Kate Crowley does not believe that the Bents lied to her.

That was the final message of the former Reserve Management Company's general counsel during her direct testimony at the Bents' fraud case Tuesday afternoon in Lower Manhattan.

To read the full, continuing saga of the collapse of the Reserve Primary Fund and the ensuing legal battle, see MFWire's living timeline.

Crowley was most generally asked to go through what her role was in the events of September 15-16, 2008, during which the Reserve Primary Fund "broke the buck" as a result of the Lehman Brothers bankruptcy.

Much of her testimony focused on conversations she had with the Bents' and with outside counsel at the firm Willkie Farr.

One major point of contention were e-mails sent to and by John Drahzal, the former Reserve global head of sales who testified on Monday. There was a question of whether or not the Bents had told Drahzel that an agreement to preserve the $1 NAV of the Primary Fund was finalized or merely in the works. It is also disputed whether or not Drahzal and his sales team had permission to share the prospect of a deal with customers.

One e-mail from Eric Lansky, the firm's head of marketing, seemed to imply that the deal was agreed to. Crowley said she "was concerned with what Eric had written, period. It wasn't correct."

The "Reserve Insights" marketing piece also reared its head again, with Crowley describing to defense counsel the process of editing and approving it. The piece detailed the intended deal with the SEC.

At one point, the piece was put on the Reserve website, a move Crowley immediately had reversed. She also wrote to Drahzal telling him to stop referencing the piece with customers.

The testimony did have one relatively bizarre moment. When detailing the notes she'd taken at a telephone meeting, Crowley told the jury she had a personal situation during the call. It turns out the personal friend she'd asked to walk her daughter to school had fallen at the corner of 90th and Madison in Manhattan, breaking her leg. Crowley had to speak via phone with a passerby who was making sure her daughter got to school, and then with an administrator at the school who assured her that the situation was under control.

During cross examination — after Crowley affirmed she did not believe the Bents had lied to her — the SEC lawyers attempted to show that the Bents had led Crowley and others to believe a deal with the SEC was in place.

They specifically cited notes Crowley took at a meeting of the Board of Trustees. The note read "[Reserve] will enter into a credit support agreement [with] Primary."

Crowley also told the SEC lawyers that after that meeting at 1 pm on September 15, she never heard the Bents say they "intended" to enter into an agreement or that they were "exploring" a deal.

The cross examination and redirect testimony of Crowley will continue tomorrow morning. 

Stay ahead of the news ... Sign up for our email alerts now
CLICK HERE