Re: Fwd: Bear Stearns High Grade Enhanced Leverage Funds -- Summary of Reed Smith Clients' Strategic Initiatives

----- Original Message ----
From: Darren <dkiesq@aol.com>
To: jeffrey epstein <jeeproject@yahoo.com>
Sent: Wednesday, August 22, 2007 10:43:00 PM
Subject: Fwd: Bear Stearns High Grade Enhanced Leverage Funds -- Summary of Reed Smith Clients' Strategic Initiatives

From: "McCarroll, James C." <JMcCarroll@ReedSmith.com>
Date: August 17, 2007 2:11:34 PM EDT
To: <dkiesq@aol.com>
Cc: "Karides, Constantine" <CKarides@ReedSmith.com>, "Gotthoffer, Lance" <LGotthoffer@ReedSmith.com>
Subject: Bear Stearns High Grade Enhanced Leverage Funds -- Summary of Reed Smith Clients' Strategic Initiatives

CONFIDENTIAL

Darren-

It was a pleasure speaking with you earlier this week, and this afternoon.  As I am sure you can appreciate, there are privileged details of our clients' strategy that I am unable to convey to outsiders, however, I have obtained client approval to lay out certain confidential but non-privileged details concerning our current strategy for investigation of the blow-up of the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage vehicles (Domestic and Overseas) (together, the "HGEL Funds"), and potential legal action in respect of that blow-up.  I hope the following will assist you in determining whether you wish to have Reed Smith represent you in connection with the HGEL Funds, and also whether you will support our clients' efforts to replace the parties currently in control of the HGEL Funds with an independent entity.  I appreciate your agreeing to keep this e-mail and its contents confidential.

In connection with the HGEL Funds, Reed Smith represents multiple funds serviced by Fix Asset Management Services, Inc., Sciens Capital and certain other investors.  Collectively, our clients hold approximately 30% of the equity interests in each of the HGEL Funds.  The General Counsels of both Fix Asset Management Services, Inc., and Sciens Capital have told us that they would be happy to speak with you, to share their perspectives on the HGEL Funds, and to discuss our efforts.   

It is important to our clients that the very troubling HGEL blow-up be investigated fully, and that appropriate action be taken against any culpable parties to recover our clients' losses.  It also is important from our and our clients' perspective, however, that precipitous, "strike" type suits not diminish the validity of our efforts, or cloud the factual and legal record such that valid claims are in any way impaired. 

The first step in our strategy to fully investigate and flesh out viable avenues for recovery in respect of the HGEL Funds is to seek removal of Bear Stearns Asset Management ("BSAM") as the General Partner of HGEL Domestic, and removal of each of the directors of HGEL Overseas (all of whom are either employed by or beholden to BSAM).  We have commenced this process through the transmission of removal petitions to the appropriate representatives of each of the HGEL Funds, pursuant to the funds' governing documents.  These documents require a meeting of all equity holders and a vote on removal and replacement of the controlling parties 30 days from transmittal of the petitions. 

In the petitions with regard to each of the HGEL Funds, FTI Capital Advisors has been nominated to replace the controlling parties.  FTI Capital Advisors is the broker-dealer arm of FTI Consulting, a publicly traded international consulting firm (symbol FCN) with very strong experience in forensic accounting, financial investigations and CDO wind-down management.  If we can secure the vote of more than 50% of the equity holders in each of the HGEL Funds, FTI Capital Advisers will replace the existing controlling parties, and will immediately commence a full investigation into the collapse of each of the HGEL Funds, enjoying full access to the books and records of each fund.  We expect that this will lead to a full exposition of all viable claims against culpable parties.

We request your support for replacement of the controlling parties of each of the HGEL Funds with FTI Capital Advisors.

In advance of a vote of the equity holders of the HGEL Funds, we are actively investigating the blow-ups of the funds on behalf of our clients, and are exploring commencing an action in the Delaware Chancery Court to gain quicker, direct access to important information currently held by the HGEL Funds.  The theories we are developing through our investigations are, of course, privileged, but we are able to inform you that we have been working with top-notch consultants to explore all reasonable theories, and have identified what we believe to be viable claims for relief that, subject to further development, would enable us to commence well-founded actions against highly solvent entities to recover our clients' full losses.

As you may know, Reed Smith is one of the world's 10 largest law firms, with over 1500 lawyers in substantial offices in major cities throughout the U.S. and Europe, as well as in the Middle East and soon in Asia.  We have considerable experience in navigating through hedge fund failures and have a dedicated Alternative Investment Dispute Resolution team that has been engaged in a number of high profile litigations resulting from hedge fund failures, as well as counseling investors in a variety of sub-prime funds.

Please let me know if you would like us to set up calls with the General Counsel of Fix Asset Management, Inc., or Sciens Capital, or if my partners (copied on this e-mail) and I can answer any questions you may have with regard to the foregoing.

I look forward to speaking with you further.

-Jim 

James C. McCarroll
jmccarroll@reedsmith.com
Reed Smith LLP
Direct Tel.:  212-549-0209
Main Line:  212-521-5400
Facsimile:  212-521-5450
599 Lexington Avenue
New York, New York  10022
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