CORRECTED-Bruce Bent's lawyer tells jury 2008 crisis just like Sandy
(Corrects headline: Bent's lawyer, not Bent, told jury)
* U.S. regulator accuses Bent of lying to investors in 2008
* Bent denies fraud, says unforeseen events to blame
* Bruce Bent and son testify at NY civil trial
By Basil Katz
NEW YORK, Nov 7 (Reuters) - A lawyer for fund pioneer Bruce Bent appealed to jurors on Wednesday to acquit his client of civil fraud charges over his company's collapse, saying the 2008 financial crisis was as unpredictable as Superstorm Sandy.
Bent and his son acted in good faith when their funds became a victim of the economic maelstrom following the collapse of Lehman Brothers in September 2008, attorney John Dellaportas told the jury in federal court in Manhattan.
"What we didn't anticipate was that New York City would experience its worst storm in its history," Dellaportas said in his closing argument. "What happened in 2008 was essentially the equivalent of what happened here."
Closing arguments in the month-long trial had been scheduled for Oct. 29, but were delayed until Wednesday to ensure that jurors could make it to the lower Manhattan courthouse, which lost power in the storm and was closed all of last week.
The U.S. Securities and Exchange Commission sued Bent, his son Bruce Bent II and their family-run Reserve Management firm in 2009, saying they lied to investors about the safety of their money after Lehman Brothers filed for bankruptcy on Sept. 15, 2008, intensifying the global financial crisis.
Much of the trial focused on the sequence of events on Sept. 15 and 16, 2008.
At the time, Reserve held $785 million in Lehman debt, or 1.2 percent of the $62 billion invested in its funds. There was a run on the funds and Reserve was unable to keep up with demand for redemptions as liquidity dried up in the market turmoil.
On Sept. 15, the day of Lehman's collapse, the Bents told the board of trustees and the SEC about the run on their funds, Bent said when he took the stand last month. Bent and his son spent a total of seven days on the stand.
Part of the defense strategy was to shift the blame onto the SEC, saying that the government should have made Reserve part of the bailout of financial institutions in the crisis.
Reserve Primary "broke the buck" - an almost unheard of event for money market funds when their net asset value falls below $1 a share. By January 2010, Reserve Management said it had distributed nearly all of the $50.5 billion left in its Reserve Primary fund after Lehman's bankruptcy.
Investors recovered about 99 cents on the dollar.
The regulators and the Bents failed to reach a settlement and the case went to trial on Oct. 9 before U.S. District Judge Paul Gardephe.
The jury is being asked to decide whether or not the Bents played by the rules of the securities markets. The SEC seeks unspecified gains the Bents might have made and a fine.
The SEC will make its closing statements to the jury later on Wednesday.
Reserve Primary was the first money market fund in the United States when Bruce Bent started it in 1970. Its collapse was a driver of the credit market seizure following Lehman's bankruptcy. New regulations have since reduced the credit and maturity risks.
The case is SEC v. Reserve Management Co et al, U.S. District Court, Southern District of New York, No. 09-cv-04346. (Reporting by Basil Katz; Editing by Phil Berlowitz)
- North Korea says Kim's powerful uncle dismissed for 'criminal acts'
- Thai PM calls snap election, protesters press on |
- Protesters fell Lenin statue, tell Ukraine's president 'you're next'
- Billy Joel, Shirley MacLaine feted at Kennedy Center Honors
- Singapore hit by rare outbreak of rioting, 27 arrested |