JP Morgan’s lawyers are once again using intimidation tactics to scare whistleblowers in the Bear Stearns mortgage fraud machine lawsuits. Lawyers at Greenberg Traurig LP filed a public letter two days ago with Judge Crotty/Judge Ramos in New York State Supreme Court outing the name of a confidential whistleblower Ambac, Syncora & Assured Guarantee has secured to testify against the Bear Mortgage team run by Tom Marano, Jeff Verschleiser, and Mike Nierenberg. The JPM/Bear lawyers have also attempted to see copies of whistleblower affidavits before tomorrow’s big deposition in an apparent move to scare people coming forward saying they could be violating confidentiality agreements they signed when they left the third party due diligence firms Bear hired to help orchestra their alleged scheme.
Confidentiality agreements are often used when offering a severance to employees leaving financial firms so they can’t talk about anything bad they saw happen at the company. The worry for whistleblowers is those firms could sue to take back pay if the ex-employees do things like tell the public about financial crimes/violations their clients asked them to commit although we have yet to see a finance firm actually pull a dickhead move like this and file a real suit.
I previously reported this fall about 30 whistleblower from Bear’s wholly owned mortgage servicing firm, EMC, and outside due diligence firms, Watterson Prime and Clayton have now come forward in an amended complaint filed by Paterson Belknap Webb & Tyler for three of their monoline clients (mortgage bond insurers) suing JPM/BEAR for billions. These whistleblowers detail a ‘Bear Don’t Care’ attitude towards packaging billions of residential securities sold to pension funds and other institutional investors that blew up and lost buyers billions and billions of dollars. Court documents show this extra layer of independent due diligence for investors was nothing more than a sham to create a false sense of confidence in the Bear rmbs product.
Some of the Watterson Prime ex-staffers have said, “ Watterson’s review was nothing more than a rubber stamp approval to satisfy defendants’ (the Bear Mortgage Team) objective of purchasing a large volume of loans for securitization…the vast majority of the time the loans that were rejected [byWatterson] were still put in the pool and sold.”
Jeff Horwitz co-editor for American Banker wrote last month
The company has appeared to take private-label repurchases more seriously of late. “We’ve been sued at [over] $54 billion of securities,” Dimon said at a Goldman Sachs investor conference earlier this month. “We expect that number to go up … We’ve hired top lawyers … top mortgage people, to make sure we understand exactly the exposure.”
Dimon added, however, that he believes it will be “pretty tough” for investors to prove their claims.
Hummm I wonder if Dimon’s thinking that now?
Today PBWT’s lead attorney on the case, Erik Haas, filed a pretty interesting response to JP Morgan’s move to scare witnesses and label PBWT as using ‘ambush litigation tactics’.
Haas reminds the court testimony obtained before a deposition is attorney work product and the defense doesn’t get to see it before they get to court and cross-examine – netnet this is lawyering 101 and JP Morgan knows this. So why are they filing a public letter naming the witness and going on and on about violations of a confidentiality agreement they don’t know if the witness even had? If these whistleblowers are currently employed at another finance firm it might make it really uncomfortable for them. Which is why they were not named in any of the latest public documents filed by PBWT but have now been exposed by JP Morgan.
Haas also reminds the court in footnote number two of today’s letter:
Defendants concede that a due diligence firm made an application to Justice Bransten for the production
of affidavits obtained by plaintiffs in MBIA Ins. Corp. v. Countrywide Home Loans, Inc., Index No. 08-
602825 (N.Y. Sup. Ct.). But defendants fail to point out that, on January 17, 2012, the court denied the
due diligence firm’s request absent further briefing on the issue. Further, in light of a whistleblower’s
testimony that the due diligence firm was attempting to stifle truthful testimony by its former employees
by invoking confidentiality agreements that the former employees may have signed (and other means),
the court noted that it “is troubled by the allegations of impropriety in requesting or pressuring Clayton
[the due diligence firm] witnesses not to speak to third parties [i.e., monoline insurers] regarding their
employment at Clayton. The court has full confidence in the attorneys that come before it, and trusts that
impropriety is not, and will not be, occurring.”
Additionally, Haas told the judge JP Morgan is using an ex Ambac employee as their defense expert witness and claimed privilege of that testimony before court (which PBWT can’t and hasn’t asked to see) so on what planet do they think they can get PBWT’s witness testimony before court.
The legal gamesmanship of JPMorgan attorneys, who apparently are getting worried about what will come out in these depositions if they are pulling these kinds of moves, is becoming more and more apparent. Actions that lead to top housing analyst Mark Hanson writing a scary research note two months ago warning on the billions of RMBS putback litigation JP Morgan could have to pay out.
What’s also important to realize is it’s the monoline lawyers at PBWT who are deposing their own damn witnesses before a trial starts. They don’t have to do this. So tomorrow’s depositions reads to me like the monoline lawyers are pretty damn confident about their fraud evidence against the Bear traders like Verschleiser, Marano, Nierenberg, that they don’t fear showing JP Morgan their cards before trial. You know for when the banking giant decides it’s about time they stop pretending they don’t have serious litigation risk from buying Bear’s crap and settle.
UPDATE 6pm: Judge Crotty ordered the whistleblowers affidavit to be released to JP Morgan tonight which means the defense has a few hours to get an extra edge on tomorrow’s deposition. I hope this means now that witness statements are not a protected plaintiff’s work document that the whistleblower testimony should be available to the press and public. But then JP Morgan is pretty good at getting judges to hide the truth for a while now.
Keep speaking truth to power, Teri. You have lots of fans out here. Don’t let JPM hide in the dark.
Crotty is a federal judge. No love lost for JPM – they fired his son from their muni bond department as part of the Bear takeover.
Yea the letters I linked to went to a state judge and a federal judge so thanks for pointing that out. Very interesting on Crotty’s son – what is his name?
Crotty was not fired bc of the Bear takeover. He was let go in a round of layoffs months before March 08.
Here’s when they started:
http://www.observer.com/2007/top-officials-leave-city-housing-agency
Here’s when they left:
http://www.observer.com/2008/former-city-housing-officials-said-be-out-jpmorgan
Teri – I commend your work – I just hope we see justice & these Bear traders get their wealth given back to others & locked up
The real justice here would be Jamie Dimon behind bars—AND NOT A CUPCAKE PRISON EITHER—for a very long time.
We have a real nice prison here in Ohio waiting for him
I want to know when the frauds of the bond insurers are going to be examined.
Crotty of SDNY threatened me in open court as a whistleblower against corruption in the Grievance Committees trying to erase attorneys who represent individuals. His family was from Buffalo and got Cuomo Sr. into power. Interesting story there.
“… netnet this is lawyering 101 and JP Morgan knows this. ..”
Yeah, except that the judge did, indeed, compel them to hand over the docs.
Yea that move by the Federal Judge Crotty surprised me so why wouldn’t the whistleblowers testimoney at the depo now be made publicly available? Sounds fair to me but then the legal gamesmanship in these cases is moving in all shades of grey and agressive tactics. To me that means JP Morgan is really worried about the billions they could have to pay out for RMBS fraud or putbacks.
Think you miss the point. If the plaitiffs lawyers violting confidentiality agreements is wrong. They have every right to depose these people and confidentiality agreements should not stop them from doing that. But for a plaitiffs law firm to knowingly violate a confidentiality agreement and then manipulate a witnesses testimony appears to be over the line. If the witnesses have something valuble to say let them say it at a deposiiton under oath. That said witness intimidation is wrong and courts should not allow it.
Confidentiality agreements cannot be used to cover up a crime.
All confidentiality agreements have provisions in them that allow disclosure in response to court orders and subpoenas provided safeguards are put in place to protect trade secret and proprietay information, which may be intertwined with facts evidencing crimes.
While the defendants in this case have a right to protect their trade secret and proprietary information, they do not have the right to pevent testimony in response to a subpoena (hence the reason for Ambac’s attorneys subpoenaing third party witnesses, I.e., “their witnesses”, for deposition).
If the depos are allowed into the public domain, expect heavy redacting and a long fight over what should and should not be redacted.
Teri – any update on all this ?