SEC Drops Case Against Manager Who Packaged ‘Squared’ CDO
The U.S. Securities and Exchange Commission dropped its lawsuit against former GSC Capital Corp. executive Edward Steffelin over his work on a JPMorgan Chase & Co. (JPM) collateralized debt obligation that later defaulted.
The SEC, which sued Steffelin in June 2011, agreed to dismiss its claims against him with prejudice, or without the option of filing them again in the future, according to papers in federal court in Manhattan. The papers, dated Nov. 8, were filed publicly today.
In a two-page agreement approved by U.S. District Judge Miriam Goldman Cedarbaum, both sides said the decision to drop the suit was “not intended to and shall not be deemed an admission by either party of the merit or lack of merit” of either side’s claims in the case. The dismissal was reported earlier by the New York Times.
The SEC claimed in its suit that Steffelin allowed the distribution of marketing materials that failed to inform investors that the hedge fund Magnetar Capital LLC helped pick assets underlying the 2007 CDO. Magnetar stood to profit if the assets defaulted, according to the SEC. Steffelin denied all wrongdoing.
“Our duty in all cases is to achieve a just and appropriate outcome,” SEC spokesman John Nester said in an e- mailed statement today. “Our decision here appropriately reflects information that came to light as the litigation progressed.”
JPMorgan agreed last year to pay $153.6 million to settle related SEC claims.
The case is SEC v. Steffelin, 11-cv-4204, U.S. District Court, Southern District of New York (Manhattan).
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