Investment Experts Discuss Bank Fraud

    Finance Expert WitnessThis was a class-action lawsuit under the Securities Exchange Act of 1934 against a major financial firm in West Virginia. It was alleged that the company’s capital market sale of student loans bundled into Synthetic Collateralized Debt Obligations, or synthetic CDOs, made false and misleading statements in violation of the 1934 Act. The firm additionally failed to disclose that they were under investigation by the Securities and Exchange Commission for making materially misleading statements in connection with their sales of student loans. Someone with expertise in finance was needed to comment on the actions of the company, the nature of synthetic CDOs, and whether any duties of care were owed to company stakeholders.

    Question(s) For Expert Witness

    • 1. Please briefly describe your investment banking and practical experience with trading, structuring, or marketing synthetic CDOs.
    • 2. Are you able to describe the expectations traders have around disclosures, and the impact that information such as buyer protection and the involvement of stakeholders in selecting referenced assets would have on trading synthetic CDOs?

    Expert Witness Response E-015575

    My career is in investment banking – I originate, structure, and place securities for clients. I am very familiar with different types of synthetic CDOs. My main area of expertise is in structuring. I have worked with founders of asset backed security, creating and selling first Second Mortgage Securitization using the technique to create securitized pools of post office loans, making the first future flow securitization of insurance receivables and asset backed securities of medical receivables. Currently, I work with securitizations of charter schools. Although I am not a trader, I can discuss the process of how trading CDOs works. I can certainly describe the area of disclosures as it relates to selling a security and what information is provided. The selection of securities (and current information about those securities) is critical in creating and selling a synthetic CDO.

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