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

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Case: 2:10-cv-01160-ALM-TPK Doc #: 1 Filed: 12/22/10 Page: 26 of 36 PAGEID #: 26 Moody’s placement of Sigma’s Senior Notes on review for downgrade onFebruary 27, 2008, and corresponding statement that Sigma’s reliance onrepo agreements increased the risk associated with Sigma; S&P’s March 18, 2008, statement that they were considering a downgradefor Sigma lowering its AAA rating; Failure to inform SERS that Wachovia had bids for Sigma in May 2008and discuss whether SERS should sell Sigma at that time – particularly inlight of Wachovia’s knowledge of Sigma’s struggles; Wachovia’s failure to inform SERS in June 2008 that Wachovia knewSigma was “operating on a day to day basis”; Wachovia’s failure to inform SERS in June 2008 that it had placed Sigmaon an internal “Credit Watch List”; Wachovia’s failure to timely inform SERS that in August 2008, creditorsof Sigma sought advice concerning the ability to recover theirinvestments if Sigma was unable to pay the $8.6 billion of debt maturingby September 30, 2008; Wachovia’s failure to inform SERS that on August 11, 2008, Sigmacreditors formed a committee to assess Sigma’s ability to pay its debts;and Wachovia’s failure to inform SERS that on August 21, 2008, it receivedbids on Sigma that were in the low 90s.78. On October 1, 2008, Sigma ceased trading and appointed a receiver towind down the investment vehicle. On October 2, 2008, Gorman advised SERS thatSigma’s “financial situation deteriorated precipitously over the past 2 days” ultimatelyleading to a Sigma announcement on October 1, 2008 that it had ceased trading andexpected the appointment of a receiver and would not be making any further payments tocounterparties. Gorman’s representation that Sigma’s “financial situation deterioratedprecipitously over the past 2 days” was, of course, false. Sigma’s financial situation hadbeen deteriorating since the middle of 2007. However, Gorman was attempting to coverthe fact that Wachovia had failed to timely advise SERS of the deteriorating financialsituation at Sigma for all that time.26
Case: 2:10-cv-01160-ALM-TPK Doc #: 1 Filed: 12/22/10 Page: 27 of 36 PAGEID #: 2779. Throughout 2009, Wachovia continued to mislead SERS throughencouraging updates that a recovery rate range of 60-70% of par value was likely.However, on November 17, 2010, SERS received a distribution of $1,261,962.98 fromSigma’s receivers, meaning that SERS sustained a loss of $23,738,037.02 on the Sigmainvestment.V. WACHOVIA’S OTHER IMPROPER INVESTMENTS80. In addition to the improper Sigma investment, Wachovia also investedcash collateral from the securities lending program in other improper investments. Aswith Sigma, Wachovia either never should have made these investments or Wachoviashould have liquidated them before SERS sustained the losses complained of herein.81. Below is a chart of the non-Sigma improper investments (collectively, the“Other Investments”) and the loss sustained by SERS with respect to each of them:Counter Party-Issuer Cusip Description Purchase Date Sale Date LossArran Residential Mortgage Funding 04271AAA9 ARRMF 2007-3A A1B 06/19/2007 06/18/2010 ($1,596.24)Credit Suisse Mortgage Capital Certificates 22545RAA4 CSMC 06-TF2A A1 11/29/2006 6/22/2010 ($201,217.67)Credit-Based Asset Servicing and Securitization 1248MHAA0 CBASS 07 SP2A1 06/29/2007 06/18/2010 ($130,438.43)Indymac NIM Trust SPMD 45669HAA7 IMNIM 2007-B 6/22/2007 06/18/2010 ($1,296,594.95)Morgan Stanley ABS Capital I 61755CAA0 MSAC 2007-HE6 A1 5/31/2007 6/22/2010 ($1,154,904.42)Option One Mortgage Securities Corp NIM Trust 68389CBH3 OONIM 2005-2A NIM 5/26/2005 4/27/2010 ($1,930,031.15)Option One Mortgage Securities Corp. NIM68403AAA5 OONIM 07-CPI NOTE 3/12/2007 6/18/2010 ($429,342.59)TrustOption One Mortgage Securities Corp. NIM68403GAA2 OONIM 07-3 NOTE 4/30/2007 6/18/2010 ($710,853.41)TrustRAAC Series 74919VAA4 RAAC 06 SP4 A1 12/08/2006 6/18/2010 ($4,087.11)TOTALS ($5,859,065.97)27
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Case: 2:10-cv-01160-ALM-TPK Doc #: 1 Filed: 12/22/10 Page: 1 of ...

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