Opinion ID: 3160896
Heading Depth: 3
Heading Rank: 2

Heading: August 14, 2007, Letter (From Flannery)

Text: On August 14, 2007, Flannery sent a letter to LDBF investors, in an attempt to explain what was taking place in the housing-related securities market. Flannery was normally not responsible for client communications, and the Chief Executive Officer (CEO) of SSgA said it would not be a good idea, asking why Flannery would want to raise [his] head up. Flannery understood the CEO to be saying that this [was] kind of an ugly situation . . . why stand up and take a bullet, but Flannery wrote the letter because he thought it was the right thing to do. Flannery said that up to the limits that [he] was given by legal, [he] wanted to take responsibility for this disaster . . . and . . . to tell something of the arc of the story to put it in context. He said he wanted to be as just completely straightforward as [he] could be. The draft of the letter Flannery prepared included the following paragraph: The situation is extreme and difficult to manage. While we believe that the subprime markets clearly convey far greater risk than they have historically[,] we feel that forced - 13 - selling in this chaotic and illiquid market is unwise. Even if mortgage delinquencies soar beyond our expectations we would expect significantly higher values for our sub-prime holdings. While recent events may have repriced the risk of these assets for the foreseeable future and it is unlikely that they will retrace to values at the turn of the year we believe that liquidity will slowly re- enter the market and the segment will regain its footing. While we will continue to liquidate assets for our clients when they demand it, our advice is to hold the positions for now. The last sentence was then edited to read, While we will continue to liquidate assets for our clients when they demand it, our advice is to hold the positions in anticipation of greater liquidity in the months to come. Deputy General Counsel Mark Duggan revised that sentence to read, While we will continue to liquidate assets for our clients when they demand it, we believe that many judicious investors will hold the positions in anticipation of greater liquidity in the months to come. Flannery kept Duggan's change because Flannery believed both his original language and the revised language were accurate. In addition to Duggan, a number of people reviewed the letter, including the co-heads of Relationship Management, SSgA's president and CEO, and outside legal counsel.