-247-
limited the hypothetical buyer to a dealer seeking to earn a
spread. See e.g., Dellinger v. Commissioner, 32 T.C. at 1185.
Third, Smithson’s testimony was sometimes evasive or
nonresponsive when it came to responding to questions that were
damaging to petitioner’s case. For example, whereas Smithson
continued to endorse FNBC’s methodology as to its credit
adjustment, he knew quite well that FNBC’s use of an 80-percent
confidence level was wrong. Smithson even acknowledged on
cross-examination that he had written a book that advised using
the mean confidence level and that, in 1993, he would have
advised FNBC to use a confidence level other than the 80-percent
confidence level. Fourth, Smithson’s testimony indicates his
belief the a single bid/ask spread applies to a given swap. Such
a belief contrasts sharply with our finding that the bid/ask
spread usually differed depending on whether a dealer entered
into a swap with another dealer, on the one hand, or with an end
user, on the other hand. Such a belief also ignores the fact
that a dealer sometimes intended to lose money on a specific swap
so as to risk-manage its books (and thus maximize its overall
profit) or to develop its clientele.
As to respondent’s two remaining experts, O’Brien and
Carney, we found each of these individuals to be helpful as to
her or his area of expertise. We found likewise as to Sziklay,
the other Court-appointed expert. We did not find the testimony
Page: Previous 237 238 239 240 241 242 243 244 245 246 247 248 249 250 251 252 253 254 255 256 NextLast modified: May 25, 2011