BRADENTON, Fla. — Allowing former JPMorgan bankers Charles LeCroy and Douglas MacFaddin to give statements six years after asserting Fifth Amendment privilege would be prejudicial against the Securities and Exchange Commission’s case, the SEC argued in a court filing.
LeCroy and MacFaddin have frustrated the SEC's efforts to investigate and litigate the facts of swap and sewer bond transactions in Jefferson County, Ala., the commission said Sept. 9.
"They have loudly protested their innocence, yet refused all attempts to get answers from them to the central questions of their involvement in the transactions at issue by asserting their Fifth Amendment privilege against self-incrimination," the SEC said, noting that the men refused to testify in 2008 and 2011.
The ex-bankers asked U.S. District Judge Abdul Kallon on Aug. 31 for permission to reopen their depositions and give statements under oath after deposing a swap expert that they have indicated is central to their case.
Now that discovery has closed, and the former bankers had the benefit of reviewing the testimony of 37 witnesses in depositions as well as "millions of documents," LeCroy and MacFaddin want to testify and "tailor their stories to the testimony of other witnesses," the SEC said in its filing.
"Here, the record establishes LeCroy and MacFaddin are using their Fifth Amendment privilege as an unfair litigation tactic, and the commission will suffer prejudice if they are allowed to withdraw the privilege and testify at this late date," said the court filing. "The court should deny this 11th-hour shift in tactics."
LeCroy and MacFaddin, in a Sept. 11 response to the SEC, denied that they "engaged in gamesmanship or abuse" by asserting the Fifth Amendment, and now seeking to reopen their statements.
They would suffer prejudice far greater than the SEC if not allowed to give depositions at this time, LeCroy and MacFaddin said in the filing.
The SEC has asked Kallon to reject the former bankers' motion to give statements, and schedule a trial.
If Kallon allows the men to testify, the SEC said it would ask for discovery to be reopened for a limited amount of time to investigate their statements.
Kallon is holding a conference call with attorneys on Sept. 25.
The case, filed in 2009, has been stalled for several years because the Department of Justice requested, and received, delays in the ability of LeCroy and MacFaddin to depose CDR Financial Products Inc. senior vice president Douglas Goldberg until after his own sentencing on bid-rigging charges unrelated to the Jefferson County case. CDR was swap advisor to the county.
Goldberg, who was sentenced earlier this year, was deposed by the former JPMorgan bankers in July.
Kallon has already rejected motions by MacFaddin and LeCroy to dismiss the pay-to-play case against them involving Jefferson's sewer deals and swaps.
