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: 25 of 36 PAGEID #: 25exposure risk to Sigma. SERS properly relied on Wachovia as its investment agent toprovide it with advice and pass along important information that was necessary to assessthe true risk associated with Sigma.75. As of September 15, 2008, there were still active bids for Sigma.Wachovia did not tell SERS about the bids. Nor did Wachovia inform SERS that it wasstill possible to sell the Sigma notes.76. By September 22, 2008, the market for Sigma was either nonexistent orsignificantly deteriorated. Sigma held $110 million in Lehman debt and nobody waswilling to take on such risk after the collapse of Lehman. JP Morgan Chase, HSBC andthe Royal Bank of Scotland pulled repo agreements from Sigma. Wachovia had let thetime for disposing of Sigma pass without even discussing the option with SERS.77. Wachovia’s notable failures to report to SERS include: Failure to report material information concerning the ongoing financialviability of Sigma in 2007; Failure to advise SERS of Sigma’s lack of operational triggers and howthe absence of those triggers could affect what remains of Sigma’s assetsin the event that Sigma went into receivership; Failure to advise SERS that unlike most SIVs, Sigma did not have asponsoring bank that could provide liquidity as did other sponsoringbanks during the credit crunch; Fitch’s statement that it was considering lowering the ratings on Sigma’s$31.6 billion in Senior Notes and $2.3 billion in commercial paper; Wachovia’s failure to timely inform SERS that in December 2007, Sigmawas placed on the “Special Surveillance List”, “Credit Watch Negative”list, and “Outlook Negative Watch List”; Fitch’s withdrawal of its rating on Sigma on January 28, 2008, becauseSigma refused to provide Fitch with the information necessary toaccurately rate Sigma;25