Discovery Resources

Weekends are anything but restful these days for those watching the financial sector and financial markets. Lehman declared bankruptcy, with the hopes that counterparty trades will be unwound neatly.  Merrill, like Bear before it, was snapped up by a competitor. The government, shutting the door to assuming more risk in favor of the buyers, scared off Barclays from Lehman. AIG is having significant problems insuring their bonds–the market is there, but unless the Financial Times had a misprint, you would basically pay close to half of the bonds’ value to insure them against loss.

The cost of buying protection against a default on AIG’s debt, using credit default swaps, leapt to record levels that day and its bonds traded at distressed levels. To protect $10m of AIG bonds for five years, an investor would have had to pay $1.25m upfront plus $500,000 per year, according to Phoenix, a US broker.

Kevin LeCroix, the Directors and Officer’s liability expert, weighs in with some of the aftershocks of Freddie and Fannie writedowns (remember that shock to the system just a few days ago?).  Kevin reports on the first regional bank to write down the securities they held of Fannie and Freddie.  He forecasts that other writedowns will ripple through the financial sector. Kevin also reports that lawsuits around this subprime & liquidity crisis may have surpassed those of the past banking crisis (the S & L bailout). Kevin will join us on October 1, 2008 for a timely webcast on litigation trends in the subprime.  Register here. All of this interlocking litigation will increase the volume, speed and complexity of ediscovery.  Watch this site for continuing education on the subject.  In the meantime, we have an ediscovery and subprime article to offer you. Andrews Litigation Reporter graciously allowed Prashant Dubey and I to reprint our article,  “Are You Ready for E-Discovery Resulting From Subprime Litigaiton.

The tricky part for those with subprime exposure will be tracking down all the loan originators, repackagers, resellers and purchasers of the bundled loans and those who marketed the packages. Their digital warehouses may contain information vital to the defense. As an example, counsel may need to learn as much as possible about where the subprime loans came from and how they were marketed when constructing a defense. During this process, they will need to determine which repositories, and from what organizations, contain relevant, responsive documents. From there, they will need to understand which repositories are in the “control of the company,” thus making them automatically subject to consideration for discovery.

Filed under Case Law & Rules, Home Page Latest, Sound Evidence, Technology Counsel.

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