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Securities Law Expert on Matt Bevin's TARP Letter: 'There's an Argument That He Actually Violated the Law'

7:02 PM, Feb 13, 2014 • By JOHN MCCORMACK
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Politico reported on Tuesday that Mitch McConnell’s Tea Party challenger, investor Matt Bevin, supported the 2008 Troubled Asset Relief Program, contrary to Bevin's present claims. The letter, signed by Bevin and the investment firm's vice president, said TARP was a "positive" development and included the line: “don’t call it a bailout."

A Bevin spokeswoman said the signature was a mere "formality" required by law and that the letter did not express Bevin's opinion, but the opinion of Daniel Bandi, chief investment officer and vice president of the fund. Bevin himself pushed back against the accusation of hypocrisy on Glenn Beck's radio program

“It would have been inappropriate and probably illegal, frankly, for me to have changed the investing commentary written by the subadviser [for] the fund who was responsible for that,” Bevin told Beck. 

But speaking to THE WEEKLY STANDARD by phone on Wednesday, Bevin could not identify a specific provision of the law that would have made it illegal for him to change the wording of the letter he signed. "You're better off asking a '40 act attorney--there are people who are literally attorneys who focus on nothing but the 1940 securities act because it is so convoluted," Bevin told me. 

According to one securities law expert, Professor Robert T. Miller of the University of Iowa, some of Bevin's claims about securities laws are untrue. 

"The general standard for the whole truth-telling required in the federal securities laws is that you may not make a material misstatement of fact and you may not omit a fact," Miller told THE WEEKLY STANDARD Thursday evening. "The question of whether TARP was a good thing or a bad thing would be treated as an issue of opinion, not a technical fact. But the truth-telling standard still applies."

"Under a United States Supreme Court case called Virginia Bankshares, the standard at the very least is that if you express an opinion, you better actually hold that opinion. If you express an opinion you do not hold, you violate the securities laws," Miller continued. "So if Bevin signed an opinion--signed a document containing an opinion that he did not actually hold, there's an argument that he actually violated the law, not that he was following the law."

Miller added that "whether someone else drafted the document doesn't really matter. He signed the certificate of the letter. So that argument is completely wrong.... If he didn't agree with the opinions expressed in the letter, he could have either not signed it, or he could have wrote down changes before he signed it."

When I spoke to Bevin on Wednesday, he said that the letter's description of TARP as a "positive" development was not an endorsement of the program and was "true enough in the grand scheme of things": 

"If you actually read those letters in their entirety, even he is not endorsing this, he is explaining, when he talks about positive developments, this is a backward looking discussion about why the markets went up 18 percent.... The reason the market went up 18 percent was largely because of government intervention, this, that, and the other thing--and then explains why indeed the market had rallied. Those things are true enough in the grand scheme of things. They're also his opinion, and they're his opinion alone."

But Bevin has run ads against McConnell denouncing TARP as a bailout, and the letter he signed explicitly states: "don't call it a bailout." How does he explain that line? "Knowing Dan [Bandi, the fund's vice president], that's him being tongue-in-cheek," Bevin said. "He's a very ironic kind of guy."

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