Four days ago, MFWire provided an update on the federal fraud trial between the SEC and the Reserve Primary Fund. But 75-year-old Reserve chairman Bruce Bent and his son are blaming the U.S. government, reports Kirsten Grind for the Wall Street Journal.

For the full story on the lawsuit so far and the death of the Primary Fund, see MFWire's timeline.

Bent and his son, president and vice chairman Bruce Bent II, told the judge for the October trial that the jury should be allowed to hear about the government's refusal to bail out Lehman, as well as criticism of the SEC's record in other crisis-related cases and potentially awkward emails, Grind reports.

"Given the current climate of public perception concerning the financial services industry ('Wall Street'), it would be all but impossible for defendants to get a fair trial without introducing appropriate contextual evidence showing defendants' place in the larger events of the September 2008 financial crisis," lawyers for the Bents argued in a court filing last week.

The collapse of Lehman Brothers helped America's very first money-market fund "break the buck" when investors staged a run on the fund — which contained $785 million in Lehman Bros. debt. — and sank it. Though investors got 99 cents on the dollar of what was left after the blowup, they had to wait as long as 15 months to get that recovery. The SEC alleges that Bent Sr.; his son, president/vice chairman Bruce Bent II; and Reserve Management Company and their distributor, Reserve Partners falsely claimed they would prop up the fund's $1 NAV even though they secretly harbored doubts.

Two attempts to settle the suit failed, according to people familiar with the discussions, Grind reports.

Meanwhile, the two Bents have denied the allegations, and also declined to comment on the case to the WSJ.

However, one of their lawyers, John Dellaportas, wrote in a statement, "Our clients, faced with a once-in-a-lifetime, world-wide financial crisis, provided truthful, timely and accurate information to the fund's regulators and stakeholders."

In a brief interview with the WSJ, the older Bent said it is "very, very amusing that no one from the SEC, no one from Congress, no one from the Fed ... has called to ask me about anything" related to the proposed money-fund rules being weighed by the SEC.

Grind further reports that after the fund's blowup, the two Bents renamed their company Double Rock Corp. and have been operating a patent-licensing business, which was sold last year to Reich & Tang. She added that the younger Bent spends some of his time working on a livestock farm outside of New York. 

Edited by: Irene Park


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