Expert Witness Profiler

Tag: loans

  • Experts’ Opinions Interpreting the PPP Regulations Were Excluded

    Experts’ Opinions Interpreting the PPP Regulations Were Excluded

    As the COVID-19 pandemic took hold in early 2020, Congress established the Paycheck Protection Program (PPP). Several businesses applied for and received PPP loan approval from Prestamos CDFI, LLC (Prestamos). However, due to individual bank-related issues, the loan funds were returned to Prestamos, leaving the businesses without the promised financial assistance. Consequently, these businesses initiated a class action lawsuit against Prestamos, alleging breach of contract. They contend that Prestamos failed to fulfill its funding obligations, falsely recorded the loans as disbursed, held them liable for repayment, and hindered their ability to secure alternative funding.

    Plaintiffs moved for class certification on September 6, 2024. They believe that class certification is appropriate because liability for each Plaintiff rises and falls with the same contract and PPP regulations.

    Prestamos filed a motion to exclude the expert reports of William Briggs, William Manger, and Steven Feinstein. According to Prestamos, none of the expert reports satisfy Daubert because they improperly offered legal conclusions. And even if the experts can make such conclusions, Prestamos argued that Briggs and Manger are not qualified and that Feinstein did not use an accepted methodology. Plaintiffs opposed excluding the three reports. 

    Business Administration Expert Witnesses 

    William Briggs operates a consulting firm based in Austin, Texas. From November 2017 to January 2021, he served in multiple roles at the United States Small Business Administration (SBA). Prior to his appointment at the United States Small Business Administration, he was employed in multiple positions in and out of public service advising clients, companies, and officials.

    Get the full story on challenges to William Briggs’ expert opinions and testimony with an in-depth Challenge Study. 

    William Manger served in the United States Small Business Administration (the “SBA”) for a total of almost eight years, from 2005 to 2009 and again from 2017 to January 2021. Most recently, he was Chief of Staff of the SBA from March 2020 to January 2021, during which he oversaw and led the SBA’s implementation of the Paycheck Protection Program (the “PPP”). In that role, he was responsible for promulgating PPP-specific rules and guidance, implementing PPP-specific processes at the SBA, and communicating with lenders, trade associations, government agencies, and members of Congress.

    Want to know more about the challenges William Manger has faced? Get the full details with our Challenge Study report. 

    Economics Expert Witness

    Steven Feinstein is Associate Professor of Finance at Babson College, and the founder and president of Crowninshield Financial Research, Inc., a financial economics consulting firm.

    He holds a Ph.D. in Economics from Yale University, a Master of Philosophy degree in Economics from Yale University, a Master of Arts degree in Economics from Yale University, and a Bachelor of Arts degree in Economics from Pomona College. He also holds the Chartered Financial Analyst (“CFA”) designation, granted by the CFA Institute.

    Discover more cases with Steven Feinstein as an expert witness by ordering his comprehensive Expert Witness Profile report

    Discussion by the Court

    In 2023, the Northern District of Texas decided Greathouse v. Capital Plus Financial, LLC, 2023 WL 5746927 (N.D. Tex. Sept. 6, 2023). That case is virtually identical to this one. In both cases, borrowers brought a class action suit against a private lender alleging that the lender failed to fund their approved PPP loans in breach of the standard contracts.

    In both cases, Plaintiffs alleged similar harms—responsibility to repay unfunded loans and inability to get loans from other lenders. Plaintiffs also had the same counsel and experts in both these cases. Both cases consisted of two motions—one to exclude the expert reports and another to certify the proposed classes. And, in both cases, the result will be the same: the expert reports will only be considered for their background opinions on the PPP and the proposed classes will not be certified because of the factual differences between Plaintiffs’ loan processes.

    Prestamos likely objects most strongly to the three experts offering improper legal opinions that aim to differentiate this case from Greathouse and interpret PPP regulations.

    Analysis

    The Court excluded the opinions explaining the differences between this case and Greathouse. The experts’ opinions interpreting the PPP regulations were also be excluded because they provided legal conclusions on whether Prestamos complied with its regulatory duties under the PPP. 

    Beyond distinguishing this case from Greathouse and interpreting the PPP regulations, the Court noted that all three experts gave background information on the CARES Act, the PPP, and the relevant regulations.

    Moreover, both Briggs and Manger have extensive experience serving in multiple roles in the SBA and Feinstein has significant knowledge of financial markets, investments, and relevant regulations.

    Because Briggs, Manger, and Feinstein are qualified and their background opinions are reliable and fit with the main issue in the case, the opinions satisfy Daubert.

    Held

    The Court granted in part and denied in part Prestamos’s motion to exclude the expert reports of William Briggs, William Manger, and Steven Feinstein while the Plaintiffs’ motion for class certification was denied.

    Key Takeaway:

    The common question in this case asks whether Plaintiffs’ PPP loans should ever have been canceled. To answer this question, the Court needs to understand the PPP and the procedure of the loan process. The experts’ background opinions supply some of this knowledge by laying out basic information about the relevant statute and regulations. 

    Case Details:

    Case Caption: Marshall v. Prestamos Cdfi, LLC Chicanos Por LA CaUSA, Inc.
    Docket Number: 5:21cv4337
    Court Name: United States District Court, Pennsylvania Eastern
    Order Date: April 29, 2025
  • Court Accepts the Mortgage Expert’s Opinion on the OPERS’ Primary Fraud Theory

    Court Accepts the Mortgage Expert’s Opinion on the OPERS’ Primary Fraud Theory

    Defendant Federal Home Loan Mortgage Corporation (“Freddie Mac”) offered Dr. Chudozie Okongwu, a mortgage market expert, to discuss the mortgage and subprime markets and the credit crisis between August 1, 2006, and November 20, 2007 (the “Relevant Period”). The lawsuit concerns whether “Freddie Mac concealed its overextension in the nontraditional mortgage market—generally composed of instruments known as subprime mortgages or low credit and high risk instruments—and its materially deficient underwriting, risk management and fraud detection practices through misstatements and omissions to investors.”

    According to Ohio Public Employees Retirement System  (“OPERS”), the central issue is not the definition of subprime or the performance of Freddie Mac’s loans relative to others, but rather if Freddie Mac’s public disclosures about its portfolio, underwriting, credit risk, and capital position were misleading and fraudulent. OPERS alleged Freddie Mac was undertaking more risk than it revealed. Freddie Mac retained Okongwu to conduct economic and financial analysis regarding some of OPERS’ claims. His analysis aimed to refute OPERS’ primary-fraud theory, asserting that Freddie Mac’s Caution Loans did not carry “subprime risk” because “[t]he Caution Loans have different characteristics to the CoreLogic Subprime Loans and perform differently than the CoreLogic Subprime Loans. In particular, the serious delinquency rates of the Caution Loans were substantially lower than those of the CoreLogic Subprime Loans at both Q3 2007 and Q3 2008.”

    OPERS contended that Okongwu’s report, testimony, and purported opinions are inadmissible as expert evidence due to being irrelevant, unreliable, unhelpful, confusing, unfairly prejudicial, and failing to meet the necessary threshold.

    Mortgage Expert Witness

    Dr. Chudozie Okongwu is a Ph.D. economist and consultant with extensive experience in finance, economics, and valuation. He possesses expertise in the mortgage market, the evolution of the credit crisis during the Relevant Period, residential-mortgage products, and mortgage-backed securities (including their sensitivity to housing price and interest rate changes). He also has significant experience using econometric models for analyzing residential-mortgage products.

    Get the full story on challenges to Chudozie Okongwu’s expert opinions and testimony with an in-depth Challenge Study. 

    Discussion by the Court

    Okongwu’s Proposed Testimony on the First Two Topics in his Amended Expert Report about Background Facts of the Mortgage and Subprime Markets is Irrelevant and Unreliable

    OPERS contended that all of Okongwu’s planned testimony concerning the background of the mortgage and subprime markets in the initial two sections of his revised expert report was irrelevant and unreliable. However, the Court disagreed with OPERS’ central argument that Okongwu’s opinions on these first two topics were not suitable for expert testimony.

    The Court reasoned that this proposed testimony covers specialized areas related to events in the mortgage market during the financial crisis and OPERS’ claim that Freddie Mac did not disclose its involvement with subprime loans—details that are beyond the common understanding of an average juror. Furthermore, the Court found Okongwu’s testimony on these first two topics in his amended expert report to be reliable. His methodology was thoroughly explained, and he clearly stated the foundation for all his provided definitions. The Court also noted Okongwu’s expertise in residential-mortgage products and mortgage-backed securities (including their sensitivity to changes in housing prices and interest rates), along with his substantial experience in using econometric models to analyze residential-mortgage products.

    Okongwu’s Prepared-Solely-for-Litigation Proposed Testimony about what Freddie Mac Disclosed Between 2005 and 2008 is Irrelevant and Unreliable

    Okongwu’s analysis focuses on critical parts of Freddie Mac’s extensive disclosures to investors, which cautioned about credit risks leading up to the financial crisis. OPERS argued that Okongwu’s proposed testimony about Freddie Mac’s disclosures between 2005 and 2008—prepared solely for this litigation—is irrelevant, unreliable, and that he lacks the necessary qualifications to testify on this subject. However, the Court recognized that what OPERS described as a simple factual account is actually an independent analysis of substantial materials covering specialized topics. The Court noted that Okongwu has extensively published on the subjects relevant to his proposed testimony in this case. Consequently, the Court found Okongwu’s testimony on Freddie Mac’s extensive disclosures to be reliable, as he reviewed and analyzed these disclosures regarding credit risks within the context of the prevailing market conditions, drawing upon his expertise.

    Okongwu’s Proposed Testimony about Freddie Mac’s Caution Loans being Different from the CoreLogic Subprime Loans is Irrelevant and Unreliable

    Okongwu performed an empirical study employing specific analytical methods to compare millions of these two loan categories, ultimately concluding that OPERS’ “primary fraud” theory is flawed. His analysis indicated that Caution Loans and subprime loans were not the same, with Freddie Mac’s Caution Loans demonstrating significantly better performance. The Court ruled that Okongwu’s analysis comparing caution loans and subprime loans is admissible, relevant, and will aid the fact-finder in comprehending and deciding on OPERS’ primary-fraud theory.

    The Court also found Okongwu’s testimony analyzing Freddie Mac Caution Loans and comparing them to the CoreLogic Subprime Loans to be reliable. However, OPERS argues that Okongwu’s comparison was incomplete, as he did not examine “the totality of Freddie Mac’s subprime-like loans” because the Caution Loans he analyzed originated from the “Loan Prospector automated underwriting system . . ., which applied higher underwriting standards than other channels from which Freddie Mac purchased loans. . . .” The Court determined that Okongwu’s proposed testimony regarding the difference between Freddie Mac’s Caution Loans and the CoreLogic Subprime Loans is a suitable topic for examination through direct and cross-examination, but does not warrant excluding the proposed testimony.

    Held

    The Court denied OPERS’ motion to strike and exclude the testimony of Dr. Chudozie Okongwu.

    Key Takeaway:

    The Court operates with wide latitude in deciding how to test an expert’s reliability, and thus has considerable leeway in deciding how to go about determining whether particular expert testimony is reliable.

    Case Details:

    Case Caption: Ohio Public Employees Retirement System V. Federal Home Loan Mortgage Corp., Et Al.
    Docket Number: 4:08cv160
    Court Name: United States District Court for the Northern District of Ohio, Eastern Division
    Order Date: March 21, 2025
  • Banking Expert Witness Not Allowed to Opine on the Materiality of Documents Submitted

    Banking Expert Witness Not Allowed to Opine on the Materiality of Documents Submitted

    A grand jury indicted Rasta Khalid Walid (“Walid”) on 17 counts, including failure to pay legal child support, bank fraud, false statements to a bank, engaging in monetary transactions, and false, fictitious, and fraudulent claims.

    Walid filed a notice disclosing the proposed testimony of two expert witnesses he intended to use at trial:

    1. Conor Newman, a certified public accountant, offers testimony regarding issues of Walid’s use of general accounting principles and Walid’s understanding of the tax code and regulations.
    2. Steve Bryant, a banking and paycheck protection program (“PPP”) expert, offers testimony regarding issues related to PPP loans.

    In response, the Government filed a motion in limine to exclude Walid’s expert testimony of Conor Newman and Steve Bryant.

    Banking Expert Witness

    Accounting Expert Witness

    Conor Newman is a Certified Public Accountant with Boyle, Deveny, and Meyer, a Montana accounting firm that provides consulting and tax services across the United States. He is responsible for services in the areas of compiled financial statements, tax consulting and compliance, and accounting system software consulting.

    Get the full story on challenges to Conor Newman’s expert opinions and testimony with an in-depth Challenge Study.  

    Banking Expert Witness

    Steve Bryant is the Vice President of Commercial Lending at First Security Bank of Missoula, a division of Glacier Bank.

    Bryant has been in commercial lending since 2008. In 2020, Bryant played a critical role in reviewing and approving or declining Paycheck Protection Program (PPP) loans.

    Want to know more about the challenges Steve Bryant has faced? Get the full details with our Challenge Study report.  

    Discussion by the Court

    The Court ruled in part from the bench on the scope of expert testimony. It allowed the parties to reserve further objections during the trial. The Court sought to clarify the scope of expert testimony at trial.

    Conor Newman

    Walid sought to elicit testimony from Newman regarding issues of Walid’s use of general accounting principles, the complexity of the tax code, and the procedural requirements for submissions like Walid’s. Newman made several findings in his report that addressed Walid’s mental state during the preparation of the report. Some of Walid’s charges requires the government to prove that Walid knew the claim was false, fictitious, or fraudulent. Newman sought to testify that Walid “held the incorrect belief” that Walid thought he had properly filed the forms. However, the Court held that Newman’s testimony with regard to Walid’s knowledge of whether he knew what he was filing was potentially fraudulent properly would be limited.

    The Court held that Newman could testify to what Walid’s filings looked like compared to others in similar circumstances for the jury to make inferences about Walid’s state of mind at the time he filed his taxes. The Court held that Walid may also testify to his own experience about what he knew at the time the claims were filed but may not use Newman to convey to the jury, Walid’s state of mind at the time he prepared his taxes.

    Steve Bryant

    Walid also sought to elicit testimony from Bryant regarding issues related to Paycheck Protection Program (“PPP”) loans. Specifically, Bryant sought to testify about documents relevant to approving or denying PPP loans and offer an opinion on the submissions for PPP loans from Walid to certain banks.

    The Government contended that Bryant should not be allowed to testify to the materiality of what Walid submitted. Count 15 in the Indictment, requires Walid to have made statements that were “material” and “had a natural tendency to influence or were capable of influencing” a financial institution. The parties agree that this testimony properly may be limited through objection at trial and instructing the jury on the legal definition of “material”.

    The Court allowed Walid’s expert to testify based on their expert opinion on a review of Walid’s submissions to the Internal Revenue Service and financial institutions, but Walid’s proposed experts shall not testify to Walid’s willfulness or Walid’s personal knowledge of filing fraudulent, fictitious, or false claims. The Court reserves ruling on any other expert testimony until trial.

    Held

    The Court granted in part the Government’s motion in limine as follows:

    1. Walid’s expert Newman shall not testify to whether Walid knew the claim Walid filed was false, fictitious or fraudulent.

    2. Walid’s experts shall not testify to an ultimate issue of the crime charged.

    3. Walid’s expert Bryant shall not testify to Walid’s intent to defraud any financial institution.

    4. Walid’s expert Bryant shall not testify to the materiality of documents submitted by Walid to any financial institution.

    Key Takeaway:

    The Court allowed Newman to testify about Walid’s use of general accounting principles and Walid’s understanding of the tax code and regulations but prohibited him from opining on Walid’s mental state or willfulness in filing fraudulent claims. Similarly, the Court allowed Bryant to discuss documents and processes related to Paycheck Protection Program (PPP) loans but barred him from testifying about Walid’s intent to defraud financial institutions or the materiality of submitted documents. These limitations preserved the jury’s role in determining Walid’s intent his state of mind.

    Case Details:

    Case caption: United States v. Walid
    Docket Number: 6:23cr12
    Court: United States District Court for the District of Montana, Helena Division
    Dated: January 17, 2025