The Bent's defense team began their defense arguments in the Reserve primary fund fraud trial today, spending the morning interviewing an expert witness about just what happened in the financial markets in September 2008.
To read the full, continuing saga of the collapse of the Reserve Primary Fund and the ensuing legal battle, see MFWire's living timeline.
The witness was Professor Richard Painter, a corporate law expert and member of the faculty at the University of Minnesota law school. Painter also served in the White House Counsel's office as chief ethics lawyer during George W. Bush's presidency.
Painter's testimony lacked some of the emotional punch of previous witnesses. Because he was not directly involved with the Reserve, he was limited to explaining the backdrop of the 2008 financial crisis and to define basic terms -- including "money market fund" and "Investment bank" -- to the jury.
He testified that the Lehman bankruptcy was unlike anything the financial world had ever seen, and that throughout the day on September 15 2008, financial professionals were unaware of the crisis they were facing.
"It was believed that the markets would absorb the information and that it would not disrupt [the markets]," Painter testified.
In cross examination, SEC lawyers tried to show that Painter was not a credible expert on financial law, noting that he'd never worked at a fund and that in the past several years of being an expert witness -- for which he made nearly $200,000 last year -- he'd never testified in a similar case.
After Painter stepped down, a brief deposition from former SEC lawyer Buddy Donohue, who had served as director of the agency's Investment Management Division for four years ending in 2010, was read to the jury.
The afternoon session promises to have a few more fireworks as former Reserve chief counsel Kate Crowley will be taking the stand.
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