Case: 2:10-cv-01160-ALM-TPK Doc #: 1 Filed: 12/22/10 Page: 1 of ...

Case: 2:10-cv-01160-ALM-TPK Doc #: 1 Filed: 12/22/10 Page: 24 of 36 PAGEID #: 24CHS Litigation Dep. Ex. 51. Wachovia never informed SERS that it could sell its SigmaMTNs at this time. Moreover, Wachovia’s position to hold the Sigma investment wasnot in the best interest of SERS or likely to aid in achieving SERS’ objectives of ensuringsafety of principal. To take a gamble on full payment through a winding down of Sigmawas completely inapposite to SERS’ objectives. At a minimum, Wachovia should haveexplained the risks and consulted with SERS about the possibility of selling the notes toeliminate the risk of continuing to hold what was an unsuitable investment from theoutset.73. On September 12, 2008, S&P reduced Sigma’s long-term debt to A fromAA-. At this time, Wachovia had a bid for Sigma but failed to convey the bid to SERS oreven discuss how to best address the risk from Sigma with SERS. Although Wachoviarepresented it would be SERS’ securities lending department and advisor – and was beingpaid quite well for doing so – Wachovia never gave SERS advice or even sharedinformation with SERS about the increasing risk associated with Sigma.74. Wachovia was SERS’ investment agent pursuant to the SLA and by law,and yet failed to advise SERS or even share information that SERS needed to make itsown decisions concerning Sigma.Even when Wachovia had bids for Sigma andknowledge of Sigma’s financial troubles, it did not ask SERS if it should sell Sigma ormake any recommendations with respect to Sigma.As SERS’ investment advisor,Wachovia should have never advised SERS to invest in Sigma as it was not a suitableinvestment for SERS’ objectives for the cash collateral funds. Moreover, as it becamemore and more obvious what an unsuitable investment Sigma was for the SERS cashcollateral funds, Wachovia should have advised SERS to sell Sigma and reduce their24