Dear Peter:

The trustee has devoted considerable time and expense keeping the Bureau of Banking apprised of developments in the bankruptcy case. He earnestly desires to continue to cooperate with the state of Maine in resolving issues, as they pertain to the Catherine Petit bankruptcy case, which arise from the alleged investment in her cause of action against Key Bank. However, the single most daunting obstacle is the manner in which the trustee's cooperation has been solicited. Your letter, received by facsimile transmission on January 21, 1997, is a perfect example.

I believe communicating with Judge Votolato by letter addressed to me, Steve Gordon and Joe Bodoff is inappropriate. It was downright irresponsible to circulate Paul Richard's Affidavit ex parte, with the judge who is responsible for adjudicating controversies in this case. The trustee has no intention of following suit. What is before the court, at this time, is the joint motion to convert this case from a Chapter 7 to a Chapter 11 case. The trustee's evaluation of potential claims and of the debtor's lawsuit against Key Bank may become relevant in the context of the approval of a disclosure statement and confirmation of a Plan of Reorganization. However, the trustee's evaluations will be made on the record, with all parties present in the courtroom.

The only reason I am sending a copy of this letter to the Judge is to correct the record and avoid the misapprehensions which your letter seeks to invoke.

Peter J. Brann, Esq.

January 23, 1997

Page 2

As a threshold matter, the trustee notes that the comments made by you at the recent telephonic status conference before Judge Votolato presumed your knowledge of the answers to the questions you belatedly pose to the trustee. The fact that; for the first time, the state of Maine is inquiring of the trustee as to his investigations reveals your remarks to Judge Votolato as baseless.

Second, your inquiries in large part request that the trustee's counsel share attorney work product and privileged communications. Prior to December 31, 1996, the trustee's evaluation of Catherine Petit's lawsuit against Key Bank was not materially different from that of Judge Votolato in his decision to convert the case to Chapter 7. We have had three weeks to reassess that lawsuit. The trustee's conclusions are a work in process and will not be disclosed to any party until the trustee's work is finished. The trustee will not share those opinions with the judge until there is an appropriate controversy before the judge which bears upon that issue.

If the debtor's case against Key Bank had not been pending in state court for ten years, I might be less adamant in my belief that the bankruptcy process must go forward. If the chapter 7 case had advanced the administration of this case, I would not advocate a conversion. Had the state accomplished any material disclosure in its proceedings against HER, Inc., I would understand your reluctance to proceed in this forum. I reaffirm the comments I made to the bankruptcy judge at the telephonic status conference. The trustee believes that it is in the best interest of creditors and of the estate to convert this case to chapter 11 because § 1129(a) presupposes findings of fact, based upon competent evidence, on each of the unresolved issues in this case. Chapter 11, then, provides a vehicle by which there will be court determinations which resolve the outstanding issues in this case, if the lawyers in this case would simply go about their business and restrain their posturing. It is not the trustee's responsibility to make the state's case against persons who are not parties in interest in this case. The trustee is doing his utmost to provide the state with a forum which is uniquely suited to address both the needs of the state and the legitimate interests of all other constituencies of the estate.