Craig McCann had an unblemished record and reputation as a top expert witness, providing testimony that helped customers win millions of dollars from financial companies.  Broker-dealers tried their best to crack his "code of integrity," but without success. That is until September 2011, when McCann, a former SEC economist, was cited by a judge for giving fraudulent testimony - in a case involving Morgan Keegan that was fraught with serious implications.  Federal Judge Lynn Hughes of Houston, TX, invalidated the $9.2mn award, in part because of McCann's allegedly "fraudulent testimony" regarding the investors' claims against the firm. [See C-I coverage of the story posted in BTN - 11/18/11]. That judgment created a more level playing field for the securities industry, which has, in turn, prompted lawyers for the brokerage firms to mount an even more relentless attack on McCann's reputation and credibility.  This new tact has helped to seriously damage McCann's reputation, lessening his effectiveness as a key witness in arbitration forums and in federal court. McCann Fighting Back. McCann faces the biggest fight of his life - he must dig his way out of a deep ditch to not only restore his reputation, but to quiet down opposing counsel. The fallout from the 9/30/11 ruling was swift.  The next business day McCann, who was testifying for plaintiffs in a class action suit against a unit of insurance company Allianz SE, had to tell their lawyer about the ruling.  Allianz lawyers used the opinion to challenge his integrity, McCann said. While Allianz's efforts were unsuccessful, the impact on McCann's business - Fairfax, VA-based Securities Litigation & Consulting Group - was noticeable, as revenues dropped by half.  He had to lay off 3 employees and leave vacant 4 other positions, turning his usual 22-person firm into a company of 15 people. Some laid-off employees had young children, a fact that torments him , he said. After launching the company in 2000, the 51-year-old father of four steadily built it up relying upon a reputation of being "scrupulously honest," he said.  "I certainly have not been in a position to have given an attorney on the other side any plausible reason to question my honesty or integrity," he said. Apparently, that fact is not lost on arbitration panels or judges handling investor cases against brokerages. Despite the onslaught of efforts to discredit McCann since the federal finding, McCann has begun to see subtle victories.

In a recent FINRA arbitration, the panel denied a request by BofA's Merrill Lynch unit to disqualify McCann after the firm's lawyers raised concerns about the federal judge's ruling.  In its written ruling, the panel uncharacteristically mentioned its denial and McCann's name.

McCann's testimony, in a face-off against a Harvard Law professor, led to a loss for Merrill, which was required to fully reimburse the investor $1.4 million. While FINRA rules prevent statements in arbitration awards from influencing other arb panels, this one may at least prompt some lawyers to question the value of the federal court opinion in their ongoing efforts to discredit McCann.

Nevertheless, the judge's September ruling remains on the record - as McCann's legal staff continues to slog through federal court in pursuit of a new decision that would undo the findings made by Judge Hughes.  So far, it's been difficult because the ruling was made in a case in which McCann was merely a witness.  McCann's initial attempt at an emergency appeal was denied because he was not officially a party to the case between Morgan Keegan and the investors.  He is awaiting another ruling from a district court that, if granted, would allow him to challenge the opinion. Through it all, McCann is still standing, though he's been "seriously harmed by what's happened."  It's hard to keep a good man down - especially one who's on a personal mission.  And judging by recent recent appearances, McCann is still a difficult expert witness for opposing parties. For further details, go to:  [Reuters, 2/14/12].