A matter of Independence
Divisions within the Bank of Montreal had a long standing disagreement about whether or not the bi-monthly Bid/Ask summary reports they collected should be 'independent' of Bid/Ask quotes from their own traders. BMO Market Risk wanted 'independent' quotes and BMO Commodities Group did not.
Kevin Cassidy's company Optionable collected Bid/Ask quotes anonymously and hence they could not (and did not) promise BMO Market Risk that the reports they sent were 'independent' of the BMO's own traders. This didn't sit well with the Bank's Market Risk Division, and there were a fair amount of discussions and meetings (both internally and with Optionable)
BMO Bet Huge in Exclusive Tiny Markets
When BMO's star trader, David Lee, who had made hundreds of millions of dollars in profit for BMO in exclusive, exotic and risky markets (where angels fear to trade) started losing money, industry analysts began criticizing BMO's risky trading. BMO needed someone to blame. With the help of their public relations/
BMO's scheme worked. BMO's scheme put Optionable out of business and placed Kevin Cassidy under Federal Criminal Indictment. Cassidy struck a deal with Federal Prosecutors and agreed to plead guilty to failing to put a disclosure statement into the reports he sent to BMO's Market Risk division alerting them to what they already knew, that the reports were not 'independent' of the Bank's own traders.
So, was Cassidy ever really "In for a Penny"?
If you subscribe to "in for a penny, in for a pound' justice, where 1% of the guilt gets you 100% of the blame, here's the question I want you to ask yourself. Was Kevin Cassidy ever 'in for a penny'? All we need to debunk BMO's Penny theory is show that BMO knew the reports Cassidy sent were not collected Independently of the Bank's own traders. Well - Cassidy provided exactly this proof under oath during his deposition. Cassidy provided the names and dates of BMO Officers to whom he specifically explained the non-independent nature of his reports.
So there it is: Optionable's business was destroyed, Cassidy is going to jail, and yet BMO's claim that Cassidy was somehow 'in for a penny' doesn't hold up.
Post Script: Kevin Cassidy is scheduled to begin serving a 30 month sentence in a New York State Federal prison on October 19, 2012.
Standard disclaimer: I am an investor in Kevin Cassidy's former company Optionable. I do not offer advice regarding buying or selling any security.