Jury shrinks in St. Petersburg vs. Wells Fargo trial
TAMPA -- The challenge of trying a case as complicated as City of St. Petersburg vs. Wells Fargo Bank was even more evident Wednesday.
A juror, a cook from New Port Richey, was excused for the rest of the trial in U.S. District Court after he became ill with the flu. That leaves seven jurors who must decide whether St. Petersburg can reclaim $11 million it lost by investing in Lehman Brothers corporate bonds before the Wall Street firm went bankrupt in September 2008. The city is suing its former financial advisor, Wachovia Global Securities for the loss, saying it failed to properly notify officials as Lehman Brothers was downgraded that summer. Wachovia was bought by Wells Fargo, which is arguing that the city is responsible for the losses.
It's a complex trial that has already tested the jury's ability to follow along. Dense with concepts like "tender price warranting liquidation", "collateral management strategies"and "fixed rebate rate", jury members have struggled to stay awake throughout opening statements and testimony. They spent much of Wednesday watching video testimony of former Wachovia officials explain what happened to the city's investment. (In civil cases, lawyers can't compel those who live more than 100 miles away to appear, so they video record those witnesses.)
A key point of the case will rest on whether the jury believes the city wasn't told about Lehman's declining financial health, and whether it should have been. There is no documentation that city officials were warned about Lehman Bros. getting downgraded before it went bankrupt. On Wednesday mornign, jurors watched testimony of Kevin O'Connor, the Chief Investment Officer for Clear Loan Securities (formerly Wachovia Global Securities).
In the video, recorded on April 7, 2011, O'Connor told Robert Marcus, a Charlotte attorney hired by St. Petersburg, that it was general practice for Wachovia to notify a client if an investment was downgraded. Asked if he had determined if St. Petersburg had been notified of the downgrade, O'Connor replied: "I didn't have time to do it and didn't think it was necessary."
But he conceded that any alert on an investment that had been downgraded was "important information."
Lynn Thompson, an investment analyst with Wachovia, doesn't have any records of any e-mails she sent the city warning of the downgrade. She has told city attorneys in pre-trial discovery that she may have called them to tell them, but wasn't sure she had.
It's an important case for both sides. In tough economic times, $11 million would be welcome for St. Petersburg, which is facing a deficit next year of about $15 million. If Wells Fargo loses, that could set a precedent in other cases. Attorneys for other former Wachovia clients are among the members of the audience watching the case.
Yet the testimony is incredibly dry. After one video deposition ended and city attorneys prepared another to be shown to jurors, U.S. Magistrate Judge Thomas McCoun joked, "I understand we have another titillating deposition." At another time, McCoun cut in to summarize the testimony, explaining why the city was showing it to them.
When McCoun told lawyers that one of the jurors was sick, he said the two sides could break for the day, tell him to stick it out, or go down to seven jurors.
Both sides agreed to go ahead without him. The city is spending $1.2 million on the case so far. Several more experts and witnesses have yet to testify.
"We'd be willing to excuse him," Marcus told McCoun. "This trial is long enough as it is."