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XAVIER BECERRA
Attorney General of California
MARTIN GOYETTE (SBN 118344)
Senior Assistant Attorney General
FREDERICK W. ACKER (SBN 208109)
Supervising Deputy Attorney General
MARCIE K, FARANO (SBN 177939)
SYLVIA KELLER (SBN 197612)
NATHANIEL SPENCER-MorkK (SBN 226886)
JOANNA ROSEN ForSTER (SBN 244943)
JERRY T. YEN (SBN 247988)
SUNEETA FERNANDES (SBN 257772)
EMILY C. KALANITHI (SBN 256972)
Deputy Attorneys General
455 Golden Gate Avenue, Suite 11000
San Francisco, CA 94102-7004
Telephone: (415) 510-3468
Fax: (415) 703-5480
E-mail:Marcie.Farano@doj.ca.gov
SHARTSIS FRIESE LLP
ARTHUR J. SHARTSIS (SBN 51549)
CHARLES R. RICE (SBN 98218)
LARISA A, MEISENHEIMER (SBN 228777)
KAJSA M. MINOR (SBN 251222)
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Tel: (415) 421-6500
Fax: (415) 421-2922
E-mail: Imeisenheimer@sflaw.com
ELECTRONICALLY
FILED
Superior Court of California,
County of San Francisco
10/01/2018
Clerk of the Court
BY:JUDITH NUNEZ
Deputy Clerk
Attorneys for Plaintiff, People of the State of California
SUPERIOR COURT OF THE STATE OF CALIFORNIA.
COUNTY OF SAN FRANCISCO
PEOPLE OF THE STATE OF
CALIFORNIA,
Plaintiff,
v.
MORGAN STANLEY & CO. LLC, flk/a
MORGAN STANLEY & CO.
INCORPORATED; MORGAN STANLEY
MORTGAGE CAPITAL HOLDINGS LLC
ffk/a MORGAN STANLEY MORTGAGE
CAPITAL INC.; MORGAN STANLEY
ABS CAPITAL I INC.; MORGAN
STANLEY CAPITAL I INC.; SAXON
FUNDING MANAGEMENT LLC; SAXON
ASSET SECURITIES COMPANY; and
DOES 1-100,
Defendants.
Case No, CGC-16-551238
EXHIBIT 1 TO DECLARATION OF
LARISA A, MEISENHEIMER IN
SUPPORT OF PLAINTIFF’S MOTION
FOR ISSUANCE OF INTERNATIONAL
LETTERS OF REQUEST
Date: November 19, 2018
Time: 2:00 p.m.
Dept: 304
Judge: Hon. Curtis E. A. Karnow
Date Action Filed: — April 1, 2016
Trial Date: February 17, 2020
Case No.
CGC-16-551238
EXHIBIT 1 TO DECLARATION OF LARISA A.
MEISENHEIMER IN SUPPORT OF PLAINTIFF’S MOTION FOR
ISSUANCE OF INTERNATIONAL LETTERS OF REQUESTEXHIBIT 1SHARTSIS FRIESE LLP
XAVIER BECERRA
Attorney General of California
MARTIN GOYETTE (SBN 118344)
Senior Assistant Attorney General
FREDERICK W. ACKER (SBN 208109)
Supervising Deputy Attorney General
MARCIE K. FARANO (SBN 177939)
SYLVIA KELLER (SBN 197612)
NATHANIEL SPENCER-MorkK (SBN 226886)
JOANNA ROSEN FORSTER (SBN 244943)
JERRY T. YEN (SBN 247988)
SUNEETA FERNANDES (SBN 257772)
EMILY C. KALANITHI (SBN 256972)
Deputy Attorneys General
455 Golden Gate Avenue, Suite 11000
San Francisco, CA 94102-7004
Telephone: (415) 510-3468
Fax: (415) 703-5480
E-mail:Emily.Kalanithi@doj.ca.gov
SHARTSIS FRIESE LLP
ARTHUR J. SHARTSIS (SBN 51549)
CHARLES R. RICE (SBN 98218)
LARISA A. MEISENHEIMER (SBN 228777)
KaJsA M. MINOR (SBN 251222)
One Maritime Plaza, 18th Floor
San Francisco, California 94111
Tel: (415) 421-6500
Fax: (415) 421-2922
E-mail: Imeisenheimer@sflaw.com
Attorneys for Plaintiff, People of the State of California
SUPERIOR COURT OF THE STATE OF CALIFORNIA.
COUNTY OF SAN FRANCISCO
PEOPLE OF THE STATE OF CALIFORNIA,
Plaintiff,
ve.
MORGAN STANLEY; MORGAN STANLEY &
CO. LLC, f/k/a MORGAN STANLEY & CO.
INCORPORATED; MORGAN STANLEY
MORTGAGE CAPITAL HOLDINGS LLC fik/a
MORGAN STANLEY MORTGAGE CAPITAL
INC.; MORGAN STANLEY ABS CAPITAL I
INC.; MORGAN STANLEY CAPITAL I INC.;
SAXON FUNDING MANAGEMENT LLC;
SAXON ASSET SECURITIES COMPANY; and
DOES 1-100,
Defendants.
Case No. GCG-16-551238
LETTER OF REQUEST FOR
INTERNATIONAL JUDICIAL
ASSISTANCE PURSUANT TO THE
EVIDENCE (PROCEEDINGS IN
OTHER JURISDICTIONS) ACT OF
1975 TO PERMIT DEPOSITION
TESTIMONY OF WITNESSES IN THE
UNITED KINGDOM
Case No. GCG-16- LETTER OF REQUEST
551238A 94111-3598
SHARTSIS FRIESE LLP
SAN FRANCISC!
TO THE HIGH COURT OF ENGLAND:
The Superior Court of California for the County of San Francisco presents its
compliments to the High Court of England and requests international judicial assistance to obtain
the oral examination under oath from Mark Abbott, Edward Chai, Helen Chang, Martin Gregg
Drennan, Lapo Guadagnuolo, Wilfred Sydney Hanna, Perry Inglis, Alexander Khein, David
Rosa, Tina Sprinz, Henry Tabe and Justin Worrall (collectively, “the Deponents”) on the topics
set forth in Section (V)(C) below. The signed Letter of Request will be forwarded in pdf format
by email to the Plaintiff's local counsel in the United Kingdom, Andy McGregor, who will file
the Letter with the High Court of England.
This Letter of Request is made pursuant to the Hague Convention of 18 March 1970 on
the Taking of Evidence Abroad in Civil or Commercial Matters, as adopted and implemented at
28 U.S.C. § 1781 and the Evidence (Proceedings in Other Jurisdictions) Act 1975. The Superior
Court of California for the County of San Francisco is a competent court of law and equity which
properly has jurisdiction over this proceeding, and has the power to compel the attendance of
witnesses both within and outside its jurisdiction. The Deponents have knowledge on the topics
set forth in Section (V)(C) below, and reside in or around London, Horsham, Oxford, and
Woking, United Kingdom.
The testimony of the witnesses is intended for use at trial, and will be highly relevant to
significant issues of fact and law in dispute in the case. Specifically, the testimony sought by this
Letter of Request goes to the heart of the case and will influence the final determination at trial of
the existence, non-existence, and/or extent of any liability under California’s False Claims Act,
Corporate Securities Law of 1968, and False Advertising Law.
This Letter of Request is made with the understanding that it will in no way require person
to violate any laws of the United Kingdom, or to undergo a broader form of inquiry than he or she
would if the litigation were conducted in England. In the proper exercise of its authority, this
Court has determined that the testimony of the Deponents on the topics set forth in Section (V)(C)
below cannot be secured except by the intervention of the High Court of England.
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Case No. GCG-16- LETTER OF REQUEST
551238SHARTSIS FRIESE LLP
LETTER OF REQUEST
In conformity with the Hague Convention of 18 March 1970 on the Taking of Evidence
Abroad in Civil or Commercial Matters (“Hague Convention”) and the Evidence (Proceedings in
Other Jurisdictions) Act of 1975 (the “UK Evidence Act”), the undersigned has the honor to
submit the following request:
Judge Curtis E.A. Karnow
Superior Court of California for the
City and County of San Francisco
400 McAllister Street
San Francisco, California 94102
United States of America
CENTRAL AUTHORITY OF The Senior Master,
SENDER AND REQUESTING
JUDICIAL AUTHORITY:
THE REQUESTED STATE: Queen’s Bench Division
For the Attention of the Foreign Process Section
Room E16
Royal Courts of Justice
Strand
London WC2A 2LL
United Kingdom
PERSON TO WHOM THE Andy McGregor
EXECUTED REQUEST IS RPC
TO BE RETURNED: Tower Bridge House
St. Katharine’s Way
London
EIW 1 AA
United Kingdom
DATE BY WHICH THE The requesting authority, the Superior Court of
REQUESTING AUTHORITY California for the County of San Francisco,
REQUIRES RECEIPT OF requests that the receipt of the response to this
THE RESPONSE TO THE Request be returned as soon as possible. The
LETTER OF REQUEST: evidence cut-off date in the underlying case is
May 1, 2019.
L THE PARTIES AND THEIR REPRESENTATIVES
A. The Applicant
The Applicant is Plaintiff the People of the State of California. The Plaintiff may be
contacted through their attorneys:
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551238A 94111-3598
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SAN FRANCISC!
Xavier Becerra
Attorney General of California
Frederick W. Acker
Supervising Deputy Attorney General
Marcie K. Farano
Deputy Attorney General
455 Golden Gate Avenue, Suite 11000
San Francisco, California, 94102
United States of America
Telephone: (415) 510-3449
Facsimile: (415) 703-5480
Arthur J. Shartsis
Charles R. Rice
Larisa A. Meisenheimer
Kajsa M. Minor
Suzanne S. Orza
SHARTSIS FRIESE LLP
One Maritime Plaza, 18th Floor
San Francisco, California, 94111
United States of America
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
B. The Defendants
The Defendants are Morgan Stanley, Morgan Stanley & Co. LLC, formerly known as
Morgan Stanley & Co. Incorporated; Morgan Stanley Mortgage Capital Holdings LLC, formerly
known as Morgan Stanley Mortgage Capital Inc.; Morgan Stanley ABS Capital I Inc.; Morgan
Stanley Capital I Inc.; Saxon Funding Management LLC; Saxon Asset Securities Company
(collectively, “Defendants”). Defendants may be contacted through their attorneys:
James P. Rouhandeh
Antonio J. Perez-Marques
Jessica L. Turner
Sheila R. Adams
Matthew Cormack
DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, New York 10017
United States of America
Telephone: (212) 450-4000
Facsimile: (212) 701-5800
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Case No. GCG-16- LETTER OF REQUEST
551238A 94111-3598
SHARTSIS FRIESE LLP
SAN FRANCISC!
Patrick D. Robbins
Mikael Abye
SHEARMAN & STERLING LLP
535 Mission Street, 25th Floor
San Francisco, California, 94105
United States of America
Telephone: (415) 616-1100
Facsimile: (415) 616-1199
Neal A. Potischman
Laura K. Pedersen
DAVIS POLK & WARDWELL LLP
1600 El Camino Real
Menlo Park, California 94025
United States of America
Telephone: (415) 752-2000
Facsimile: (415) 752-2111
I. NATURE AND PURPOSE OF THE PROCEEDINGS AND SUMMARY OF THE
FACTS
A. Plaintiff's Allegations
This is a civil action being actively litigated in the Superior Court of California for the
County of San Francisco before the undersigned California Superior Court Judge, the Honorable
Curtis E.A. Karnow, who has been assigned to the case since May 19, 2016, See People of the
State of California v. Morgan Stanley, et al., Civil Case No. GCG-16-551238. Plaintiff brought
this action against Defendants for violating California’s False Claims Act, Securities Law and
False Advertising Law in connection with false and misleading statements about the risks
associated with 19 different residential mortgage backed securities (“RMBS”) and -- of particular
import for purposes of this Request -- the Cheyne Structured Investment Vehicle (“SIV”) notes
that were purchased by the California Public Employee Retirement System (“PERS”). A copy of
the First Amended Complaint For Treble Damages, Civil Penalties and Permanent Injunction for
Violation of the California False Claims Act, Corporate Securities Law of 1968, and False
Advertising Law in this proceeding is annexed hereto as Schedule A.
The People have alleged that Morgan Stanley & Co. (“MS&Co”), together with its
indirect subsidiary Morgan Stanley International Ltd (“MSIL”) (collectively, “Morgan Stanley”),
played an instrumental role in the creation and launch of the Cheyne SIV. The People have
alleged that Morgan Stanley: (a) acted as “structurer” of the Cheyne SIV and, accordingly,
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designed the flawed structure of the Cheyne SIV (i.e., the type and amount of assets that could be
purchased by the SIV); (b) created a pre-offering “warehouse” (i.e., purchased and held securities
on behalf of the Cheyne SIV), had veto rights over all assets that went into the Cheyne SIV prior
to launch, and filled the Cheyne SIV with questionable assets sold by Morgan Stanley; (c) led the
negotiations with the rating agencies concerning what rating the Cheyne SIV notes would receive,
and in that role, knowingly caused the rating agencies to issue inappropriately high ratings for the
Cheyne SIV notes; and (d) drafted the marketing materials containing false ratings that
misrepresented the risk of the Cheyne SIV to investors like PERS.
The false ratings secured by Morgan Stanley were material to PERS’s purchase of the
Cheyne SIV notes because PERS’s investment managers relied on these ratings when they
purchased the Cheyne SIV notes. As a result of the false and misleading statements concerning
the Cheyne SIV, PERS suffered massive losses when the Cheyne SIV collapsed in 2007.
B. Knowledge of the Persons to Be Examined
Plaintiff is seeking to obtain testimony from Mark Abbott, Edward Chai, Helen Chang,
Martin Gregg Drennan, Lapo Guadagnuolo, Wilfred Sydney Hanna, Perry Inglis, Alexander
Khein, David Rosa, Tina Sprinz, Henry Tabe and Justin Worrall (collectively, the “Deponents”).
Plaintiff believes that the Deponents are knowledgeable about certain facts relevant to this action.
Plaintiff submits that documents produced by Defendants in this case identify the Deponents as
key individuals involved in creating, rating, marketing and monitoring the Cheyne SIV and each
having personal knowledge of the same. Accordingly, the testimony that Plaintiff seeks from
these Deponents is highly relevant to Plaintiff's allegations, as described more fully below.
1. Mark Abbott (Woking, Surrey, United Kingdom)
Abbott was an analyst at Moody’s during the relevant time period. He was directly
involved in the initial rating and ongoing monitoring of the Cheyne SIV. Abbott worked and
communicated with Morgan Stanley and Cheyne to create and launch the Cheyne SIV. He also
communicated with Morgan Stanley and Cheyne to (1) negotiate exceptions from important
Moody’s tests and parameters in order for the Cheyne SIV to pass those tests and parameters and
(2) ensure that the false credit ratings were obtained.
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2. Edward Chai (London, United Kingdom)
Chai was Senior Portfolio Manager at Cheyne in London during the relevant time period.
Chai was one of the individuals primarily responsible for selecting assets for the Cheyne SIV,
and, in that role, communicated directly with Morgan Stanley’s CDO Structuring Team to seek
and obtain approval for assets he identified for purchase by the Cheyne SIV. He is therefore
familiar with Morgan Stanley’s direct role in structuring the Cheyne SIV. Chai also
communicated with Morgan Stanley and the rating agencies regarding the ratings of subprime
RMBS and other assets held by the Cheyne SIV.
3. Helen Chang (London, United Kingdom)
Chang was a Vice President at Morgan Stanley in London during the relevant time period.
Chang was directly involved in the communications and negotiations with the rating agencies that
led to the false rating on the Cheyne SIV. Chang also played an integral role in marketing the
Cheyne SIV.
4, Martin Gregg Drennan (London, United Kingdom)
Drennan was an Executive Director at Morgan Stanley in London during the relevant
period and served as the lead arranger for the Cheyne SIV. He was directly involved in all
aspects of the creation, structuring, marketing, and monitoring of the Cheyne SIV. Drennan
worked and communicated with the rating agencies as well as Cheyne to create and launch the
Cheyne SIV. He was involved in reviewing and approving the purchase of the Cheyne SIV’s
underlying assets. Drennan was the primary liaison between Cheyne and the rating agencies in
securing the Cheyne SIV’s false credit ratings, including (1) negotiating exceptions from the
rating agencies to important tests and parameters in order for the Cheyne SIV to pass those tests
and parameters and (2) ensuring that the false credit ratings were obtained. Drennan was also
involved in negotiating Morgan Stanley’s fees for its role as arranger and placement agent for the
Cheyne SIV.
5. Lapo Guadagnuolo (London, United Kingdom)
Guadagnuolo was a Senior Director at S&P in London during the relevant time period.
He was the lead analyst on the committee of analysts at S&P responsible for assigning false
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ratings to the Cheyne SIV. Guadagnuolo was directly involved in all aspects of the creation,
initial rating, ongoing monitoring, and continuing rating of the Cheyne SIV. He worked and
communicated with Morgan Stanley and Cheyne to create and launch the Cheyne SIV. He also
communicated with Morgan Stanley and Cheyne to (1) negotiate exceptions from important S&P
tests and parameters in order for the Cheyne SIV to pass those tests and parameters and (2) ensure
that the false credit ratings were obtained.
6. Wilfred Sydney Hanna (Horsham, West Sussex, United Kingdom)
Hanna was a Partner at Cheyne in London during the relevant time period and served as
head of the Cheyne ABS team. He is one of the people responsible for the creation, day-to-day
operations and structuring of the Cheyne SIV. He also was one of the primary individuals
involved in the retention of Morgan Stanley to arrange and structure the Cheyne SIV.
7. Perry Inglis (London, United Kingdom)
Inglis was Managing Director at S&P in London during the relevant period and was one
of the lead analysts on the committee of S&P analysts that assigned false ratings to the Cheyne
SIV. He was directly involved in all aspects of the initial rating, ongoing monitoring, and
continuing rating of the Cheyne SIV. Inglis worked and communicated with Morgan Stanley and
Cheyne to create and launch the Cheyne SIV. He also communicated with Morgan Stanley and
Cheyne to (1) negotiate exceptions from important S&P tests and parameters in order for the
Cheyne SIV to pass those tests and parameters and (2) ensure that the false credit ratings were
obtained. In addition, he was involved in negotiating S&P’s fees for rating the Cheyne SIV and
signed the engagement letter with Cheyne on behalf of S&P.
8. Alexander Khein (London, United Kingdom)
Khein was an Executive Director at Morgan Stanley in London during the relevant time
period and was directly involved in early discussions with Cheyne, even before Morgan Stanley
engaged Cheyne. He was also directly involved in Morgan Stanley’s product approval of the
Cheyne SIV and in designing the structure of the Cheyne SIV that ultimately contributed to its
collapse.
9 David Rosa (London, United Kingdom)
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Rosa was a Senior Vice President for SIVs at Moody’s during the relevant time period.
He was the lead analyst at Moody’s responsible for assigning false ratings to the Cheyne SIV. He
also was directly involved in all aspects of the initial rating and ongoing monitoring of the
Cheyne SIV. Rosa worked and communicated with Morgan Stanley and Cheyne to (1) negotiate
exceptions from important Moody’s tests and parameters in order for the Cheyne SIV to pass
those tests and parameters; and (2) ensure that the false credit ratings were obtained. Rosa also is
knowledgeable about the downgrade and receivership of the Cheyne SIV.
10. Tina Sprinz (London, United Kingdom)
Sprinz was a Portfolio Manager at Cheyne for the Cheyne SIV. She was one of the
primary individuals involved in selecting assets for the Cheyne SIV warehouse prior to the launch
of the Cheyne SIV and, in that capacity, expressed concerns about Morgan Stanley improperly
favoring the sale of its own assets to the Cheyne SIV. She also interacted with Morgan Stanley
and the rating agencies on ratings issues for the Cheyne SIV.
11. Henry Tabe (Oxford, United Kingdom)
Tabe was Vice President-Senior Credit Officer and then Managing Director at Moody’s in
London during the relevant period and was one of the lead analysts on the committee of analysts
at Moody’s responsible for assigning false ratings to the Cheyne SIV. He was directly involved
in all aspects of the initial rating, ongoing monitoring, and continuing rating of the Cheyne SIV.
Tabe worked and communicated with Morgan Stanley and Cheyne to create and launch the
Cheyne SIV. He also communicated with Morgan Stanley and Cheyne to (1) negotiate
exceptions from important Moody’s tests and parameters in order for the Cheyne SIV to pass
those tests and parameters and (2) ensure that the false credit ratings were obtained. Tabe also is
knowledgeable about the downgrade and receivership of the Cheyne SIV.
12. Justin Worrall (Oxford, United Kingdom)
Worrall was a Fixed Income Professional at Morgan Stanley during the relevant time
period. He was directly involved with the coding and testing procedures for the simulation
models that Morgan Stanley built, which were an integral part of the rating process for the
Cheyne SIV and ultimately led to the false ratings.
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551238SHARTSIS FRIESE LLP
Ill. |. ADDRESSES OF THE PERSONS TO BE EXAMINED
Martin Gregg Drennan
Royal Bank of Scotland
280 Bishopsgate
London EC2M 4RB
United Kingdom
Helen Chang
UBS
5 Broadgate Circle
London EC2M 2QS
United Kingdom
Wilfred Sydney Hanna
(known as Syd Hanna)
Elixir Ventures
International Limited
Holland House,
Hollands Way,
Warnham, Horsham
RH12 3RH
United Kingdom
David Rosa
Legal & General Group
1 Coleman Street
London EC2R 5AA
United Kingdom
Alexander Khein
BlueCove Limited
10 New Burlington Street
London W1S 3BE
United Kingdom
Lapo Guadagnuolo
Standard & Poor’s
20 Canada Square
Canary Wharf,
London E14 SLH
United Kingdom
Tina Sprinz
Emst & Young - EMEIA
1 More London Place
London SEI 2AF
United Kingdom
Mark Abbott
Fingertip Scientific Ltd
6 Lydele Close, Horsell
Woking GU21 4ER
United Kingdom
Iv. PROCEDURAL STATUS OF THE CASE
This case is currently in the pretrial fact discovery phase.
t
Justin Worrall
ioSport Group Limited
Holly Cottage, Holly Street
Mill Street, Stanton St. John
Oxford OX33 1HJ
United Kingdom
Perry Inglis
Milford Capital Partners
20-22 Wenlock Road
London N1 7GU
United Kingdom
Edward Chai
Lions Bay Limited
26 Glenrosa Street
London SW6 2QZ
United Kingdom
Henry Tabe
Woodford Investment Management
9400 Garsington Road Oxford
Business Park
Oxford OX4 2HN
United Kingdom
Plaintiff is reviewing
documents produced by Defendants and has already commenced taking depositions. The fact
discovery deadline is May 1, 2019. The Court has set the trial to begin on February 17, 2020.
Vv. EVIDENCE TO BE OBTAINED
A. Purpose
The evidence to be obtained consists of testimony for use at trial of this action and is
necessary for the just and proper resolution of the proceedings before this Court. This Court
respectfully requests the High Court of England to compel the Deponents to appear and to be
deposed, under oath.
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LETTER OF REQUESTA 94111-3598
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B. Relevant Time Period
All testimony relates to the period from August 1, 2003 through December 31, 2008.
Cc. Topics For Examination
A detailed list of specific questions to be put to the Deponents need not be provided in
advance, in accordance with the rules of this Court. The following constitutes a non-exhaustive
list of anticipated areas of examination:
1. Morgan Stanley’s engagement, analysis and approval process
concerning the Cheyne SIV.
The People allege that Morgan Stanley played an essential role in the creation and launch
of the Cheyne STV. Evidence of Morgan Stanley’s engagement, analysis and approval process
concerning the Cheyne SIV is directly relevant to that allegation and to Morgan Stanley’s
knowledge of problems with the Cheyne SIV and the subprime RMBS that it held.
2. The structuring of the Cheyne SIV, including the purchase of the
Cheyne SIV’s underlying assets.
The People allege that Morgan Stanley knowingly created, assembled and packaged the
Cheyne SIV with assets that were riskier than what was represented to investors like PERS. In
particular, Morgan Stanley reviewed and had veto rights over all of the assets selected for the
Cheyne SIV’s $3 billion asset portfolio when the Cheyne SIV launched. The People allege that
Morgan Stanley used this opportunity to fill the Cheyne SIV with subprime and lower credit
quality assets securitized by Morgan Stanley. Morgan Stanley’s conduct in structuring the SIV is
also directly relevant to the People’s claim that Morgan Stanley knowingly pressured the rating
agencies to secure inappropriately high ratings for Cheyne SIV notes.
3. Awareness of problems in the residential-backed housing market
from 2003 to 2007.
The People allege that Morgan Stanley created, assembled and packaged the Cheyne SIV
with sub-prime RMBS assets that Morgan Stanley knew were riskier than what was represented
to investors like PERS. Evidence concerning Morgan Stanley’s awareness of problems in the
residential-backed housing market between 2003 and 2007 is directly relevant to the claim that
Morgan Stanley had knowledge of the Cheyne SIV’s risky underlying assets and its falsely high
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ratings.
4, The development and application of models and tests used to rate the
Cheyne SIV.
The People allege that Morgan Stanley knowingly caused the credit rating agencies to rate
the Cheyne SIV inappropriately high, thereby making it look less risky than it actually was.
Morgan Stanley’s development of the models and tests that led to the fraudulent ratings is directly
relevant to Morgan Stanley’s knowledge that the models dramatically understated the risks of the
Cheyne SIV.
5. The target market and actual marketing and sale of interests in the
Cheyne SIV (including the drafting and circulation of marketing and
offering materials).
The People allege that Defendants knowingly caused a false claim to be presented to
PERS in connection with the Cheyne SIV. The People seek evidence of Morgan Stanley’s direct
efforts to market the Cheyne SIV to PERS and other pension funds. The People also seek
evidence that Morgan Stanley was aware that the target market for the Cheyne SIV was limited to
large institutional investors like PERS, as such evidence is probative of whether Morgan Stanley
understood that the Cheyne SIV would be marketed to PERS. Finally, the People seek evidence
of Morgan Stanley’s drafting and circulation of marketing materials and offering documents
containing the false statements at issue here. Evidence that Morgan Stanley authored those
marketing materials for the Cheyne SIV with the intent that they be distributed to investors,
including PERS, is directly relevant to Plaintiff's claim that Morgan Stanley caused false claims
regarding the Cheyne SIV to be presented to PERS.
6. Interactions with the rating agencies, Moody’s and S&P, concerning
the Cheyne SIV.
The People allege that Morgan Stanley knowingly caused the credit rating agencies to
incorporate flawed modeling assumptions that led to the Cheyne SIV receiving artificially high
ratings. The interactions with the rating agencies concerning the Cheyne SIV are directly relevant
to that allegation and highly probative of whether Morgan Stanley engaged in misconduct in
order to secure fraudulent ratings from Moody’s and S&P for the Cheyne SIV.
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7. Investor and other reports concerning the Cheyne SIV.
The reports concerning the assets held by and the performance of the Cheyne SIV,
including reports authored or edited by Morgan Stanley, are directly relevant to establishing
Morgan Stanley’s knowledge of the riskiness of the assets underlying the Cheyne SIV. The
reports are also relevant to Morgan Stanley’s role in causing the credit rating agencies to rate the
Cheyne SIV higher than Morgan Stanley and the rating agencies knew was appropriate for the
Cheyne SIV.
8. The communications between and among MS&Co, MSIL and Cheyne
concerning the Cheyne SIV.
The People allege that MS&Co aided and abetted Cheyne’s and MSIL’s violations of the
California securities laws. The People further allege that MS&Co, both directly and through its
control over its indirect subsidiary MSIL: (a) designed the structure of the Cheyne SIV (i.e., the
type and amount of assets that could be purchased by the SIV); (b) drafted the marketing
materials for the SIV; (c) helped draft the legal documents for the SIV; (d) created a pre-offering
“warehouse” and funded Cheyne’s purchase of assets to build up the SIV; and (e) led the
negotiations with the rating agencies concerning what rating the Cheyne SIV notes would receive.
Communications between and among MS&Co, MSIL and Cheyne concerning the Cheyne SIV
are directly relevant to whether a primary violation occurred, whether MS&Co knowingly
provided substantial assistance with respect to that violation, and whether MS&Co exercised
control over the day-to-day activities of MSIL.
9. The fees and other compensation earned by Morgan Stanley in
connection with the Cheyne SIV.
The People allege that Morgan Stanley had a financial incentive to falsify the ratings of
the Cheyne SIV and its underlying assets. Evidence concerning the fees and other compensation
earned by Morgan Stanley in connection with the Cheyne SIV is directly relevant to that
allegation.
10. The relationship between MS&Co and MSIL.
13
Case No. GCG-16- LETTER OF REQUEST
551238A 94111-3598
SHARTSIS FRIESE LLP
SAN FRANCISC!
Under California law, every person or entity who, with knowledge, directly or indirectly
controls or induces any person or entity to violate California’s Securities Law is deemed to
violate those laws to the same extent as the controlled or induced person or entity. MSIL was an
indirect subsidiary of MS&Co through the latter’s direct subsidiary Morgan Stanley International
Holdings Inc. Employees of MSIL reported to and were supervised by MS&Co executives.
Evidence concerning the relationship between MS&Co and MSIL is directly relevant to the
People’s claim that MS&Co, with knowledge, controlled and induced MSIL to violate the
California Securities Law.
D. Relevancy
This Court recognizes that English law prohibits the English Court from taking steps
pursuant to a Letter of Request from a foreign nation that would not be permissible in English
civil litigation. UK Evidence Act, § 2(3). This Court also recognizes that the English Court does
not allow wide-ranging investigatory examinations, and instead, may only order the examination
of a witness pursuant to the UK Evidence Act where it is to obtain evidence relevant to the issues
for trial. Taking into account this restrictive approach by the English Courts, this Court is
satisfied that the evidence sought by the Plaintiff in this Letter of Request is directly relevant to
the issues for trial. Accordingly, this Court respectfully requests the Senior Master of the
Queen’s Bench Division of the High Court to require the Deponents to appear and to be deposed,
under oath.
VI. OTHER MATTERS
A. Requirement that the Evidence Be Given Under Oath and Special Form to Be
Used
This Court respectfully requests that you require that the testimony be given under the
following oath: “I, [deponent’s name], swear or affirm that the testimony that I am about to give
is the truth, the whole truth and nothing but the truth.” This Court also respectfully requests that,
in the event that the law of the United Kingdom does not permit the swearing of an oath by a
witness, the duly appointed officer should make inquiry of such witness to ensure that he
14
Case No. GCG-16- LETTER OF REQUEST
551238SHARTSIS FRIESE LLP
understands the gravity of the procedure and affirms that his statement will be true and correct in
all respects.
B. Special Methods or Procedures to Be Followed
This Court respectfully makes the following requests:
1. That this Letter of Request be granted and the evidence-taking proceeding be
performed on an expedited basis because the fact discovery cut-off in the underlying case is on
May 1, 2019.
2. That the depositions be taken in the manner provided by California Code of Civil
Procedure sections 2027.010 and 2025.010 et seg., copies of which are attached hereto as
Schedule B, or as closely thereto as possible given the foreign venue.
3. That the examinations be taken orally, transcribed verbatim in writing, and
videotaped, and that the transcript of the testimony be authenticated in accordance with your
procedures. With respect to the transcript of the testimony, this Court further requests that the
Plaintiff's counsel be permitted to provide a United States court reporter to transcribe the oral
examinations.
4, That the attorneys for Plaintiff and Defendants be permitted to attend the
depositions and conduct the examinations.
5. That the parties’ attorneys be permitted to take turns conducting examination and
cross-examination until they have no further questions.
6. That the parties’ attorneys be permitted to refer to documentary evidence when
conducting the examination and cross-examination.
7. That the examinations take place at dates and times as may be agreed upon
between the witnesses and counsel for the parties.
8. That, to the extent that multiple hearing dates are necessary to complete the
examination on all of the topics set forth in Section (V)(C) above of each Deponent, the hearings
are scheduled on consecutive days or as close to each other as reasonably practicable.
15
Case No. GCG-16- LETTER OF REQUEST
551238A 94111-3598
SHARTSIS FRIESE LLP
SAN FRANCISC!
Cc. Request for Notification of the Time and Place for the Execution of the
Request and the Identity and Address of the Person to Be Notified
1. This Court respectfully requests that the depositions commence on a date as soon
as practicable and in all events prior to May 1, 2019, at the offices of:
Andy McGregor
RPC
Tower Bridge House
St. Katharine’s Way
London
EIW1AA
United Kingdom
In scheduling the depositions, counsel for Plaintiff will work with the Deponents in an
effort to accommodate their schedules and minimize any inconvenience.
2. This Court respectfully requests the following persons be notified of the time and
place for the execution of the Request:
Andy McGregor
RPC
Tower Bridge House
St. Katharine’s Way
London
EIW1AA
United Kingdom
Telephone: + 44 20 3060 6188
Facsimile: +44 20 3060 7188
Arthur J. Shartsis
Charles R. Rice
Larisa A. Meisenheimer
Kajsa M. Minor
Suzanne S. Orza
SHARTSIS FRIESE LLP
One Maritime Plaza, 18th Floor
San Francisco, California, 94111
United States of America
Telephone: (415) 421-6500
Facsimile: (415) 421-2922
Patrick D, Robbins
Mikael Abye
SHEARMAN & STERLING LLP
535 Mission Street, 25th Floor
San Francisco, California, 94105
United States of America
Telephone: (415) 616-1100
Xavier Becerra
Attorney General of California
Frederick W. Acker
Supervising Deputy Attorney General
Marcie K. Farano
Deputy Attorney General
455 Golden Gate Avenue, Suite 11000
San Francisco, California, 94102
United States of America
Telephone: (415) 510-3449
Facsimile: (415) 703-5480
James P. Rouhandeh
Antonio J. Perez-Marques
Jessica L. Turner
Sheila R. Adams
Matthew Cormack
DAVIS POLK & WARDWELL LLP
450 Lexington Avenue
New York, New York 10017
United States of America
Telephone: (212) 450-4000
Facsimile: (212) 701-5800
Neal A. Potischman
Laura K. Pedersen
DAVIS POLK & WARDWELL LLP
1600 El Camino Real
Menlo Park, California 94025
United States of America
Telephone: (415) 752-2000
16
Case No. GCG-16-
551238
LETTER OF REQUESTA 94111-3598
SHARTSIS FRIESE LLP
SAN FRANCISC!
Facsimile: (415) 616-1199 Facsimile: (415) 752-2111
D. Request for Attendance or Participation of Judicial Personnel of the
Requesting Authority at the Execution of the Letter Request
No attendance of judicial personnel is requested, except as may be required under the law
of the United Kingdom.
E. Expenses
Expenses incurred that are reimbursable under §2(5) of the UK Evidence Act will be
borne by the Plaintiff. Plaintiff's payment of any expenses is without prejudice to their making a
subsequent request to be reimbursed for these costs pursuant to the UK Evidence Act, Hague
Convention, or in the final order of this Court under applicable local rules.
DATED:
THE HONORABLE CURTIS E.A. KARNOW
CALIFORNIA SUPERIOR COURT JUDGE
17
Case No. GCG-16- LETTER OF REQUEST
551238SCHEDULE AaN Aw Bw N
KAMALA D. HARRIS
Attorney General of California
Martin GOYETTE (SBN 118344)
Senior Assistant Attorney General
FREDERICK W. ACKER (SBN 208109)
Supervising Deputy Attorney General
MArciE K. FARANO (SBN 177939)
SYLVIA KELLER (SBN 197612)
NATHANIEL SPENCER-MORkK (SBN 226886)
JOANNA ROSEN FORSTER (SBN 244943)
Jerry T. YEN (SBN 247988)
SUNEETA FERNANDES (SBN 257772)
Deputy Attorneys General
455 Golden Gate Avenue, Suite 11000
San Francisco, CA 94102-7004
Telephone: (415) 703-5513
Fax: (415) 703-1234
E-mail:Marcie,Farano@doj.ca.gov
Altorneys for the People of the State of California
ELECTRONICALLY
FILED
Superior Court of Caltfornia,
County of San Francisco
10/21/2016
Clerk of the Court
BY:EDWARD SANTOS
Deputy Clerk
SUPERIOR COURT OF THE STATE OF CALIFORNIA
COUNTY OF SAN FRANCISCO
PEOPLE OF THE STATE OF
CALIFORNIA,
Plaintiff,
%
MORGAN STANLEY & CO. LLC, f/k/a
MORGAN STANLEY & CO.
INCORPORATED; MORGAN STANLEY
MORTGAGE CAPITAL HOLDINGS LLC
f/k/a MORGAN STANLEY MORTGAGE
CAPITAL INC.; MORGAN STANLEY ABS
CAPITAL TINC.; MORGAN STANLEY
CAPITAL TINC.; SAXON FUNDING
MANAGEMENT LLC; SAXON ASSET
SECURITIES COMPANY; and DOES 1-
100,
Defendants.
Case No. CGC-16-551238
FIRST AMENDED COMPLAINT FOR
TREBLE DAMAGES, CIVIL PENALTIES
AND PERMANENT INJUNCTION FOR
VIOLATION OF THE CALIFORNIA
FALSE CLAIMS ACT, CORPORATE
SECURITIES LAW OF 1968, AND FALSE
ADVERTISING LAW
FIRST AMENDED COMPLAINT FOR TREBLE DAMAGES, CIVIL PENALTIES AND
PERMANENT INJUNCTION FOR VIOLATION OF THE CFCA, CSL AND FAL,Ce nN DH & YW YD we
Nb DP Be Be eR Be Be eB Be Be eB eB
Be S © HM IY AA RB YWwH KS
23
TABLE OF CONTENTS
Page
Introduction ...sssesssesessscrsesssstscssssesasesesssecsuseensaneecsssensscersssssuarssacecsuseeenssuteastsecerengusasensesanrsseneennsneese 1
General Background 1
The Parties......
1 Plaintiff, the People of the State of California
IL. Defendant:
Other Relevant Entities
Factual Allegations......
I. Types of Structured Finance Securities Involved in This Action .........0.0ccee 8
IL. The Morgan Stanley Defendants’ RMBS Fraud
A. Morgan Stanley Defendants’ RMBS Roles Generally....c.ceesesseseeeeeeene 8
B. Morgan Stanley’s RMBS Securitization Process,..c.scsecssessesrsereerseseseancerss LZ
1. Mortgage Loan Acquisition
2. Due Diligence.
Credit and Compliance Due Diligence
a.
b. Loan Tape Discrepancy Review
ef
Valuation Due Diligence.......
d. Morgan Stanley Knew Its Due
Was Inadequate
iligence Process
3. Securitization and Marketing.
a. Loan Level Risk Metrics in the Investor Tape and
Offering Documents.
(i) CLTV
(2) Delinquency
@) Loan Purpos
b. Morgan Stanley Knew It Was Sccuritizing Loans.
That Were Likely to Default ..
C. The MSAC 2007-NC4 Securitization
L Morgan Stanley’s Relationship with New Century
i
FIRST AMENDED COMPLAINT FOR TREBLE DAMAGES, CIVIL PENALTIES AND
PERMANENT INJUNCTION FOR VIOLATION OF THE CFCA, CSL AND FALeC eke NUN DH Bw Ne
RoR
Roe 3
26
27
TABLE OF CONTENTS
(continued)
2. Morgan Stanley’s Due Diligence Review Revealed
Problems with the tury Loans, Which Morgan
Stanley Ignored ..
3. Morgan Stanley Made Numerous Misrepresentations to
Investors about the Quality of the MSAC 2007-NC4 Loan
Collateral, and Those Misrepresentations Were Material to
PERS’s Decision to Invest
4, Morgan Stanley Knowingly Concealed the Existence of
Simultancous Second Liens and Understated the Number of
High-CLTV Loans in the MSAC 2007-NC4 Collateral Pool....... 35
5. Morgan Stanley Knowingly Understated the Number of
High-LT'V Loans in the MSAC 2007-NC4 Collateral Pool.......... 36
6. Morgan Stanley Understated the Number of Cash-out
Refinances in the MSAC 2007-NC4 Collateral Pool... 37
7, Morgan Stanley Understated the Number of Non-Owner-
Occupied Properties in the MSAC 2007-NC4 Collateral
POO seesescsssveneess 7 sersetemeeemeaneseeeeens BO
8. Morgan Stanley Understated the Delinquency Ri Rate of the
MSAC 2007-NC4 Collateral Pool ... “ peoseneee
9. Morgarm-Stantey*s Misrepri
Dangerous Loans...
10. MorgarrStantey*s Misrepresentations Were Material to
PERS’ s-BeeisientePurchase MSAC 2007-NC4...
D. Similar Misrepresentattomsin Other Securitizations ..
entations Concealed the Most
1. Misrepresentationsn the SAST 2007-2 Securitization 41
2. Misrepresentations-in the SAST 2007-3 Securitization
3. Misrepresentations in the MSM 2007-6XS Securitization ......... 44
4. Misrepresentations in the MSM 2006-15XS Securitization..........46
TIL. The Cheyne SIV
A. SIVS Generally
B. Morgan Stanley’s Role in the Cheyne SIV
1. The Cheyne SIV's Inflated Ratings .......
2. Morgan Stanley Convinced Rating Agencies to Incorporate
Flawed Modeling Assumptions That Would Ensure
Artificially High Ratings
ii
FIRST AMENDED COMPLAINT FOR TREBLE DAMAGES, CIVIL PENALTIES AND
PERMANENT INJUNCTION FOR VIOLATION OF THE CFCA, CSL AND FAL.Nv
RoW
TABLE OF CONTENTS
(continued)
Page
a. Morgan Stanley’s Model Failed to Apply Adequate
Discounts in Order to Protect Senior Note Holders..........55
b, Morgan Stanley’s Models Used Faulty and
Inadequate Data. 57
c. Morgan Stanley’s Capital Matrix Proposal
Underestimated Risk
3. Morgan Stanley Convinced the Rating or to Ignore
Cheyne’s Lack of Expericnee -
4, Morgan Stanley Convinced the Rating Agencies to Allow
the Cheyne SIV to Hold More Risky Assets...
5. Morgan Stanley Knew the Cheyne SIV Held Risky Assets,
and Profited from It
6. Morgan Stanley Marketed the
Other Investors
The Cheyne SIV Collapses
Morgan Stanley’s Offering and Marketing Materials were Material
to Decisions by PERS and Other Investors to Purchase Cheyne SIV
Notes
62
Statutes of Limitations ......
First Cause of Action ...
Second Cause of Acti
Third Cause of Action...
Fourth Cause of Action
Fifth Cause of Action
Sixth Cause of Action
Seventh Cause of Act
Prayer for Relief,..........
ion
TOM -cnseonennsersaregecersenssesscsnsnentnntitepsqunqemurentanenaressesiehsvassoanshuesistaateqeqesnenaupinesedhte 74
iii
FIRST AMENDED COMPLAINT FOR TREBLE DAMAGES, CIVIL PENALTIES AND
PERMANENT INJUNCTION FOR VIOLATION OF THE CFCA, CSL AND FALThe People of the State of California, by and through Kamala D. Harris, Attorney General
of the State of Caliteria-based on information and belief, allege as follows for their First
Amended-Complaint for Treble Damages, Civil Penalties, and Permanent Injunction for Violation
of the California False Claims Act, Corporate Securities Law of 1968 and False Advertising Law:
INTRODUCTION
1. As set forth herein, defendants were major participants in the events leading up to the
2007-2008 financial crisis, including, of relevance to this action, creating, assembling and
peekeginetisky structured finance securities.
2. BetencantsMorgan Stanley & Co. LLC, Morgan Stanley Mortgage Capital Holdings
Lb€spworgan Stanley ABS Capital I Inc., Morgan Stanley Capital I Inc., Saxon Funding
Menagement LLC and Saxon Asset Securities Company (collectively “the Morgan Stanley
Defendants” or “Morgan Stanley”) knew the risks of the securities at issue in this complaint, yet
consciously chose to ignore red flags and conceal hazards from potential and actual purchasers of
the securities. In some instances, the Morgan Stanley Defendants misrepresented key warning
factors to buyers of the securities. In other instances, the Morgan Stanley Defendants encouraged
rating agencies to give the securities stronger ratings that failed to acknowledge the risks the
Morgan Stanley Defendants knew the securities posed for purchasers.
3. Relying on the Morgan Stanley Defendants’ misrepresentations and emissiers,
California investors, including the California Public Employees’ Retirement System (“PERS”)
and the California State Teachers’ Retirement System (“STRS"), purchased structured finance
securities stevetured; arranged, underwritten or sold by Morgan Stanley and its affiliates.
Cobtemie Hvesters, including PERS and STRS, suffered massive losses as a result of the conduct
by the Morgan Stanley Defendants alleged herein.
GENERAL BACKGROUND
4. “Structured finance” refers to the process of securitizing the cash flow from an asset
or pool of assets, typically consisting of loans or other debt instruments. A structured finance
security is the financial product that results from this securitization. The most significant types of
structured finance securities for purposes of this action are Residential Mortgage Backed
1
FIRST AMENDED COMPLAINT FOR TREBLE DAMAGES, CIVIL PENALTIES AND
PERMANENT INJUNCTION FOR VIOLATION OF THE CFCA, CSL AND FALcoo em NY DH BR BY BO
YN Bw MB YN NKR YB BR ee ewe Be Oe Re He
oD AD A RB YB NF DSO wD YR H RF We
Securities (“RMBS”) and notes issued by Structured Investment Vehicles (“SIVs”), described
more fully herein.
5, The Morgan Stanley corporation is a global financial services firm and financial
holding company. The Morgan Stanley corporation and its subsidiaries and affiliates, including
the Morgan StanleyDefendants named herein, provide products and services to a large and
diversified group of tlents and customers, including corporations, governments, financial
institutions and individuals. On its website, the company boasted, “[s]ince Morgan Stanley was
founded in New York City in 1935, it has evolved into one of the world’s foremost financial
institutions.” It stated, “. . .we offer the finest in financial thinking, products and execution to
individual investors, companies, institutions and government agencies.” Morgan Stanley’s
business units include its Tastitutional Services division, which conducts investment banking and
sales, trading, and financing activities. As set forth herein, Morgan Stanley and its subsidiaries
and affiliates, including the Morgan Stanley Defendants named herein, among other things, acted
as sponsors and underwriters of RMBS; provided warehouse lending (i.e., short-term financing
used to acquire—or “warehouse”—assets prior to issuance of a RMBS) to subprime and other
mortgage originators; and traded, made markets in, and structured debt securities and derivatives
involving mortgage-related securities. According to drafts of a December 2005 business plan,
Morgan Stanley sought to become “the dominant global residential mortgage franchise on Wall
Street in [its] target markets (Alt-A, Alt-B, subprime).”
6. Trom 2000 through 2007. the Morgan Stanley Defendants were active participants in
the RMBS market. The Morgan Stanley Defendants sponsored, underwrote, and brokered
hundreds of RMBS during that period, including the RMBS purchased by PERS and STRS listed
in Appendix A, incorporated herein by reference.
7. Looking for opportunities to bring in more revenue from stHetured Raanee seeutities:
the Morgan Stanley Defendants entered the SIV market in 2004. SIVs were designed as special
purpose entities to hold long-term asset backed securities (including, for example, RMBS) and
issue short-term debt instruments. Because short-term instruments typically have a lower interest
rate than long-term securities, a SIV could profit from the interest rate spread while providing
2
FIRST AMENDED COMPLAINT FOR TREBLE DAMAGES, CIVIL PENALTIES AND
PERMANENT INJUNCTION FOR VIOLATION OF THE CFCA, CSL AND FAL,| investors with a more liquid short-term instrument. Defendant Morgan Stanley & Co, LLC. as
-arrangertead dealer, and structurer, helped Cheyne Capital Management Ltd. (“Cheyne”) issue
SIV notes through Cheyne Finance PLC and its wholly-owned subsidiaries Cheyne Finance LLC
and Cheyne Capital Notes LLC (“the Cheyne SIV”). PERS bought millions of dollars’ worth of
Cheyne SIV notes, as described herein.
THE PARTIES
1, PLAINTIFF, THE PEOPLE OF THE STATE OF CALIFORNIA
8. Attorney General Kamala D. Harris is the chief law officer of the State of California
(“State”). She brings this action on behalf of Plaintiff, the People of the State of California.
IL DEFENDANTS
9. Defendant Morgan Stanley & Co. LLC, f/k/a Morgan Stanley & Co. Incorporated
(“Morgan Stanley & Co.), is a limited liability company organized under the laws of the State of
Delaware, with its principal place of business in the State of New York, and doing business in the
State of California. Morgan Stanley & Co. is successor in interest to Morgan Stanley & Co.
Incorporated. Morgan Stanley & Co. is a wholly-owned subsidiary of the Morgan Stanley
corporation. Morgan Stanley & Co. is a Secutities and Exchange Commission (“SEC”) registered
broker-dealer and a member of the Financial Industry Regulatory Authority, Inc. (“FINRA”) and
other self-regulatory organizations. During the time period at issue, Morgan Stanley & Co. was
also registered with the SEC as an investment advisor firm. Morgan Stanley & Co. is registered
as a broker-dealer with the State of California pursuant to the California Corporate Securities
Law. Defendant Morgan Stanley & Co, was an underwriter for all of the RMBS listed in
Appendix A except for the SAST 2004-2 RMBS. In addition, the ELAT 2007-2, MSHLC 2007-1,
MSM 2006-15XS8, MSM 2007-6XS, MSAC 2007-NC4, SAST 2007-2, SAST 2007-3, and SEMT
2007-3 RMBS listed in Appendix A were purchased by PERS and STRS through licensed
individual brokers who were, at the time of the purchases, employed by and registered with
Morgan Stanley & Co, Defendant Morgan Stanley & Co. was also arranger and placement agent
for the Cheyne SIV described herein.
Wi
3
FIRST AMENDED COMPLAINT FOR TREBLE DAMAGES, CIVIL PENALTIES AND
PERMANENT INJUNCTION FOR VIOLATION OF THE CFCA, CSL AND FAL10. Defendant Morgan Stanley Mortgage Cap#e Heltings LLC-H/k/a Morgan Stanley
Mortgage Capital Inc., is a New York limited liability company, with its principal place of
business in the State of New York, and doing business in the State of California. Morgan Stanley
Mortgage Capital Holdings LLC is an affiliate of Morgan Stanley ABS Capital I Inc. and, during
the relevant period, was a direct wholly-owned subsidiary of Morgan Stanley & Co. All
managers of Morgan Stanley Mortgage Capital Holdings-LLC were employees of Morgan
Stanley & Co. Most, if not all of, the execu