Judge Richard Leon of the U.S. District Court for the District of Columbia dismissed former U.S. Securities and Exchange Commission Chairman Harvey Pitt as an expert witness today, following Pitt’s decision a week ago to cut short his own deposition in a securities fraud class action against Fannie Mae.
According to Robert Stern of O’Melveny & Myers, one of the attorneys representing Fannie Mae, Leon criticized Pitt – who was not in the courtroom – saying it was inappropriate of him to walk out of the deposition.
Stern said Leon also had strong words for Stanley Chesley, the lead counsel for the plaintiffs; during a status hearing Wednesday, Chesley had told Leon that Pitt was out of town, but Stern said the defense presented evidence to the judge today showing that Pitt was in D.C. at the time. Chesley, of Cincinnati’s Waite, Schneider, Bayless & Chesley, was not in court, but Leon addressed Chesley’s co-counsel James Cummins, also of Waite, Schneider, Bayless & Chesley, about the issue, Stern said. Cummins could not immediately be reached for comment.
Fannie Mae and its auditor, KPMG, were sued in 2005 by the attorney general of Ohio on behalf of that state’s pension plans after the federal agency regulating Fannie Mae found that the mortgage giant had overstated profits and failed to comply with other generally accepted accounting principles.
Pitt, who served as SEC chairman from 2001 and 2003 and is now CEO of Washington, D.C.-based consulting firm Kalorama Partners, was testifying during a Feb. 24 deposition as an expert witness for the plaintiffs on SEC oversight practices and on a 2004 SEC order that Fannie Mae restate its finances.
Pitt told attorneys he could no longer answer questions after acknowledging that he was unaware of testimony by another former SEC official about the case. The defense moved to either dismiss Pitt as an expert, arguing it would be unfair to allow a redo after the defense committed time and resources to analyzing his opinion; or else order him to continue with the deposition and bar him from changing his original report.
“This was the right outcome and the right result given the circumstances,” Stern said in a telephone interview Friday.