Cassidy's Lawyer Drops a Nuclear Bomb on The Bank of Montreal

photo credit: Dimitar Krstevski

Wednesday November 27, 2013:  Earlier this evening Kevin Cassidy's lawyer, Lawrence Gelber filed a motion that clearly explains the events leading up to The Bank of Montreal's (The Bank) 2006-2007 Natural Gas trading losses which The Bank blamed on brokerage firm Optionable and its CEO Kevin Cassidy.  Trust me, with this Motion Gelber clearly and definitively debunks The Bank's narrative and exposes their fraudulent behavior against Optionable, Cassidy and the Federal Court system. 

Document 250: Defendant Kevin P. Cassidy's Memorandum Of Law In Opposition To Plaintiff's Motion To Dismiss Its Complaint Without Prejudice
Document 251: Declaration Of Lawrence R. Gelber In Opposition To Motion To Dismiss Claims Against Defendant Kevin P. Cassidy Without Prejudice (Part 1)
Document 252: Declaration Of Lawrence R. Gelber In Opposition To Motion To Dismiss Claims Against Defendant Kevin P. Cassidy Without Prejudice (Part 2)

Whether Cassidy's motion is successful in getting The Bank's complaint dismissed "With Prejudice", as opposed to The Bank's current offer to dismiss it "Without Prejudice" or not - a nuclear megaton of information that the Bank wanted kept secret is now in the public domain via the exhibits attached to the motion. For example the entire Deloitte report is included.  A few years back, The Bank's fraudulent statements to the Canadian press triggered a Class Action suit to be filed against Optionable. The Class Action lawyers filing the suit fought The Bank for access to the Deloitte report (and lost).  The Class Action lawyers reasonably believed what The Bank had told reporters - that the Deloitte report contained damning accusations against Optionable.   Well, it turns out it's a shame they didn't get access to the Deloitte report, because it doesn't contain any of the accusations that Bank claimed it did!  Gee, I wonder why The Bank fought the Class Action lawyers to keep this report a secret.  Oh, and that quote from Bill Downe that The Bank wanted Optionable to remove from their website....... yeah.... the entire email is included as an exhibit in Cassidy's motion.

The truth about what really happened is now in the public domain.

What Risk Management process did the Bank of Montreal think was in place?

Photo credit: iStock.com (fee paid)

You might think that it would be difficult to write a blog about a single legal matter for six years without repeating yourself. And in my case, you’d be right.  It is difficult and I do repeat myself – a lot. Worse, there is one particular question that I just keep coming back to: What Risk Management process did the Bank of Montreal (The Bank) think was in place?  Like a pit bull snarling and slobbering over a half eaten bone, I have latched onto the idea that The Bank lied to us all when they claimed that their 2007 trading losses were the result of a conspiracy aimed at subverting their risk management controls.  I didn't buy it back in 2007, I don’t buy it now, and so help me God, I feel like a stray dog that's had a bone ripped away and muzzle slapped over its face, because I just haven't been able to find the right words to put into this blog that will convince you (yes, Y.O.U.) not to buy it either.

Here's how it happened.  The Bank’s Risk Management department followed a process called the Independent Price Verification Process (IPV)  IPV is an internal proprietary process within The Bank and as such they’re not obligated to make the steps of the process public, (and so they haven’t).  Kevin Cassidy (of Optionable - a company I am invested in) however, is currently sitting in Federal prison for supposedly conspiring with David Lee (of The Bank) to subvert The Bank’s IPV process.  Oh sure, a person can conspire with another person to subvert a process without actually ever seeing the guidelines for it - no problem there.  But I still find it frustrating however that a person accused of conspiring to subvert a process can go through the legal system for 6+ years without the nuts and bolts of the process they are accused of conspiring to subvert being laid bare for legal review and analysis.  This is why I keep coming back to the question: What Risk Management process did the Bank of Montreal (The Bank) think was in place? Just like to the accused has a right to confront their accuser; we should be given the opportunity to know exactly what the process was that we’re being accused of conspiring to subvert.)  

I got a bit of a shock the other day when I downloaded the transcript of Kevin Cassidy’s sentencing hearing, although I completely enjoyed the first part.  In the first part, Cassidy’s lawyer Douglas Jensen engaged Judge Griesa in a dialog about the RealMarks service that Optionable performed for The Bank.  The verbal exchange read like a symphony to someone like me who has hungered for this type of detail.  It is my impression that the Judge was right there with Jensen too, based on the number of light bulbs that seemed to be igniting for him.

As you might expect, Prosecutor Michael Levy wasn’t enjoying Jensen’s information exchange with the Judge as much as I was (and the Judge seemed to be)  When Levy’s turn came to speak, he said that he had had to figuratively ‘bolt himself to his chair’ for the previous 45 minutes in order to keep from making objections.  I bring up Mr. Levy’s discomfort to highlight one point.  Neither Mr. Jensen’s statements (which I loved) nor Mr. Levy’s statements (which angered me) were put to the rigors of being proven in a court trial.  Yes, the statements were being made in a court of law, and yes, they were being spoken directly to a Judge. But at the end of the day, the statements were only statements, not trial proven facts. And let me tell you, one of Mr. Levy's statements really bothered me, and not just because I believe it is untrue. It bothered me because I believe it is untrue AND its aim was an attempt to falsely fill a gaping hole in the Bank's narrative regarding my most nagging question: What Risk Management process did the Bank of Montreal think was in place?  Are you curious to know what Mr. Levy said? (hint: it's about the process The Bank thought was in place)

Please allow me to take a step back before telling you.

Although The Bank’s IPV process is a proprietary secret which the Bank is within their rights to prevent us from evaluating, the RealMarks contract that The Bank entered into with Optionable is not a secret.  While we can't know for sure what's in the IPV, we can know for sure what Optionable agreed with The Bank to deliver through the RealMarks service.  Remember, the RealMarks contract was drawn up by lawyers at Optionable, vetted by lawyers at The Bank and signed into effect by The Bank’s Executive Managing Director of Commodity Markets (Robert Moore).  While the contract is filled with legal jargon that is hard to understand in the Terms and Conditions as well as the Disclaimers and Limitations of Liability sections, (including amusingly enough an agreement not to sue each other over the results of the RealMarks service, ha!), it does make one thing crystal clear.  The first sentence of the contract says:  “RealMarks provides specific market information based on actual market quotes obtained by Optionable.”  

Think of RealMarks as a basic input/output device.  You put actual market quotes into RealMarks and the specific market information you get out is the market reaction to those actual market quotes.  Are you with me on this? (this is important)

So in their role as a brokerage firm, Optionable took actual market quotes from The Bank, market tested them by entering real buy and sell orders into Optionable's trading platform for those options, at those prices, and then reported the response those orders generated back to The Bank. This wasn’t a hypothetical exercise.  These were real orders that real traders could and did trade on. This is what Optionable did, and it is exactly what The Bank contracted with them to do, and so help me God, there isn't a single thing illegal about it.

OK... now I’m ready to tell you what Mr. Levy said.  Mr. Levy said that the process The Bank thought was in effect went like this: a Risk Manager from The Bank sent a broker at Optionable a list of options to market test through RealMarks, and this list was sent without including prices at which to place the market testing orders.  The reason I find this so disturbing is: a) I don’t believe it happened and b) simply supplying the names of the options without the prices for them would not have given Optionable enough information to place the market testing orders c) it paints a picture that makes what David Lee did (supply Optionable the prices at which to place the market testing orders) look like some conspiratorial breach in The Bank’s process, when it fact, it was a key basic requirement in order for Optionable to perform the service that the Bank asked them to do. If The Bank wanted to only send the names of the options to be market tested, without the prices to test them at, then they didn't want the RealMarks service.  That doesn't make RealMarks 'bad', and it doesn't make the RealMarks requirement for actual market quotes into a 'conspiracy'.  Likewise, not wanting to provide actual market quotes doesn't make The Bank 'evil'.  What makes The Bank 'evil' is putting the company I invested in out of business 6 years ago, and worse, allowing the man who ran that company to go to jail over some imaginary conspiracy theory.   

Do you get it?  Do you see it? Am I making any sense? Do you see how The Bank is flat out wrong when they claim that the transmission of quotes from David Lee to Optionable was some type of conspiracy?  Lee's participation wasn't a conspiracy; it was a basic requirement for the service The Bank wanted.  I don't know if I can say it any clearer than that.  

In closing I'd like to say that back in 2007 The Bank lost a lot of money trading exotic options for natural gas derivatives, and they lost that money fair and square. When it came time to admit it, rather than accepting responsibility, they came up with a conspiracy theory instead, and they did it with the full knowledge and authorization of The Bank's CEO Bill Downe.  We still don't know what Risk Management process The Bank thought they had in place, but we do know that there was no other way for The Bank to have received output from RealMarks other than by The Bank providing prices to Optionable, so that Optionable could test The Bank's prices in the market.  I hope I've given you enough information to see how The Bank's conspiracy theory is contradicted by the practical reality of how the RealMarks system worked.  If I have, I like to ask you to take action against the Bank of Montreal by sharing links to this blog in your social media networks.  Let's get the word out!

This blogging platform does accept comments, so if you have any questions about any part of what I've written, please feel free to ask.  Thanks for taking the time to read this, whether you agree with me or not.   Peace.

Disclosure: I am an investor in Optionable.  This blog does not offer advice on buying or selling any security.

Bill Downe's Letter to the Court

Defense in the Bank of Montreal v. Optionable case has requested the opportunity to depose (question under oath) the Bank’s CEO, Bill Downe.  On October 23, 2013 Downe filed a letter with the Court (a Declaration) explaining the reasons why he feels the deposition request should be denied. On October 30, 2013, Downe’s letter was discussed at a case management conference with Judge Cott.

While attending the case management conference, I learned that there are two Requirements that must be met in order to depose the CEO of a large company.  They are:  1) The deposition can’t create an undue burden for the company and 2) The CEO alone must know things that others in the company do not.  This is called ‘unique knowledge’. 

In his letter, Downe claims that:
1) a deposition would create an undue burden for his company
2) he has no “unique knowledge” only regurgitated knowledge

Judge Cott has ruled that:
1) Bill Downe’s letter be placed into the public record. (BMO has complied) 
2) Bill Downe specify who the “other people” are he claims spoon-fed him the regurgitated knowledge; and share that list with the Court, the Defense and CME Group.  (to my knowledge, that list has not yet been shared yet)

Here then, in his own words, is Bill Downe’s declaration.

DECLARATION OF WILLIAM A. DOWNE

WILLIAM A. DOWNE, pursuant to 28 U.S.C. § 1746, declares as follows:

1. I submit this declaration to explain facts related to the request for my deposition that has been made by certain defendants in the litigation captioned Bank of Montreal v. Optionable, Inc, et al.,  No. 09-CV-7557 (GBD) (JLC) (the "Litigation"). I have personal knowledge of the facts stated in this declaration.

2. Since March 1, 2007, I have been President and Chief Executive Officer of Bank of Montreal ("BMO"). In this role, I am ultimately responsible for the management and oversight of all of BMO's complex operations. Working with BMO's board of directors and other members of the executive management team, I am responsible for directing the bank's overall strategy.

3. BMO is the eighth largest bank in North America by total assets as at July 31, 2012. It employs approximately 46,000 individuals and serves more than 12 million customers. It has operations around the world and provides a broad range of retail banking, wealth management, and investment banking products and services.

4. My responsibilities as BMO's President and CEO require my full attention. My schedule is exceedingly busy, and I make all efforts to ensure that it is managed in a manner that allows me to maximize the time I spend carrying out my duties and responsibilities for the benefit of BMO's shareholders, employees, customers, and clients.

5) Counsel has advised me that my deposition is being sought in connection with the Litigation. If I am required to testify at a deposition, BMO's operations and affairs will be disrupted, because the time and attention that I will be required to devote to the preparation for, and attendance at, the deposition (including travel from and to my home in Toronto) will distract me significantly from the duties and responsibilities described above. In my role as President and CEO, I am charged with a number of duties and responsibilities that cannot be performed by, or delegated to, other bank employees.

6. I am aware of the Litigation as a result of conversations with counsel. I have been briefed regarding the Litigation at various points, including before it was filed and since then. To the best of my recollection, all of these briefings were either conducted by counsel or conducted by others in the presence of counsel and for the purpose of seeking or receiving legal advice.

7. I am aware that the subject matter of this Litigation was also the subject of investigations by various governmental and regulatory entities. I have been briefed regarding the status of those investigations at various points, and to the best of my recollection, all such briefings were either conducted by counsel or conducted by others in the presence of counsel and for the purpose of seeking or receiving legal advice.

8. Prior to serving as BMO's President and CEO, I was BMO's Chief Operating Officer (from March 2006 until March 1, 2007) and, before that, the CEO of BMO Nesbitt Burns (beginning in 2001). BMO Nesbitt Burns is a fully integrated Canadian investment dealer.

9. The information I have concerning the subject matter of the Litigation including the information that I obtained while President and CEO and in my earlier roles within BMO - was obtained from others, including lawyers, lower-level BMO employees, and individuals outside of the bank.

I declare under penalty of perjury under the laws of the United States of America that the foregoing is true and correct.
Executed on October 23, 2013 in Toronto, Ontario, Canada.

(signed)
William A. Downe

===================================================================


Disclosure: The author of this blog is an investor in Optionable.  This blog does not offer advice on buying or selling any security.

The Narrative is Gonna Change

October 30, 2013 – Case Management Conference with Judge Cott

Note: audio recording is not permitted in court.  Contents of this blog are based on my hand written notes.  I am not a lawyer and may have misinterpreted some of the discussion.
I've also used software to translate these notes into French for this blog's French Canadian readers.  Please excuse any grammatical errors in the translation.

Conference Agenda:
1) Should the Defense get to depose Bank of Montreal CEO Bill Downe?
2) How many people should the Defense get to depose?

Agenda Item #1 :  Should the Defense get to depose Bank of Montreal CEO Bill Downe?
 - Requirements to depose a CEO
a) The CEO has to have “unique knowledge” of the situation
b) The deposition can’t create an undue burden to the company

Arguments:
BMO : Why Downe should not be deposed.  (Robert Lack)
* Lack said that Downe wrote a letter to the court claiming he has no unique knowledge.  All he knows was reported to him by “others”.
* Lack said that deposing Downe would be an undue burden on BMO

- Judge Cott acknowledged that the burden of deposing a CEO is a valid concern, however on its own, it can’t prevent a deposition.  So the question is really: Did Downe have "unique knowledge".
- Judge Cott acknowledged a legal precedent suggesting that a CEO should not be the first person deposed at a company.  (Defense was asking that Downe be deposed first)

Defense : Why Downe should be deposed. (and deposed first) (Lawrence Gelber)
* Gelber (Cassidy's lawyer) did the ‘heavy lifting’ of presenting the argument for a Downe deposition to Judge Cott.
* Gelber said that Bill Downe was dead center in the middle of The Bank’s Risk Management activities.
* Gelber said that Bill Downe not only has "unique knowledge", he has unique granular knowledge of the Bank’s energy trading and risk management practices.
* Gelber’s statements were in direct contradiction to Downe’s letter
* Gelber said that Bill Downe was not CEO at the time the trading losses were mounting.  He only became CEO shortly before the trading losses were announced.
* I believe I heard Gelber say that Downe was an integral part of The Bank's risk management since 1999/2000.  His roles included both "Deputy chairman" and Chief Operations Officer (which I imagine would be a very hands-on role)
* Gelber argued that it would be more efficient to depose Downe first, because he truly is the single person at The Bank with the complete picture of what happened.
* Gelber is concerned with the 4/1/14 discovery deadline set by Judge Cott. Gelber wants to prevent The Bank from attempting to run out the clock for a Downe deposition.
* Gelber says until now The Bank has controlled the narrative of what happened and the narrative is about to change. Namely:
** The Bank shifted the blame to Optionable for the purpose of protecting Downe
** Regarding inconveniencing the Bank CEO with a deposition; Gelber brought up the inconvenience this case had had on his client (who is in jail)

Defense : Why Downe should be deposed. (Soloman Klein)
* Klein does not care if Downe if deposed first, sixth, or whatever.  He just wants the Judge to order Downe's deposition.
* Klein asked Judge Cott for a ruling *today* regarding Downe's deposition.

Agenda Item #2: How many people should the Defense get to depose?
* BMO provided a list of over 100 people with knowledge of the case. (there appears to be either a legal precedent or perhaps just an agreement between the parties that 10 depositions per side was going to be the max)
* BMO has arranged for 5 employee depositions.  They are:
** Thomas Merrill – (author of the Merrill report which convinced BMO top management that David Lee was manipulating the skew of his OTM options (out of the money options)
** Eric Tripp – President, BMO Capital Markets (may require 2 days (14 hours)
** Livio Bencich: Managing Director, Financial Products at BMO Capital Markets
** Jeffrey Paulson
** Meredith Othero – from the HR Department
* BMO scheduled these depositions from November through December 16 – at 1 day each.

Judge Cott’s Orders:
* Denied Defense the request order Downe's deposition *today*.
** HOWEVER – he stated that he is “highly inclined” to order a Downe deposition, IF:
*** Defense shows that Downe has unique knowledge
*** Downe's testimony would not be redundant to the testimony of the people deposed before him
* Ordered that the Downe letter be entered into the public record
* Ordered that The Bank tell Defense as well as CMEG exactly who the "other" people are that Downe refers to in his letter.
* Ordered that The Bank push up the timeline for the five scheduled depositions so that they are finished before the end of November.
* Ordered parties to meet during the week of 12/2 and identify the other Bank employees to be deposed and to make a schedule for them.
* Ordered a 12/11 conference - anticipated agenda will be whether or not Defense had made a case for deposing Downe.

Judge Cott’s Observations:
* He is inclined to allow Defense more than 10 depositions
* He cautioned The Bank not to complain about any extra depositions (if they’re hoping to avoid a Downe deposition)
* If he allows it to happen, Judge Cott expects The Bank to have Downe prepared for the deposition by January.

Disclosure: I am an investor in Optionable.  This blog does not offer advice on buying or selling any security.
---------------  En français ------------------------------------

30 OCTOBRE 2013 - Conférence sur la gestion de l'instance avec le juge Cott

deuxième projet - encore un peu rugueux - mais je voulais obtenir ces notes rapidement, quel que soit.
Remarque : l'enregistrement audio n'est pas autorisé en cour. Contenu de ce blog sont basés sur mes notes écrites à la main. Je ne suis pas un avocat et peut avoir mal interprété certains de la discussion.
J'ai aussi utilisé des logiciels de traduire ces notes en français pour ce blog français les lecteurs canadiens. Veuillez excuser les erreurs grammaticales dans la traduction.

Ordre du jour de la Conférence :

1) la défense obtenir de destitution Banque de Montréal PDG Bill Downe?
2) Combien de personnes devraient l'obtenir la défense de destitution?

L'ordre du jour #1 : la défense obtenir de destitution Banque de Montréal PDG Bill Downe?

Exigences de destitution un PDG
a) Le Directeur général a d'avoir des "connaissances uniques" de la situation
b) le dépôt ne peut pas créer un fardeau indu à la société

Arguments : 
BMO: Pourquoi Downe devrait ne pas être renversé. (Robert Lack)

* Lack dit que Downe a écrit une lettre au tribunal en alléguant qu'il n'a aucune connaissance unique. Tout ce qu'il sait lui auraient été rapportés par "autres".
* Lack dit que témoignant Downe serait un fardeau indu sur BMO

- Juge Cott a reconnu que le fardeau de témoignant un PDG est une préoccupation valable. cependant, sur son propre, il ne peut pas empêcher une déposition. La question est donc vraiment : Downe n'ont "connaissances uniques".
- Le juge Cott a reconnu un précédent juridique suggérant qu'un PDG devrait ne pas être la première personne déposé à une société. (La défense demandait que Downe être destitué première)

la défense : Pourquoi Downe devrait être destitué. (Et destitué première) (Lawrence Gelber)
* Gelber (Cassidy de l'avocat) a fait le "levage lourd" de présenter l'argument de Downe dépôts de juge Cott.
* Gelber dit que Bill Downe était mort au centre de gestion des risques de la Banque.
* Gelber dit que Bill Downe a non seulement "connaissances uniques", il a ses propres connaissances granulaire de la Banque de commerce de l'énergie et les pratiques de gestion des risques.
* Gelber de déclarations étaient en contradiction directe avec Downe la lettre
* Gelber a dit que le Bill Downe n'était pas PDG au moment où les pertes ont été de fixation. Il n'est devenu PDG peu avant les pertes ont été annoncés.
* Je crois que j'ai entendu Gelber dire que Downe était partie intégrante de gestion des risques de la Banque depuis 1999/2000. Son rôle comprend à la fois des "vice-président" et chef des opérations (dont j'imagine qu'il doit être très pratique de rôle)
* Gelber soutient qu'il serait plus efficace de destitution Downe parce que, premièrement, il est véritablement la seule personne à la banque avec l'image complète de ce qui s'est passé.
* Gelber est concerné avec le 4/1/14 découverte délai fixé par le juge Cott. Gelber veut empêcher que la Banque essaie de s'exécuter à l'heure pour un dépôt Downe.
* Gelber dit jusqu'à présent, la Banque a contrôlé le récit de ce qui s'est passé, et le récit est sur le point de changer. À savoir :
** La Banque décalé le blâme sur Optionable dans le but de protéger Downe
** concernant incommoder la banque PDG d'une déposition; Gelber a soulevé le désagrément que cette affaire a eu sur son client (qui est en prison)

la défense : Pourquoi Downe devrait être destitué. (Soloman Klein)
* Klein ne s'occupe pas si Downe si destitué premier, sixième, ou quoi que ce soit d'autre. Il veut simplement au juge d'ordonner Downe la déposition.
* Klein a demandé à la juge Cott pour une décision * aujourd'hui * concernant Downe la déposition.

L'ordre du jour #2 : Combien de personnes devraient l'obtenir la défense de destitution?
* BMO a fourni une liste de plus de 100 personnes avec la connaissance de l'affaire. (Il semble que ce soit un précédent juridique ou peut-être seulement un accord entre les parties que 10 dépositions par côté allait être le max)
* BMO a organisé pour 5 employé les dépositions. Ils sont :
** Thomas Merrill - (auteur du rapport Merrill qui a convaincu haut BMO gestion que David Lee a manipulé l'inclinaison de son OTM options (de l'argent options)
** Eric Tripp - Président, BMO Marchés des capitaux (peut nécessiter 2 jours (14 heures)
** Livio Bencich: Directeur général, produits financiers, BMO Marchés des Capitaux
** Jeffrey Paulson
** Meredith Othero - du département des RH
* BMO planifié ces dépositions de novembre à décembre 16 - 1 jour chacun.

Cott juge les ordres :
* refuser la défense demande l'ordre Downe de dépôts * aujourd'hui * .
** TOUTEFOIS - il a déclaré qu'il est "très tendance" à l'ordre un Downe dépôts, SI :
*** La Défense montre que Downe a savoir unique
*** Downe témoignage proposé ne serait pas superflu de le témoignage du peuple déchu devant lui

* a ordonné que le Downe lettre être entré dans le dossier public
* Ordonna que la banque dire défense ainsi que CMEG exactement qui les "autres" les gens sont que Downe se réfère dans sa lettre.
* a ordonné que la Banque pousser vers le haut la chronologie du prévu cinq dépôts afin qu'ils soient terminés avant la fin de novembre.
* Commandés parties à se réunir au cours de la semaine du 12/2 et d'identifier les autres employés de la banque pour être destitué, de faire un planning pour eux.
* Commandé le 12/11 conférence - ordre du jour prévu sera de savoir si ou non la défense avait fait un cas de destitution Downe.

Cott juge les Observations :
* Il est enclin à autoriser la défense plus de 10 dépôts
* Il a conseillé à la Banque, qui n'est pas à se plaindre de tout extra dépositions ( s'ils sont en espérant éviter un Downe dépôts)
* si il permet cela, juge Cott attend de la Banque ont Downe préparé pour les dépôts en janvier.

La divulgation : je suis un investisseur dans Optionable. Ce blog n'offre pas de conseils sur l'achat ou la vente de la sécurité.

JP Morgan's Jamie Dimon's London Whale Fate Shows That Bill Downe's "Blame Optionable" Campaign Was Unnecessary

Imagine Bank of Montreal's (The Bank) Bill Downe's surprise at learning the fate of JP Morgan's Jamie Dimon in the wake of the London Whale losses.  Much like Dimon, Downe was faced with having to explain losses from over-sized bets in illiquid markets to regulators and investors. Sure, both men blamed their own traders and Risk Managers, but Downe took an additional step.  Downe sponsored a  campaign, code named "Blame Optionable" which fraudulently* looped in and destroyed the brokerage firm Optionable, of which I am an investor.

 I'd like to share the following story with you from The New Yorker's website:  Will Anyone Hold Jamie Dimon Responsible for the London Whale Scandal?   While the article isn't intended to be supportive of Dimon, it shows that Downe could have survived at BMO without destroying Optionable.

Instead The Bank is still in court 6+ years later attempting to squelch Downe's emails from reaching the public.  Downe and The Bank could have been miles past this by now; Optionable, the company I am invested in, could still be a profitable brokerage, and their reporting service "Real Marks" could still be improving visibility in these lucrative yet highly illiquid markets.

 While BMO has been successful to date selling their version of the story, the truth is known and documented.  More people know the truth than the Bank can possibly squelch, and this all could have been avoided if Downe had just taken the heat upfront and moved on.

Disclosure: I am an investor in Optionable.  This blog does not offer advice on buying or selling any security.

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footnote:
* Why do I say that the "Blame Optionable" campaign FRAUDULENTLY looped Optionable in?
The Blame Optionable campaign claimed that there was a secret agreement between The Bank's Trader David Lee and Optionable's Kevin Cassidy.  Under this theory Lee would secretly provide price points to Cassidy and Cassidy would secretly report them back to The Bank.  REALITY: It is documented that The Bank indeed wanted and requested the reports to be independent of their own traders, including Lee.  That part is true.  It is also documented that: a) The Bank's Risk Managers asked Lee to send quotes to Cassidy  b) Kevin Cassidy met with The Bank's Upper Management and told them in person that Lee's input was included and that the reports could not be created without Lee's input.   These two facts when combined prove that The Bank knowingly made fraudulent statements when they claimed that Lee and Cassidy conspired to keep knowledge of Lee's participation away from them.

** Photo Caption: The London Whale Swam in Illiquid Markets

Optionable Press Release links Bank CEO to Fraud

I am reposting the Press Release that appeared Optionable's web site on 9/30/13 in its entirety, without edits or comments of my own. Optionable removed this press release on 10/2/13 per court order.
===================================================================

Bank of Montreal CEO Downe Linked to Fraud and Cover Up
September 30, 2013
-
New evidence obtained by Optionable links current Bank of Montreal CEO Bill Downe to a cover up in relation to trading losses in natural gas positions incurred by the bank in early 2007.

Emails by Mr. Downe clearly show he was aware that BMO took a large speculative position without proper risk oversight. In an internal email to staff, 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."  Further evidence uncovered by Optionable indicates that Mr. Downe has admitted that BMO executives who were charged with unwinding the positions had told him “the book was bigger than anything they had ever seen”.   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 rather than disclose the fact that BMO was running a book that was not tied to customer business at all but rather was engaged in massive speculation.

"The fact that this fraud reached the highest level of the executive suite at BMO is tragic”, said Dov Rauchwerger, Optionable CEO. “It is important to note that even at this point in time Mr. Downe shockingly continues to perpetuate the falsehood that BMO was running a client driven book in natural gas. The lack of remorse is shameful, especially given that their cover up landed an innocent man in prison.”

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 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.

The Optionable story minus the megaphone

A few weeks ago Optionable posted a press release on their website, which was the first public statement by the company in 6 years.  I thought I would take this opportunity to attempt to write a news article based on the press release.  My hope is that the end product will more closely resemble something an actual reporter would write, and less like the ramblings of a megaphone wielding community activist.  Here goes.

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New York – Back in 2007, Optionable was a fast track New York brokerage firm.  Optionable commanded a sizable voice brokerage presence and had rolled out a groundbreaking electronic options trading platform that was gaining acceptance in the market.  New York based, Bank of Montreal Commercial Markets (BMO CM) traded heavily through Optionable and had become their largest client.  The New York Mercantile Exchange (NYMEX) invested $27M to secure a minority interest in Optionable after releasing a string of press releases that announced expanded services NYMEX offered in partnership with the firm.
 
And in a New York minute, it was gone.

According to a July 2013 statement released on Optionable’s website, the company claims that their reversal of fortune was no accident.  Optionable asserts that each for their own reasons, their two most important partners profited by taking deliberate and destructive actions against them which has left Optionable permanently unable to generate revenue as a brokerage firm.

Why did they do it?

Optionable claims that the Bank of Montreal had been incurring trading losses while still reporting profits to the Securities and Exchange Commission.   When the losses could no longer be concealed, the Bank hired a crisis management agency that advised the Bank to publicly blame Optionable, as their CEO had an unrelated previous criminal record, which would serve as a smoke screen for the Bank’s failed risk management practices.

Optionable also claims that NYMEX “piled on” to the Bank of Montreal’s bad acts so that they could launch a competing product through the Chicago Mercantile Exchange (CME) and thereby laid the groundwork for their own ten billion purchase by CME the following year.

Optionable states that they have filed significant counterclaims against CME and that they will not cease to fight for their beleaguered shareholders until BMO and CME are held accountable.  October 2013 depositions of Bank of Montreal personnel have been scheduled.

Optionable's first public statement in six years can be found here.
Disclosure: I am an investor in Optionable.  This blog does not offer advice on buying or selling any security.