Last December, BMO's lawyer Anne Beaumont told Judge Daniels that she expected BMO to complete their 'document production' by the end of February. Yet Team BMO arrived at the conference today without having completed this task.
“Who cares?”, you might wonder.
Since last December I’ve done some thinking about the relevance of the trading data that BMO fought to prevent the Defense from seeing. I've also thought about why BMO might drag their heels producing it. (NOTE: there is still a battle to be fought over whether or not this data could be used at trial, but BMO lost the fight to withhold it from the defense)
Here’s what I’m thinking:
If BMO is fighting so hard to hide this data, it must be pretty damning, right? It must expose two things: 1) The weakness of BMO's complaint against Optionable and 2) The strength of Optionable’s counter claims against BMO.
“Remind me”, I hear you ask, “What was BMO’s complaint again?”
My understanding of BMO’s position is that they claim to have relied on reports that Cassidy/ Optionable provided to their Back Office on a twice-monthly basis as their only available double check of the valuations that their own trader (David Lee) provided to them on a daily basis. Their complaint is that while it was fine for Lee to send his valuations to the Back Office as the basis for their daily review of his valuations, it was a violation of Federal Law for Lee to send his valuations to Optionable as the basis for their twice monthly review. At his allocution in the Federal Criminal case against him, Cassidy acknowledged that Lee did send him valuations to use as the basis of his twice monthly reports, although Cassidy also stated that he believed the reports he sent to BMO were accurate, despite Lee's involvement. The data that BMO hasn't produced yet will help validate Cassidy's "belief".
This is probably also a good point at which to mention that I have a vested interest in this case as I am an Optionable shareholder. My interpretation of events is most likely not shared by BMO or the Federal Prosecutors. Given my bias, here is my highly opinionated and only slightly educated view of BMO’s “struggle” to produce this data:
1) There must be a lot of data. It seems like BMO is working through a “Mountain of Data”. If I were to see samples of this data I probably wouldn't know how to interpret it. What I do know is that the sheer volume of it suggests to me that BMO had *A LOT* of their own data about the value of the portfolio that Lee traded on their behalf.
2) I believe that the twice monthly reports from Optionable consisted of a single page that someone at Optionable faxed over to someone at BMO’s Back Office. For the sake of argument, lets err on the side of caution and say the reports were a few pages long. They were still at best an overview - a snapshot - an estimation.
3) So…. what we’re looking at is BMO with a “Mountain" of their own proprietary data and they are asking us to believe that instead of climbing this "Mountain of Data" they safeguarded their multi-hundred-million dollar High-Risk investment with a brief twice monthly report from a tiny brokerage firm that they knew received a huge portion of their annual revenue from the very same BMO trader whose valuations were supposed to be under scrutiny here.
4) Now, I can get behind the concept that a brief report is more manageable to digest than a "Mountain of Data". And I can even give a little ground and say that it seems like BMO didn't have a good grasp of their "Mountain of Data". So, perhaps there could be some truth to their claim that they were somewhat dependent on reports from Optionable as a high level overview. But..... ummm…. BMO is a huge multi-national bank, right? They had hundreds of millions of dollars in sketchy high risk investments in play here, right? They had been involved in this specific high risk market for over a decade and they've had problems with previous trader's valuations too, right? So, when they got hit with a huge trading loss in 2007, rather than facing the music with their shareholders, they ran off and blamed some easily scapegoated tiny brokerage rather than admit that their own Controls and Risk Management had failed. To spare themselves some bad publicity, BMO detonated a nuclear bomb on Optionable's business, poisoned their marriage with NYMEX and triggered a Federal Criminal investigation against some poor schmuck with an unrelated prior criminal record. Optionable's business is dead, they're fighting a messy "divorce" and Kevin Cassidy is looking at jail time, all for the "crime" of sending BMO what may well prove to be ACCURATE reports. Well...... I can’t get behind that.
Side note:
Despite CMEG/ NYMEX getting a pass on the Oral Arguments scheduled with Judge Daniels today, CMEG/NYMEX will be back for a May 16th appearance. The next conference with Judge Daniels and the Bank of Montreal will be on May 31.
