Epstein Secrets

s reports on internal control over financial reporting, required by Rule 302 of the Sarbanes-Oxley Act, were materially false and misleading because Bear Stearns' internal controls were ineffective. The Officer Defendants' statements were false and misleading because Bear Stearns' internal controls were signif

the losses on the remaining $845 million exposure were ultimately recorded, or if those losses were in fact ever recognized prior to its collapse. b. Bear Stearns' Financial Statements Misrepresented its Exposure to Decline in the Value of RIs 389. Statement of Financial Accounting Standards No. 140, Accounti

the housing market. 525. Moreover, despite the fact that Deloitte was obliged to be especially skeptical of related party transactions such as the High Grade fund bailout, Deloitte deliberately or recklessly disregarded the fact that the collateral the Company had received as a result of the bailout was

its, his investments with Bear Steams were also guided by the "assurances, advice and representations" of 'other executives at the highest levels of Bear Stearns' management" Am. St. Claim 11 19 (emphasis added). -5- EFTA00314494 on big-picture issues of strategy and growth. The day-to-day management and ove

new, highly risky and highly leveraged fund, which was viewed by many as an excellent investment opportunity and which was made available to every High Grade investor. Accordingly, Epstein was provided with the PPM for the Enhanced Fund dated June 30, 2006 (Exhibit C). As with the High Grade Fund, the ma

' Leveraging Practices 19 3. Bear Stearns' Backing of the Hedge Funds 20 E. Bear Stearns' Misleading Models and Inadequate Risk Management 23 I. Bear Stearns' Misleading Valuation and Risk Models 23 a. The Importance of Valuation Models 24 EFTA00316715 Case 1:08-cv-02793-RWS Document 102 Filed 02/27

y developed by BSAM. The Hedge Funds' objective was to provide current income and capital appreciation in excess of LIBOR by investing primarily in High Grade structured financed securities, with an emphasis on long positions in triple-A and double-A rated asset backed securities, such as CDOs. The High G