Litigation, Regulation and Arbitration Expert Practice

The litigation, regulation and arbitration expert practice provides advisory services including internal investigations, expert analysis, as well as deposition and testimony on loss causation, industry customs and practices, generally accepted market conventions, economic damages related to market structure, financial institutions governance, and complex issues related to finance, economics and market standards and practices within securities, derivatives, reinsurance, and commodities markets, in addition to market structure across a diverse range of non-financial industry sectors.

Compass Lexecon Announces Mordecai Reaffiliation

Compass Lexecon Announces “Renowned Economist, Dr. David K.A. Mordecai, Reaffiliates With Compass Lexecon”

Compass Lexecon has announced that Dr. David K.A. Mordecai is reaffiliating with Compass Lexecon. In the email announcement circulated today, Daniel R. Fischel, Chairman and President at Compass Lexecon commented, “We are thrilled to welcome David back to the firm. With nearly four decades of direct industry experience across a range of commercial sectors and capital markets, Dr. Mordecai will add tremendous value to our firm.”

Dr. Mordecai added, “I am elated to be affiliating with Compass Lexecon again, re-engaging with valued colleagues and further contributing my experience and technical capabilities to best-in-class teams of experts at the forefront of industrial economics, finance, and engineering disciplines.”

Dr. Mordecai is President and co-founder of Risk Economics, a New York City based advisory firm, which specializes in the application of computational economics to the proprietary development and scalable implementation of robust modeling and data analytic frameworks for valuation, strategic and systemic risk analysis, and dynamic asset-liability management.

A Visiting Scholar at Courant Institute of Mathematical Sciences NYU and Adjunct Professor at NYU, Dr. Mordecai advises research activities at RiskEcon® Lab for Decision Metrics @ Courant Institute since its founding in 2011. Since November 2013, Dr. Mordecai has served as the Scientist-in-Residence at FinTech Innovation Lab sponsored by the Partnership Fund for NYC. In 2014, he was appointed the Course Director to lead the NYU Center for Data Science Capstone graduate applied research program in its inaugural year. He has also been associated with the NYU interdisciplinary collaboration that researches the relationships between social media and political behavior. Dr. Mordecai serves on the Board of Governors for the New York Academy of Sciences, and is the founding Editor-in-Chief of the Journal of Risk Finance a quarterly peer-reviewed research periodical (ca. 1999), addressing topics in financial risk intermediation.

In 2020, he was formally commissioned by the Office of the Attorney General for the State of Colorado for the SB-217 pattern and practice investigation of the Aurora Police Department (APD) and related entities, as technical advisor pro bono, in order to conduct extensive statistical and empirical analyses of data retrieved from the Aurora Police Department related to police interactions, arrests and uses of force. In his respective capacity as a Visiting Scholar at Courant Institute, working closely with a Compass Lexecon team and Risk Economics® co-founder and fellow Courant Visiting Scholar Samantha Kappagoda, Dr. Mordecai participated in the methodological aspects of the analysis as research in the public interest being conducted at RiskEcon® Lab for Decision Metrics @ Courant.

Dr. Mordecai actively conducts applied research at the intersection of risk engineering and industrial economics, as a former senior executive at global banks and diversified financial institutions with nearly forty years of direct industry experience across a range of commercial sectors and capital markets. His expertise includes forensic financial and economic analysis, financial engineering, the valuation of fixed income securities and structured products, including over-the-counter derivatives, complex insurance and reinsurance liabilities, M&A successor liability, operational risk, reliability and warranty-indemnity analysis, and asset-liability and risk management models and practices. He has advised and provided technical oversight for pattern and practice investigations, internal regulatory investigations, insurance investigations for state regulators, as well as stress-testing for global financial institutions. Having testified extensively at deposition, trial, arbitration, and international arbitration, he has been admitted as an expert in federal, state and county courts, and cited favorably in court decisions.

Dr. Mordecai earned a PhD with concentrations in Econometrics/Mathematical Statistics and Economics/Industrial Organization from the University of Chicago, and an MBA in Finance from the NYU Stern School of Business.

For more information, see the Compass Lexecon announcement.

Compass Lexecon Announces Mordecai Reaffiliation

David K.A. Mordecai Reaffiliates with Compass Lexecon

David K.A. Mordecai Reaffiliates with Compass Lexecon

Risk Economics®, Inc. is pleased to announce that Dr. David K.A. Mordecai is reaffiliating with Compass Lexecon. Dr. Mordecai is President and co-founder of Risk Economics®, a New York City based advisory firm, which specializes in the application of computational economics to the proprietary development and scalable implementation of robust modeling and data analytic frameworks for valuation, strategic and systemic risk analysis, and dynamic asset-liability management.

A Visiting Scholar at Courant Institute of Mathematical Sciences NYU and Adjunct Professor at NYU, he advises research activities at RiskEcon® Lab for Decision Metrics @ Courant Institute since its founding in 2011. Since November 2013, Dr. Mordecai has served as the Scientist-in-Residence at FinTech Innovation Lab sponsored by the Partnership Fund for NYC. In 2014, he was appointed the Course Director to lead the NYU Center for Data Science Capstone graduate applied research program in its inaugural year. He has also been associated with the NYU interdisciplinary collaboration that researches the relationships between social media and political behavior. Dr. Mordecai serves on the Board of Governors for the New York Academy of Sciences, and is the founding Editor-in-Chief of the Journal of Risk Finance a quarterly peer-reviewed research periodical (ca. 1999), addressing topics in financial risk intermediation.

In 2020, he was formally commissioned by the Office of the Attorney General for the State of Colorado for the SB-217 pattern and practice investigation of the Aurora Police Department (APD) and related entities, as technical advisor pro bono, in order to conduct extensive statistical and empirical analyses of data retrieved from the Aurora Police Department related to police interactions, arrests and uses of force. In his respective capacity as a Visiting Scholar at Courant Institute, working closely with a Compass Lexecon team and Risk Economics® co-founder and fellow Courant Visiting Scholar Samantha Kappagoda, Dr. Mordecai participated in the methodological aspects of the analysis as research in the public interest being conducted at RiskEcon® Lab for Decision Metrics @ Courant.

Dr. Mordecai actively conducts applied research at the intersection of risk engineering and industrial economics, as a former senior executive at global banks and diversified financial institutions with nearly forty years of direct industry experience across a range of commercial sectors and capital markets. His expertise includes forensic financial and economic analysis, financial engineering, the valuation of fixed income securities and structured products, including over-the-counter derivatives, complex insurance and reinsurance liabilities, M&A successor liability, operational risk, reliability and warranty-indemnity analysis, and asset-liability and risk management models and practices. He has advised and provided technical oversight for pattern and practice investigations, internal regulatory investigations, insurance investigations for state regulators, as well as stress-testing for global financial institutions. Having testified extensively at deposition, trial, arbitration, and international arbitration, he has been admitted as an expert in federal, state and county courts, and cited favorably in court decisions.

David K.A. Mordecai Reaffiliates with Compass Lexecon

Dr. Mordecai earned a PhD with concentrations in Econometrics/Mathematical Statistics and Economics/Industrial Organization from the University of Chicago, and an MBA in Finance from the NYU Stern School of Business.

California Superior Court Relies upon Testimony of Dr. Mordecai in Denying Motion for Summary Judgment in Millennium Tower Related Successor Liability Matter

California Superior Court Relies upon Testimony of Dr. Mordecai in Denying Motion for Summary Judgment in Millennium Tower Related Successor Liability Matter

Judge Kiesselbach of the California Superior Court extensively cited and relied upon testimony by Dr. Mordecai in denying motion for summary judgment filed by a  leading engineering firm in the successor liability dispute filed in the matter Lehman v Transbay Joint Powers Authority (TJPA). TJPA was joined by Millennium Tower Association (MTA) in opposing the summary judgment motion filed by the engineering related to successor liability from its 2010 acquisition via an asset purchase agreement (APA) of the geotechnical engineering firm for the Millennium Tower.  

Dr. Mordecai filed a declaration and offered testimony at deposition, as an expert in forensic financial and economic analysis, with support from Samantha Kappagoda of Risk Economics®. In overruling objections to Dr. Mordecai’s testimony, the decision by Judge Kiesselbach acknowledges Dr. Mordecai to be a “qualified economist[] with relevant experience” who employs “factors and methodology economists employ to arrive at their conclusions.” The Judge further relied upon opinions of Dr. Mordecai in determining there to be “multiple triable issues of material fact as to whether the APA was truly an “asset only” purchase.” Among Dr. Mordecai’s primary opinions cited in the discussion and analysis of the decision by Judge Kiesselbach pertained to the actual amount, adequacy and terms of cash equivalent consideration paid by and available to creditors at the time of sale, relative to the fair market value of the acquired assets.

Dr. Mordecai and Samantha Kappagoda worked extensively with Michael S. McCauley of Jones Day who, with Matthew A. Dekovich of Norton Rose Fulbright, represented TJPA.

California Superior Court Relies upon Testimony of Dr. Mordecai in Denying Motion for Summary Judgment in Millennium Tower Related Successor Liability Matter

The U.S. Department of Justice Prevails as Court Rejects Starr’s $40 Billion Appeal

The U.S. Department of Justice Prevails as Court Rejects Starr’s $40 Billion Appeal

One of AIG’s largest shareholders, Starr International Company, Inc. (“Starr”) sued the United States, alleging that the Government’s acquisition of AIG equity in connection with its bailout of the firm and subsequent actions relating to a reverse stock split were unlawful. The U.S. Court of Federal Claims (“Claims Court”) held a trial on Starr’s direct claims, for which Starr sought over $40 billion in relief on behalf of itself and other shareholders. The Claims Court ultimately held that the Government’s acquisition of AIG equity constituted an illegal exaction in violation of Section 13(3) of the Federal Reserve Act, 12 U.S.C. Section 343, but declined to grant relief for either that illegal exaction or for Starr’s reverse stock split claims holding that Starr suffered no damages.

In its conclusion, the Court of Appeals acknowledged and affirmed the opinions and factual basis for those opinions as expressed in the testimony of Dr. Mordecai, which addressed market evidence of no economic loss, and hence zero damages to AIG shareholders from the transaction, as well as opinions which addressed matters of generally-accepted industry custom and practice involving corporate restructuring transactions, and the corresponding economic valuation of credit and equity.

Starr appealed the denial of direct relief for its claims. The Government cross-appealed, arguing that Starr lacked standing to pursue its equity acquisition claims directly or, alternatively, that the Government’s acquisition of equity did not constitute an illegal exaction.

On May 9, 2017, a Federal Circuit panel concluded that Starr and the shareholders represented by Starr lacked standing to pursue the equity acquisition claims directly, as those claims belonged exclusively to AIG. The panel therefore vacated the Claims Court’s judgment that the Government committed an illegal exaction and remanded with instructions to dismiss the equity acquisition claims that seek direct relief. The panel also concluded that the Claims Court did not err in denying relief for Starr’s reverse stock split claims, and affirmed the Claims Court’s judgment as to the denial of direct relief for the reverse stock split claims.

As the damages expert for the Government, cited prominently by Federal Court of Claims Judge Thomas C. Wheeler in his decision, Dr. Mordecai had previously summarized his testimony at trial according to four primary points:

  • First, he provided an opinion on the initial rescue, asserting that it “did not result in an economic loss to AIG’s shareholders.”
  • Second, Dr. Mordecai addressed the need for the Government to obtain an equity component in AIG. Dr. Mordecai opined that “[w]ithout the equity component, the Revolving Credit Facility (“RCF”) [would] not [have] provide[d] a return to adequately compensate for the significant risk of lending to AIG.”
  • In his third opinion, he critiqued as economically irrelevant and flawed, Dr. Cragg’s attempts to compare the AIG rescue to other government interventions.
  • Finally, he critiqued Dr. Kothari’s estimate of the alleged harm suffered by both the Credit Agreement Class and the Reverse Stock Split Class as being fundamentally flawed. According to Dr. Mordecai, Dr. Kothari’s estimates of the alleged harm suffered by both classes was flawed because share dilution does not equal economic loss, Dr. Kothari ignored that AIG’s stock price actually increased as a result of the initial rescue, and Dr. Kothari did not estimate a value for the losses to shareholders.

Among his other opinions, Dr. Mordecai had testified at trial that AIG’s shareholders did not suffer economic loss from the Government’s rescue and that Plaintiffs’ expert’s damage calculations were fundamentally flawed because AIG’s stock price actually increased as a result of the rescue. He had also opined that, based on a study of large bankruptcies, it was unlikely that AIG’s shareholders would recover anything if the company had filed for bankruptcy protection.

The U.S. Department of Justice Prevails as Court Rejects Starr’s $40 Billion Appeal

Testimony by Compass Lexecon affiliated corporate governance expert Robert Daines rebutting plaintiff allegations of effective corporate control acknowledged and closely tracked facts and opinions as testified by Dr. Mordecai regarding no economic loss and hence no damages from share dilution.

Dr. Mordecai worked closely with a team of attorneys at the United States Department of Justice including Kenneth Dintzer, Scott Austin, Brian Mizoguchi, John Roberson, Mariana Acevedo, Renee Gerber and Vince Phillips; John Sturc of the U.S. Treasury Department; Kit Wheatley of the Federal Reserve Board of Governors; and outside counsel including John Kiernan and Nick Tompkins of Debevoise & Plimpton LLP and Lynn Earl Busath, Jonathan Martin, Matt Kelly and Alan Tabak of Davis Polk & Wardwell LLP.

Dr. Mordecai was principally supported by a team in the Compass Lexecon New York office led by Michael Kwak, which included Tristram Worth, Mihir Gokhale, Nick Fasano and Chris Fiore, in addition to other teams in the Chicago and Pasadena offices of Compass Lexecon.

MF Global

Bankruptcy Court Approves Settlement of MF Global Litigation Trust Claims Against Corzine et al.

David K.A. Mordecai, President of Risk Economics, filed two expert reports on behalf of the Litigation Trustee of the MF Global Litigation Trust in MF Global Holdings Ltd. Investment Litigation, Joseph Deangelis (Tavakoli) v. Corzine et al, In the United States District Court Southern District of New York 12 MD 2338 (VM), 11 Civ. 7886 (VM), under Judge Victor Marrero.

The opinions provided in Dr. Mordecai’s reports, filed in August and September 2015, focused primarily on causation (as well as foreseeability), within the context of the accumulation of Euro sovereign repo-to-maturity exposure in excess of the firm’s creditworthiness and capital base. He subsequently testified at deposition in this matter during November 2015, and defendants initiated settlement negotiations subsequent to Dr. Mordecai’s deposition.

On September 16, 2013, the Litigation Trustee had directed the filing of an amended complaint in the Adversary Proceeding (Adv. Docket No. 22), which ultimately consolidated this matter with the Multi-District Litigation (the “MDL“) under the caption DeAngelis v. Corzine, Docket No. 11-CV-07866 in the United States District Court for the Southern District of New York (MDL Docket No. 513).

The Litigation Trustee entered into a certain Stipulation and Agreement of Settlement dated as of July 6, 2016 (the “MDL Settlement Agreement“), which resolved the Litigation Trust Claims. The Litigation Trustee, with MF Global Holdings Ltd. (“MFGH“), as Plan Administrator, moved on July 20, 2016 for approval of the MDL Settlement Agreement (Docket No. 2271), and the Bankruptcy Court approved the MDL Settlement Agreement on August 10, 2016 (Docket No. 2282).

On August 24, 2016, the Litigation Trustee and the Plan Administrator moved for approval of the agreement allocating the consideration received by the Litigation Trust and the Plan Administrator under the MDL Settlement Agreement (Docket No. 2291). The Bankruptcy Court approved the allocation agreement on December 1, 2016 (Docket No. 2322).

Dr. Mordecai was primarily supported by Samantha Kappagoda from Risk Economics, and a team of economists. He worked with a team of attorneys led by Bruce Bennett, and which included Michael McCauley, Michael Schneidereit and Alexandra Fries from Jones Day.

MF Global

David K.A. Mordecai is President and Co-Founder of Risk Economics, a New York City based advisory firm. Risk Economics specializes in the application of computational economics to the proprietary development and scalable implementation of robust modeling and data analytic frameworks for valuation, strategic and systemic risk analysis, and dynamic asset-liability management.

As lead for the Risk Economics® litigation, regulation and arbitration expert advisory practice, David Mordecai serves as an expert on loss causation and economic damages related to market structure, financial institutions governance, and complex issues related to finance, economics and market standards and practices within securities, derivatives, reinsurance, and commodities markets, as well as market structure within a broad range of non-financial industry sectors. His expertise includes industrial and financial engineering, the valuation of fixed income securities and structured products, including over-the-counter derivatives (in particular fixed income and credit derivatives), complex insurance and reinsurance liabilities, as well as asset liability and risk management models and practices. He has advised and provided technical oversight for internal regulatory investigations, as well as stress-testing for global financial institutions. Having testified extensively at deposition, trial, arbitration and international arbitration, he has been admitted as an expert in federal, state and county courts, and cited favorably in court decisions.

MF Global

MF Global Holdings Ltd. as Plan Administrator v PricewaterhouseCoopers LLP Proceeds to Trial

David K.A. Mordecai, President of Risk Economics, filed two expert reports on behalf of the MF Global Plan Administrator in MF Global Holdings Ltd. as Plan Administrator v PricewaterhouseCoopers LLP. This claim seeks in excess of $2 billion in damages for the professional negligence of accounting firm PricewaterhouseCooper (PwC) as MF Global’s auditor. The opinions provided in Dr. Mordecai’s reports, filed in August and November 2015, focused primarily on causation.

On August 5, 2016, U.S. District Court Judge Victor Marrero upheld the claims brought by MF Global Holdings against PwC. Judge Marrero’s decision, which cited Dr. Mordecai’s opinions extensively, denied PwC’s summary judgment motion, and clears the way for the case to proceed to trial.

Dr. Mordecai is being primarily supported by Samantha Kappagoda from Risk Economics. He is working with a team of attorneys led by Daniel J. Fetterman, which includes Michael C. Harwood, Trevor J. Welch, Christian T. Becker, David J. Mark, and Frank DiCarlo.

MF Global

David K.A. Mordecai is President and Co-Founder of Risk Economics, a New York City based advisory firm. Risk Economics specializes in the application of computational economics to the proprietary development and scalable implementation of robust modeling and data analytic frameworks for valuation, strategic and systemic risk analysis, and dynamic asset-liability management.

As lead for the Risk Economics® litigation, regulation and arbitration expert advisory practice, David Mordecai serves as an expert on loss causation and economic damages related to market structure, financial institutions governance, and complex issues related to finance, economics and market standards and practices within securities, derivatives, reinsurance, and commodities markets, as well as market structure within a broad range of non-financial industry sectors. His expertise includes industrial and financial engineering, the valuation of fixed income securities and structured products, including over-the-counter derivatives (in particular fixed income and credit derivatives), complex insurance and reinsurance liabilities, as well as asset liability and risk management models and practices. He has advised and provided technical oversight for internal regulatory investigations, as well as stress-testing for global financial institutions. Having testified extensively at deposition, trial, arbitration and international arbitration, he has been admitted as an expert in federal, state and county courts, and cited favorably in court decisions.