EPSTEIN
page 3 / 689 . OCR, unverified
182
a.
Third Quarter 2007 Press Release
182
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b.
Third Quarter 2007 Conference Call
184
c.
Third Quarter 2007 Form 10-Q
185
5.
November 14, 2007 Write Downs
189
6.
Fourth Quarter and Fiscal Year 2007
190
a.
Press Release
190
b.
Fourth Quarter 2007 Conference Call
192
7.
Fiscal Year 2007 Form 10-K
193
a.
The Company's Financial Results
194
b.
The Company's Risk Management Practices
195
c.
The Company's Exposure to the Market Risk
197
d.
Compliance With Banking Regulations
198
e.
The Company's Internal Controls
199
f.
Deloitte's Certification
200
C.
Additional False and Misleading Statements in Calendar Year 2008
200
IX.
LOSS CAUSATION
204
X.
CLASS ACTION ALLEGATIONS
206
XI.
PRESUMPTION OF RELIANCE
209
XII.
INAPPLICABILITY OF STATUTORY SAFE HARBOR
211
CLAIMS FOR RELIEF
211
COUNT I For Violation of Section 10(b) of the Exchange Act and Rule 10b-5
Promulgated Thereunder (Against All Defendants)
211
COUNT II For Violation of Section 20(a) of the Exchange Act (Against the Officer
Defendants)
214
COUNT III For Violations of Section 20A of the Exchange Act (Against Defendants
Cayne, Schwartz, Spector, Molinaro, Greenberg, and Farber)
215
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PRAYER FOR RELIEF
116
DEMAND FOR JURY TRIAL
218
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GLOSSARY OF DEFINED TERMS
2008 OIG Report: A report entitled "SEC's Oversight of Bear Steams and Related Entities: The
Consolidated Supervised Entity Program."
AAG: AICPA Industry Audit and Accounting Guides.
AAM: AICPA's annual Audit and Accounting Manual.
ABS: Asset-backed securities.
ABS CDOs: Asset-backed collateralized debt obligations-related investments.
ABX: An index that tracked synthesized subprime mortgage performance, refinancing
opportunities, and housing price data into efficient market valuation of subprime RMBS
tranches.
Advisers Act: U.S. Investment Advisers Act of 1940.
AICPA: American Institute of Certified Public Accountants.
Alix: Michael J. Alix, who served as the Company's Chief Risk Officer from February 3, 2006
until the Company's demise in 2008.
Alt-A Mortgages: Mortgages made to borrowers who are considered less than prime because
they are unable to document their income and assets, have high debt-to-income ratios, and/or
have troubled credit histories.
APB: Accounting Principles Board Opinions.
ARM: Audit Risk Alerts.
ARB: AICPA Accounting Research Bulletins.
AS: Auditing Standard.
AU
Sections of the Statements of Auditing Standards, which are codified by the American
Institute of Certified Public Accountants.
Basel II: Recommendations on banking laws and regulations issued in June 2004 by the Basel
Committee on Banking Supervision, an institution created by the central bank governors of the
Group of Ten Nations.
Basel II Guidelines: Basel II.
Basel Committee: Basel Committee on Banking Supervision, an international banking group that
advises national regulators, such as the SEC.
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B&D AAG: AAG that was applicable to Brokers and Dealers in Securities.
Bear Stearns: The Bear Steams Companies Inc., Bear, Steams & Co. Inc., and Bear Steams
Asset Management.
Bear Stearns Defendants: The Bear Steams Companies Inc.; James E. Cayne; Alan D. Schwartz;
Warren Spector; Samuel Molinaro; Alan C. Greenberg; Michael Alix and Jeffrey Farber.
BEARRES: Bear Steams Residential Mortgage Corporation.
Broker-Dealer Risk Assessment Program: A program requiring broker dealers that are part of a
holding company structure with at least $20 million in capital to file with the SEC certain
disaggregated information about their finances.
BSAM: Bear Stearns Asset Management, a wholly-owned subsidiary of The Bear Steams
Companies Inc.
CAP: Capital Accumulation Program.
Captive Originations: mortgages originated by BEARRES and ECC that were sent directly into
the securitization process at Bear Steams.
CAO: Center for Audit Quality.
Cayne: James E. Cayne, a director, Chairman of the Board and Chief Executive Officer of Bear
Stearns during the Class Period.
Cioffi: Ralph Cioffi, the Bear Steams trader who started and managed the High Grade Fund, a
Managing Director of BSAM and a Director of BSC.
CDOs: Collateralized debt obligations.
CDO Report: Report issued by an employee of BSAM, on April 19, 2007, showing that the
CDOs in the Funds were worth substantially less than previously thought.
CDO Squared: A CDO backed by other CDO notes.
CES: Closed end second lien loans.
CF Division: SEC Division of Corporation Finance, charged with ensuring that investors are
provided with material information in order to make informed investment decisions.