Epstein Secrets

109 3. Inflation of Capital By Using Incorrect Marks 110 V. 4. Misrepresentations to Regulators Relating to VaR DEFENDANTS' SCIENTER 112 A. James E. Cayne 112 B. Alan D. Schwartz 115 C. Samuel L. Molinaro. Jr. 116 D. Warren J. Spector 120 E. Alan C. Greenberg 121 F. Michael J. Alix 123

ns: mortgages originated by BEARRES and ECC that were sent directly into the securitization process at Bear Steams. CAO: Center for Audit Quality. Cayne: James E. Cayne, a director, Chairman of the Board and Chief Executive Officer of Bear Stearns during the Class Period. Cioffi: Ralph Cioffi, the B

to applicable clients and firm professionals. The ARAs are included in the AICPA's annual Audit and Accounting Manual ("AAM"). 345. In particular, Farber, Bear Steams' Senior Vice President-Finance and Controller, had previously been a partner with Deloitte. Accordingly, Farber should have had familia

Defendants) 214 COUNT III For Violations of Section 20A of the Exchange Act (Against Defendants Cayne, Schwartz, Spector, Molinaro, Greenberg, and Farber) 215 vi EFTA00316720 Case 1:08-cv-02793-RWS Document 102 Filed 02/27/09 Page 8 of 347 PRAYER FOR RELIEF 116 DEMAND FOR JURY TRIAL 218 vii

internal control structure and procedures of the issuer for financial reporting. 357. In connection with the Company's 2006 Form 10-K, Defendants Cayne and Molinaro executed the applicable Rule 302 certification. 358. Defendants Schwartz and Molinaro filed identical certifications with respect to

olders' equity was 18.3%. "We are pleased with this excellent performance, revenues for the first quarter were up for every business segment," said James E. Cayne, chairman and chief executive officer of The Bear Steams Companies Inc. "Growing the company remains a core focus as we 164 EFTA00316892 Case 1:

and 10-K. 124 EFTA00316852 Case 1:08-cv-02793-RWS Document 102 Filed 02/27/09 Page 140 of 347 501. The quarterly and annual reports signed by Farber repeatedly touted the Company's risk management, including its use of internally-developed models to derive the fair value of the Company's financi

mpliance Inspections and Examinations ("OCIE") 117 EFTA00316845 Case 1:08-cv-02793-RWS Document 102 Filed 02/27/09 Page 133 of 347 to Defendant Farber, who reported directly to Molinaro. The disclosure controls and procedures that Molinaro purportedly put in place should have informed him that the

mark disputes; and (iii) falsely inflating its net capital by using misleading methods to calculate VaR. (iv) Internal Controls 732. Defendants Cayne and Molinaro each made false and misleading statements when they executed Sarbanes Oxley Act certifications, annexed as an exhibit to the Form 10-Q

rt to more accurately measure risk of loss." 726. In fact, the Company had undertaken no such review, and its Controller and Principal Accountant, Farber, had been repeatedly warned by government regulators that the Company's VaR models were inaccurate and out of date. According to the 2008 OIG Report

ed by, among others, 193 EFTA00316921 Case 1:08-cv-02793-RWS Document 102 Filed 02/27/09 Page 209 of 347 defendants Greenberg, Cayne, Schwartz, Farber and Molinaro. The Form 10-K made misrepresentations regarding the Company's financial results, risk management practices, exposure to market risk,