Wall Street fights back against expert witness in lawsuits

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LEADING WITNESS

Lawyers for investors often hire McCann, an economist with a doctorate from the University of California at Los Angeles, to testify as an expert witness about the value and risks of certain securities. McCann has testified against Wall Street about everything from the risks of equity indexed annuities to valuations of complex securities.

Securities industry lawyers have been particularly stymied by McCann, whose deep knowledge of the valuation and risks of securities has often been insurmountable.

The stakes are high. McCann's testimony has helped seal huge wins for investors, including a $54 million ruling against a Citigroup unit and a $15 million ruling against three former executives of Lehman Brothers Holdings.

Opposing lawyers often try to challenge an expert's qualifications. And until recently, securities industry lawyers had little to stand on when it came to attacking McCann's credentials or his credibility. But that changed in late September when a federal judge deemed McCann's testimony from a 2010 arbitration involving Memphis-based brokerage Morgan Keegan & Co to be "fraudulent."

The finding was based on a discrepancy in figures that he gave in two separate arbitration cases against the brokerage involving a group of money-losing bond funds that became the subject of state and federal regulatory actions. Morgan Keegan settled with the SEC for $200 million.

McCann, who heads Fairfax, Virginia-based Securities Litigation & Consulting Group Inc, does not deny revising his figures. But the discrepancy, which he says was "minor," would have done no good for Morgan Keegan.

McCann's revision came after he discovered Morgan Keegan priced more securities on its own than he had initially thought, instead of through an independent company. The change to his calculations would have bolstered arguments about the brokerage's liability to those investors, who relied solely on Morgan Keegan's word about the risks and value of the securities in question.

McCann said he informed Morgan Keegan of the revision during a different case prior to the hearing that led to that award. "This is not true," said Morgan Keegan spokesman Eric Bran in an email. Bran acknowledged that while McCann mentioned the miscalculation, he "did not go into any more detail."