Litigation Assignments

Sperlinga Advisory's litigation support clients have included money managers, other buy-side firms (pension/endowment), major broker-dealers and a series of assignments performed for a Department of the U.S. Government. In addition to our report writing and testifying experience, SA LLC has:

i) Valued and provided risk analysis associated with complex mortgage and asset-backed securities;

ii) Performed forensic structured finance analysis;

iii) Led in-depth document review and due diligence teams; and

iv) Provided technical deposition interpretation;

Case studies can be reviewed using the links on the right. These assignments do not represent a complete list of the Firm's experience, but rather provide a sample of SA LLC's previous engagements involving litigation. Certain of our economic (i.e. non-litigation) case studies involved working with attorneys and can be found here.

Sperlinga Advisory’s Principal, John Contino, began his securities industry career in 1983, and worked for PaineWebber and Drexel Burnham prior to founding the Firm. His CV can be accessed by clicking here.

FDIC (Guaranty Bank) v. Deutsche Bank Securities Inc., et. al.:

Retained on two related cases by Simpson Thacher & Bartlett LLP. The plaintiff (FDIC) was named as receiver for seven different depository institutions. 103 different residential mortgage securities from these institutions were resecuritized into SSGN 2010-S1. The FDIC brought suit against the dealer defendants to recover damages relating to 5 of those 103 securities.

Sperlinga Advisory was part of the damages team and was assigned to respond to the plaintiff’s expert’s valuation of the residual interests associated with the resecuritization, as well as that expert’s allocation of the residual valuations to those securities at-issue in the cases.

We projected cash flows of all 103 securities in the resecuritization from the relevant as-of date. We then created a model of the resecuritization which allowed us to calculate valuations for both the entire resecuritization’s residual interests, as well as the contribution of each of the at-issue securities to the total residual valuation.

This analysis allowed us to challenge the plaintiff’s expert’s assertion that the valuations of the residual interests were undeterminable with a reasonable degree of certainty, with defensible estimates totaling hundreds of millions of dollars. We allocated our valuation estimates to the at-issue securities and challenged the plaintiff’s damages estimates.

Expert reports were produced and Sperlinga Advisory’s principal was deposed. The cases all settled prior to trial.

National Credit Union Administration Board v. RBS Securities Inc.

Retained by Kirkland & Ellis LLP (representing RBS Securities Inc., et. al.) The plaintiff, the National Credit Union Credit Administration Board (NCUAB) was named as receiver for five different credit unions. Residential mortgage securities from these institutions were resecuritized into at least 9 different resecuritizations (NGN Trusts). The NCUAB brought suit against RBS to recover damages relating to 56 mortgage securities used as collateral across the 9 at-issue NGN Trusts.

Sperlinga Advisory was part of the damages team and was assigned to respond to the plaintiff’s expert’s valuation of the residual interests associated with the resecuritizations and different valuation dates. In addition, we were asked to value the contribution of the 56 at-issue securities to the NGN Trust residuals.

We projected cash flows of hundreds of securities backing the at issue resecuritizations from the relevant as-of dates. We then created a model of each resecuritization which allowed us to calculate valuations for each resecuritization residual interest, as well as the contribution of each of the at-issue securities to the total residual valuation, which was used to challenge plaintiff’s experts’s analyses about the value of the residuals associated with the NGN Trusts.

Expert reports were produced and Sperlinga Advisory’s principal was deposed. The case settled prior to trial.

Bankruptcy-Related Litigation Valuation:

Retained by two American Law 100 firms to assist in the defense of a major Wall Street Bank in bankruptcy-related litigation. The plaintiff brought suit to clawback losses related to repurchase agreement financings of mortgage securities done with several Wall Street Banks.

Our work involved the analysis of loss causation, Great Financial Crisis-era mortgage securities valuations, enterprise level liability management and unusual bond calls, among other complex issues. Sperlinga Advisory competed for and won an opportunity to serve the other five dealer-defendants as an expert on a sub-set of our work.

The case was settled prior to our submitting a report.

Federal Housing Finance Agency Related Cases:

Sperlinga Advisory was retained by the counsel of four large banks to assist in the defense against lawsuits brought by the Federal Housing Finance Agency (“FHFA”) on behalf of FNMA and FHLMC.

Our work in these cases took place in 2013 through 2014, and involved cases filed in the SDNY. In three of the cases, we were asked to attribute the losses incurred on the non-agency residential mortgage securities at issue to various factors, using both SA LLC's analytical capabilities and our principal's direct knowledge of those forces acquired as a mortgage credit manager at the time these securities were acquired.

In the fourth case, Sperlinga Advisory was asked to value certain of the non-agency mortgage securities at issue, and to defend its results against alternative valuations provided by both third-party pricing sources and an opposing expert.

These cases all settled prior to trial.

George Miller, Chapter 7 Trustee for American Business Financial
Services, Inc. v. Greenwich Capital Financial Products, Inc.:

Sperlinga Advisory worked for Kirkland and Ellis, representing Greenwich Capital Financial Products ["GCFP"]. The Chapter 7 Trustee [Mr. Miller] for American Business Financial Services Inc. ["ABFS", a Philadelphia-area mortgage originator] brought suit against GCFP, stemming from a DIP loan made to ABFS by GCFP.

We were asked:

i) To perform forensic valuations on certain complex, non-agency mortgage securities [specifically, REMIC residuals] which served as collateral for the DIP;

ii) To explain those securities in reports to the court; and

iii) To give an opinion as to the "commercial reasonableness" of the sale of these securities.

SA LLC's principal was named a testifying expert in this case and filed expert and rebuttal reports. These reports were part of a pre-trial summary judgement motion by GCFP, which was granted on all counts by the bankruptcy judge.

TCW v. Jeffrey Gundlach et. al.:

Sperlinga Advisory worked for Munger, Tolles & Olson, who represented Jeffrey Gundlach and DoubleLine Capital. Mr. Gundlach had been a star mortgage securities manager for TCW. In late 2009, TCW fired Gundlach and three other defendants, accusing them of misappropriation of trade secrets, among other charges. Shortly after their dismissal, Gundlach, the other named defendants and roughly 36 members of the TCW MBS team formed DoubleLine Capital. TCW sued Mr. Gundlach, DoubleLine and others, asking for $566MM in damages. Mr. Gundlach countersued for $500MM in damages related to his termination. Representing TCW was Quinn Emanuel with John Quinn leading the TCW trial team.

The MTO trial team used our expertise from the early stages of the case to develop the requisite background knowledge of mortgage security modeling and the workings of the mortgage market. SA LLC's standing came not only as mortgage security participants and users of similar mortgage models, but also as a designers and builders of them as well. Several expert reports were produced, and Sperlinga Advisory's principal also testified at trial in Los Angeles in September 2011. The challenge was to explain to the jury the complex tools which were alleged to have been misappropriated and how they are used in the industry.

The jury found for:

i) Mr. Gundlach on the back wages claims and awarded him $66.7MM; and

ii) TCW on their claims, but determined Mr. Gundlach did not act willfully.

There were charges where the judge determined the damages, and SA LLC provided support with respect to the post-trial hearings which resulted in a settlement of all remaining civil litigation between TCW and DoubleLine in December 2011. Reuters wrote this about the settlement.

The Maplebrook School:

The Maplebrook School, based in Amenia, NY, served developmentally disadvantaged children. Fernandez & Burnstein was the law firm representing the School. A portion of the School's endowment was invested in complex mortgage derivatives, whose value plummeted during a period of rising interest rates.

Sperlinga Advisory was retained to write a report, consisting of:

i) An analysis of the appropriateness of these securities as investments for the School's endowment;

ii) A forensic analysis as to how the risk / return profile appeared at the time of their purchase; and

iii) An analysis supporting the School's damage calculation.

The company who sold the School the securities in question settled with the School prior to litigation.

The Merchant's Trust:

The Merchant's Trust was located in Burlington, Vermont and invested funds on behalf of their trust customers. The Trust Company invested some of these funds into the Piper Jaffrey Government Income Fund. These trust customers lost money when the Piper Jaffrey Government Income Fund dropped in value. Gravel & Shea was the law firm that represented The Merchant's Trust.

Sperlinga Advisory was retained to write a report as to the risk profile of the Piper Jaffrey Government Income Fund, and the appropriateness of that investment for The Merchant's Trust's typical trust customers. The dispute for which SA was retained to help resolve was between the Trust Company and their providers of director's and officer's insurance. Gravel & Shea's opponents settled the case after our report was submitted and prior to any litigation.

Subsequently, Sperlinga Advisory's Principal was called upon to testify before a Federal Judge in District Court in a related case. This litigation was brought by class action attorneys representing a small group of the trust company clients, who did not accept the settlement offered by The Merchant's Trust.

Nodvin v. N.F.S.C.:

Marvin Nodvin was a high net worth individual who had invested in mortgage derivatives through a securities firm which became defunct. National Financial Services Corporation ("NFSC", a division of Fidelity Investments) was the clearing broker for the defunct securities firm. Nodvin lost money when the prices of the mortgage derivatives he owned dropped. Mr. Nodvin brought action against NFSC, because NFSC had loaned Mr. Nodvin money through the defunct broker to purchase the mortgage derivatives. Cohn Lifland Herrmann represented Mr. Nodvin, and retained Sperlinga Advisory.

Sperlinga Advisory wrote a report describing the mortgage derivatives in which Nodvin had invested. SA also arranged for Cohn Lifland to retain another (independent) expert, to work on the case. Lengthy depositions followed the submission of our report. Sperlinga Advisory's Principal, John Contino, was called to testify as an expert before an arbitration panel, for the purpose of explaining the nature of the mortgage derivatives to the arbitration panel.

Sperlinga Advisory further retained to work on a related case in Atlanta, Georgia, also involving Mr. Nodvin and NFSC, where the attorneys representing Mr. Nodvin were Bondurant, Mixon and Elmore. That matter was tried in Georgia state court.

US Department of Labor - Office of the Solicitor:

Throughout the mid-1990’s [with our most recent assignment ending in 1999], Sperlinga Advisory has been involved with the US Department of Labor – Office of the Solicitor with what was called the Derivatives Project.

In the cases upon which SA LLC worked, the US DOL was involved in the prosecution of cases under ERISA (generally, involving pension plans) and the Taft-Hartley Act (generally, union funds). Sperlinga Advisory served the DOL through several investigations, in which mortgage-backed securities were involved. The firm acted in the capacity of an investigative expert. Such an expert works with both investigators and DOL attorneys to assist them prior to charges being filed, and included:

i) Performing forensic financial analysis to determine the prudence of a particular money managers past actions;

ii) Performing similar forensic analysis to determine suitability of certain securities;

iii) Sitting in depositions to assist DOL attorneys with witnesses who may have provided technical answers;

iv) Provided advice to DOL attorneys as to possible defenses of money manager actions they might face; and

v) Authored reports that summarized findings with respect to all the above mentioned points.

Because investigations involved participants who had not been charged with any crime, Sperlinga Advisory operated in an environment of strict confidence. As such, we cannot provide any details as to the assignments upon which we worked.

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