Optionable Archive - Selected Docs #2

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Today Circuit Judges Dennis Jacobs, Robert D. Sack, and Gerard E. Lynch issued a Summary Order (signed by Clerk Catherine O'Hagan Wolfe) that affirmed the Order of Restitution issued by Judge Griesa in the case: United States of America v. Kevin Cassidy.  Griesa's order calls for Cassidy to pay BMO $8,635,059.

In my opinion the Summary Order fails to provide a just resolution to the 2007 trading losses that the Bank of Montreal experienced as a result of their own flawed risk management process as implemented by the Bank's current CEO Bill Downe.  (Back in 2007, Downe was in charge of the Division in which the trading losses happened) 

Going forward, part of the mission of this blog will be to retrieve documents related to this case and others involving Optionable and republish them in a SEO-friendly format. This will insure that they remain publicly accessible via search engines such as Google, Yahoo and Bing for years to come.

The document below, presented in its entirety, is the press release Optionable issued on October 27, 2013 exposing that the Deloitte Report (part 1 / part 2) the Bank of Montreal used to vilify Optionable and its CEO Kevin Cassidy actually exonerated them both.  Here then is the press release:
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Deloitte Report Exonerates Cassidy in Bank of Montreal Fraud

October 27, 2013 - Freshly reviewed evidence incontrovertibly exonerates former Optionable CEO Kevin Cassidy in relation to losses announced by Bank of Montreal in April 2007 in their energy trading division. Cassidy, in an effort to avoid trial due to the complexity of the case and a previous criminal history related to alcoholism, plead guilty to one count of conspiracy to commit wire fraud. A clear reading of the evidence, however, indicates that not only did Mr. Cassidy not engage in any wrongdoing but in fact was a major asset aiding BMO in its effort to overcome problems arising from massive over trading and shoddy risk management.

In May 2007, BMO announced that based on an independent report from Deloitte consulting they "had concerns about the quotes coming from Optionable". The clear implication was that the Deloitte report cast doubt on the integrity of quotes coming from Optionable. However, that was not the case and in fact, Mr. Cassidy of Optionable was cited as a source by Deloitte making suggestions as to how to improve valuation verification practices.

Furthermore, an examination of the Deloitte report clearly shows that far from casting doubt as to accuracy of Optionable quotes, the report clearly indicates that BMO was misinterpreting the Optionable quotes and that the Optionable quotes were indisputably accurate based on the size of BMO’s position and prevalent industry practice.

The decision to misrepresent the findings of the Deloitte report to the public was part of a broader strategy by BMO to divert attention from their disastrous risk management practices and the fact that they had lied to the public in stating that they were running a conservative, client driven book. In an internal email, CEO Downe summarized the BMO predicament. Downe commented “It happens to be a fact and you couldn’t lose this much money by taking one gigantic bet if you had risk controls in place.” BMO had numerous times disclosed to the public they were running a conservative client driven book. The fact that BMO was engaged in massive speculative trading was deliberately never disclosed to the public by BMO at the time and has still not been disclosed. Years of gains in their natural gas trading book had padded earnings at the Canadian bank and had resulted in increased bonuses for BMO executives.

When the natural gas positions run by head trader David Lee began to experience losses due to excessive speculation, BMO executives moved quickly to cover up the size of their positions. Investment Banking Head Yves Bordeaux implored David Lee “to come up with a plan because how are we going to explain things to people who thought we were just trading around customer business." Faced with an angry shareholder base, potential regulatory actions, and possible downgrades by rating agencies, BMO, led by CEO Downe, settled on a plan to “blame Optionable” and “redirect the spin by suing Optionable.” Mr. Downe chose to participate in the cover up and set up Cassidy to take the fall for the BMO fraud rather than disclose the fact that BMO was running a book that was not conservative and customer driven but was engaged in massive speculation.

“Our hearts go out to former CEO Kevin Cassidy and his family”, said Dov Rauchwerger, Optionable CEO. ”I can only imagine what it must be like to be set up to take responsibility for someone else's crimes. We are gratified that the documented evidence has incontrovertibly exonerated him, however, and we hope this will provide solace for him and his family."

About Optionable
Optionable was the developer of a groundbreaking options trading platform for professional options traders. In May 2007, actions by Bank of Montreal (BMO) and the New York Mercantile Exchange (NYMEX) destroyed five hundred million dollars in market value and billions more in lost opportunity costs. Its business destroyed, the company is now actively investigating and pursuing all avenues to hold NYMEX (now CME) and BMO accountable.