had no interest in running cornerstone.

And at best, I would say that ink was mixed. That answer your question? Yes. So was the issue of Cornerstone resolved or it was put off for another day? Very clear in those term sheets that Cornerstone was an open item. And why did Copco leave it open as an open item? Well, as with all, as someone who's negotiated thousands of term sheets, it's an iterative process. You try to knock off as many issues as you can possibly knock off in the hope that you have very few at the end that you can ultimately reach your middle ground on now after the 24th top go send ink a redline term sheet yes and that was the term sheet that we saw attached to mr

reese it was withdrawn that was a red line of ink's previous term sheet? Correct. Okay. And are you aware of the fact that that was provided the next day on the 25th? I've been informed of it. Okay. What was the key change in the allowed claim that was in the red line term sheet? Again, as I testified before, we tried to reduce the allowed claim to $350 million. We also removed any limitation on the Gux that would be paid. We eliminated any notion that there would be a limitation on cash that could be spent so there are no minimum cash requirement. We insisted on extensions of the leases.

Let me say extenses, meaning you did you extend or expand the language of the releases? That was... We extended, we expanded the language for the releases. Okay. Did you put in that ink had to pay the Topco preferred $25 million? We did not. Why not? Because it was made, again, without spinning,

And without spinning wheels, it was made abundantly clear to us by Ms. Frisley and Mr. Keglevick that it was never happening. Ultimately, it was an agreement reached on most of the issues? Yes. And you know approximately when that happened? Well, there was a lot of iterative of the conversations that went on between the February 24th meeting until the petition date. larger issues seem to be resolved. Smaller issues were still up in the air, and ultimately we all came to an agreement shortly before the petition filing.

And what was the resolution of the amount of the allowed claim? After some discussion back and forth, it was, our request was rejected. And did the special committee of Topko conclude that it was still the $400 million was still a reasonable amount to settle the allowed claim? Yes, as I, yes, as I testified before, when the $400 million number first came to us, given the magnitude of the over billion dollar claim, It struck us as a reasonable ground to reach a conclusion on the allowed claim. Now, as part of the consideration of the elements of the agreement relating to the fraudulent transfer claims, did the special committee hire an independent financial advisor to analyze whether Inc. was insolvent when the dividend payments were made to Topco?

No, we did not. Why not? In the context of the structure of these negotiations, all of the boxes were, all of the advisors' information were available to all the boxes. It wasn't like we were getting separate information that may have been skewed from others of the boxes. And so information that we got from Alex Partners or information that we may have gotten from Evercore or from Kirkland and Ellis was exactly the same.

And as I testified before, each of those entities obviously well recognized of high reputation were extremely careful that none of the information that was provided was different among the boxes. But would having a solvency opinion have changed the special committees analysis of the facts and the need for a settlement. Objection calls for speculation. Well, I'll rephrase it. You want to restate the question? Yeah.

So you listed one reason, I had asked you why the reasons why he didn't hire a independent financial advisor. Were there other reasons why you didn't hire independent financial advisor? There was a 22 solvency opinion from Duff and Phelps. It too, like the data points on trading and the points on the ratings of the public securities was a data point. And so what was an additional solvency expert going to provide? He was going to say either the same thing or something different. It would be extremely expensive to get it. And we knew, based on the discussions between the

various boxes that this would be a battle of the experts, highly fact intensive, extremely expensive, and it would not necessarily result in a different result. So to spend the money to get information that we already had struck us as not being worthwhile. How did the issue of the magnitude of the claims impact into the decision of whether to hire an independent financial advisor, if it did? I'm not sure it overwhelmingly did. I think when you're dealing with claims that are a billion dollars,

obviously solvency, as we understand from these proceedings, is an extremely contentious and difficult issue, but it's ultimately would be litigated. And so it didn't really matter to me on that level. Okay. And you mentioned it. Let me just amplify that for one second. Nothing a financial advisor was going to say, given the credibility, honestly, and the reputation of Duff and Phelves, nobody was going to say something, particularly given the fact that both Ms. Flayton and I are pretty seasoned restructuring professionals,

that was going to sort of change the landscape. And during the course of the investigation, did the special committee instruct counsel to go interview Duff and Phelps? We did not. Why not? I think for the same reason I just gave. Duff and Phelps was in the business of giving sovereignty opinions, and no amount of questioning from Cobre and Kim was going to change their result from 2022. Now, I want to turn your attention back to the tax claims. Are you aware of any advisor for the debtors that opined on the deferred tax liability? Yes, I am.

And who did? PWC. Without getting into the substance of the PWC opinion, to your knowledge, did PWC provide an opinion regarding whether the deferred tax liability could be extinguished in Chapter 11? Just yes or no? Yes. And we see your understanding that that opinion was obtained for the purpose of, excuse me, it was obtained for the purposes of obtaining tax insurance? Yes.

Now, without getting into any of the specifics of the opinion, what degree of certainty did PWC give in its opinion? The word was a should opinion. And what? Subject to infinite number of. caveats that I've read through a long career. And what's your understanding... I'm going to move to strike that answer. Our speculation in this case provides that no other contents of that opinion

other than the conclusion should come into evidence. Your Honor, I don't think you pierced the 502D order by making that comment with no issue with keeping this at a show. So what you're saying is subject to the... Infinite number of... Yes, just that. All right. That's fine.

All right, that'll be struck. Okay. Okay. Thank you. Thank you. Thank you. Thank you. And what was your understanding of a should opinion as it relates to whether or not it was binding?

Not binding at all. Now, in connection with that opinion, without telling us what he said, did the special committee consult with David Warner, the tax, Council? We did. There come a time that, I'm sorry, the special committee became aware that, um, uh, that tax insurance was acquired. Yes. Okay. And you know who acquired it? Inc. acquired it. Uh, uh, and, uh, and uh, top go was a named insurer. Okay. And you know how much in tax insurance was obtained?

$925 million. Do you know the premium for that insurance? My understanding is that it's $36 million. To your understanding that that tax insurance cover the full amount of potential liability, as you understood it? No. Did the special committee consider having Topco purchase its own tax insurance and not settle with ink? We considered it. feelers were

floated it became pretty clear that additional tax insurance would be prohibitive and we didn't feel that we had given everything else that was on our plate given the potential

for claims given everything else that it would not have been a it would have been such a prohibitive amount of money that it would not have been useful. Incidentally, if you had succeeded on defending their fraudulent transfer claims, was it your understanding of whether Topco could distribute the assets in light of the detail? No.

We would have had a very significant potential deferred tax liability claim that would have, again, even more so, dwarfs the fraudulent conveyance. Okay. Now, I want to ask you, you previously testified about Cornerstone. Do you call that? Yes, I do. Okay. And you testified that you were familiar with Cornerstone prior to the February 24th meeting from, is that right? Correct. What considerations did the special committee take into account regarding the disposition of Cornerstone, meaning what to do with Cornerstone? There were a number of things.

first and foremost, I think, is that over a quite considerable period of time, particularly post-COVID, Cornerstone's business has deteriorated, margins have shrunk. The notion of a restructuring has, as happens a lot in reaching. detail cases has resulted in some trade contraction and that they were inextricably entwined for their results in their relationship with ink. Now, can you explain when you say it is strictly intertwined in its relationship with ink? Can you just explain to the court what it is you're referring to?

So, Your Honor, there are maybe three or four. of these items. One is cornerstone because of its relationship with ink and because given the nature of this CBC business, QBC business, is, enjoys a very, very significant discount with UPS. To the extent that would be removed, the discount goes away. and they would be in a position where their overall operating expenses would be similarly increased. How they would have managed that and how they would have negotiated that is anybody's guess. The second item is that QVC provides, given the magnitude of the size of QVC, and the concomitant magnitude of the size of Cornerstone, QVC provides a boatload of administrative services to Cornerstone.

And all of those allow for Cornerstone to operate kind of in a, I wouldn't quite say, an expense-free environment, but an much-reduced administrative expense environment. The third item, I think, that is meaningful about it is that Cornerstone is a low margin, it starts out to be a low margin business. And so with each of these items, if you were to take them away, or alternatively, if for whatever reason, Inc. did not take it into the fold, ink had made it extremely clear to us that they would negotiate and market. rates because they were not going to put themselves in a position where they were going to, in what is otherwise a struggling business, they were going to put themselves in a position where it was them bearing this sort of the administrative risk. The last point I'll make is that there, as I am sure Your Honor knows well, in each of these situations when you have

a standalone entity and you immediately then have to build your own infrastructure, It takes a while. You have to get the right people. It's not 100% clear that they're going to be successful, and they too are a drag on ultimately operating performance. So what you're describing is a world where there's cornerstone set with Topko and not with ink, is that right? Correct. And just explain to the court why that was part of the consideration as to what

Topco was going to do with Cornwallistern. Well, I think what Mr. Cobra is getting at, Topco had been, there had been an attempt to sell Copco in 2025, which was unsuccessful. There was also a number of funding analysis that were done that indicated that in various ways, depending upon how ink dealt. with the administrative expenses, that Topco would have required additional funding.

Given the performance of the business, the real question is, where is that funding going to come from? Clearly, Topco was not in a position because it's not an operating company, was not in a position to provide that kind of funding, given the fact that we're facing claims, potential claims, in which if we're defending them ourselves, they're going to be extremely expensive and experts and everything else associated with it. And so the, and it was also, at least from my experience, as a capital markets and leverage finance lawyer for a long time,

not completely clear that Cornerstone could go out to the market and get third-party funding. So all of those things, I think, militated towards what were we going to do with it if either Linta or Inc. didn't take it in the context of the settlement. And were there conversations with Inc about how much cash ink was prepared to leave withdrawn? where there conversations with Inc about how much cash Copco could have in the settlement, if there were a settlement with Inc. In other words, let me ask a different way.

Was it contemplated whether Copco would have enough cash to support Cornerstone in the settlement discussions? Let me restate what you're saying, and to the extent I get it wrong, please correct me. If your question is, did Topco have enough cash without Inc's support to be able to fund a standalone entity? Very questionable. And during the discussions was Topco, I'm sorry, was Inc. offering that to provide that type of cash?

Absolutely not. It was one of the things that you considered was whether or not Topco would run a marketing process as it relates to Cornerstone. Invariably in these situations, if you can't fund it and the business is troubled, an alternative is to try to find a buyer. And did you consider in that whether Topko had would have sufficient cash to run a marketing process in light of a settlement within? Again, given my experience in M&A transactions and the length of time, and the likely distractions for the management,

because as Your Honor well knows, in those kinds of situations, you would have to develop a business plan. That business plan would have to have credibility. It would have to be validated. You would have to hire an investment banker. An investment banker would clearly not be costless in these situations. Given the fact that this was not necessarily,

a highly sought after property, the level of the marketing of that would take quite a long time. And let's say, for example, you were able to get to a transaction. The contours of the contract as far as things like working capital adjustments and other things, could, based on the performance of Cornerstone, results. in a significant lower return in the liquidity event than the headline number. So did Topco make a decision as to whether or not it was going to retain its interest in Cornerstone as an asset? We made a decision that in the context of the overall settlement and the other items that were being that were being negotiated with Inc.

That we would transfer our 62% interest in Cornerstone to Inc. And remember also, Your Honor, because Linta at this point had already agreed to transfer their 38% interest in it, there was no transaction that we ultimately could do without Linta's approval. given the magnitude of their minority interest. So in talking about the settlement that was actually reached, do you believe that you and Ms. Flayton negotiated for as much as the special committee could negotiate for and obtain for Topco and its stakeholders? We do.

And what was the reason for that? Well, we believe that we took the principal risks off the table. We provided a release to the preferred holders that were the most at risk, which was the ones that got the $456 million. We took our tax liabilities off the table. We took our tax indemnity off the table, which was extremely important. We provided and we provided the release. We provided the releases, as I think I said a minute ago, releases for the preferred. We allowed for the Gucks to be paid in full.

And we also reached a resolution of the fact that we would no longer be responsible for advisory fees. Based on everything you've heard and read following the preferred shareholder, groups' objections to the settlement. Do you still believe that the settlement is in the best interest of Topco? Yes. And did you have a view as to whether the settlement was a fair, reasonable, was fair and reasonable in the best interests of Topco stakeholders?

I do, and I do believe we exercised our best business judgment and our fiduciary duties. In the course of this, did the special committee consider not settling at all? In other words, and just litigating the claims? We considered everything. And what was the views of the special committee at the time if you were to litigate the claims? My judgment, it was a no-win situation for us. Because? Because we were faced with an opposing entity, which was an operating company, which had significant cash.

and had made it extremely clear to us that they were not going away. And we further knew, forgetting what Mr. Keglevick and Ms. Frisley had also said to us, we also knew that they were under extreme pressure from their lenders to pursue these claims because of the discount that the lenders were taking on their debt. And you considered the costs of litigating these claims? What that would look like? I always consider the cost of litigating claims, Mr. Calgary. And is that partially based on your experience as a leader at Cahill and DLA?

Yes. Okay. And just generally, based on those experiences, have you had exposure to the costs of large complex litigation? Yes, I have. So there are aspects about how many claims that could be brought that would have impacted the cost here? MR. Well, again, everybody assumes in the context of this you only have one vertical.

You had two verticals here where you could have very extensive claims in different jurisdictions with different facts and so on and so forth, which all that does is it multiplies it by how much? really know, but given the magnitude of the claims and given honestly the uncertainty as to what the IRS may or may not do, it was to find any kind of rational, say, amount that this would actually cost us, was just guessing. MR. Your Honor, approaching my final two topics, I wonder if it would be okay with Your Honor's

indulgence. We'd be going over an hour now. To take a brief 10-minute break, and then we'll come back and I'll try to wrap it. All right, why don't we come back at 5 after 2? Thank you, Your Honor. Thank you, Your Honor. Thank you. Thank you.