ATTORNEY-CLIENT PRIVILEGED ATTORNEY WORK PRODUCT PREPARED IN ANTICIPATION OF LITIGATION
MEMORANDUM
TO: Victoria Chambers, Partner, Calderwood & Harkness LLP
FROM: Jasmine Thornton, Lead Associate; Liam Donahue, Working Associate
DATE: January 25, 2024
RE: Witness Preparation Memorandum — Naveen Chakravarti, SVP & Division Head, BridgeFin; Investigative Testimony Scheduled January 30, 2024
MATTER: Belmont Ridge Bank National Association — SEC Investigation, File No. HO-14287
ENGAGEMENT NO.: SC-MAT-2023-4172
CONFIDENTIALITY LEGEND: This memorandum is a privileged and confidential attorney work-product communication prepared by Calderwood & Harkness LLP in connection with its representation of Belmont Ridge Bank National Association. It is not to be disclosed to any person outside the attorney-client relationship without the express written consent of the Responsible Partner. This memorandum reflects the mental impressions, conclusions, opinions, and legal theories of the attorneys preparing it and is entitled to the heightened protection afforded opinion work product under Hickman v. Taylor, 329 U.S. 495 (1947), and its progeny.
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I. Purpose and Scope
This memorandum sets forth the preparation strategy for the investigative testimony of Naveen Chakravarti, Senior Vice President and Division Head of BridgeFin, the digital lending platform division of Belmont Ridge Bank National Association ("BRB" or the "Bank"), before the Staff of the Securities and Exchange Commission ("SEC"), Division of Enforcement. The memorandum is intended to provide the lead partner, Victoria Chambers, with a comprehensive roadmap for conducting three preparation sessions with Mr. Chakravarti in advance of his testimony, as well as a framework for managing the testimony itself on the day it is taken.
Mr. Chakravarti's investigative testimony is scheduled for January 30, 2024, commencing at 9:30 a.m. Eastern Time, at the SEC's headquarters offices located at 100 F Street NE, Washington, D.C. 20549, Room 3050. The testimony is to be taken pursuant to a testimony subpoena issued on December 5, 2023, under Formal Order of Investigation No. EN-2023-0947, which authorizes the Staff to examine certain accounting practices and public disclosures of Belmont Ridge Bank National Association. The Formal Order was entered by the Commission on September 14, 2023, following the Staff's preliminary inquiry, which commenced informally in approximately June 2023.
Based on the subpoena cover letter and prior correspondence between our firm and the Staff, the anticipated SEC Staff participants in the January 30 testimony session are as follows:
• Andrea Felton, Senior Staff Attorney, Division of Enforcement (lead questioner)
• Christopher Yuen, Staff Attorney, Division of Enforcement
• Diane Milosevic, Staff Accountant, Division of Enforcement
In addition, Gregory Bonham, Assistant Director of the Financial Fraud Unit within the Division of Enforcement, and Branch Chief Renata Moss may attend or observe all or portions of the testimony. Mr. Bonham's attendance, should it occur, would signal continued senior-level interest in this matter and should be noted for purposes of assessing the Staff's posture.
Counsel attending on behalf of BRB will be Victoria Chambers, Partner, and Jasmine Thornton, Lead Associate, of Calderwood & Harkness LLP. Liam Donahue will not attend the testimony itself but will be available by telephone throughout the day to provide real-time research support and document retrieval assistance as needed.
It is important to note the sequencing context for Mr. Chakravarti's testimony. This testimony follows the investigative testimony of Patricia Navarrete, Chief Financial Officer of BRB, which was taken on January 18, 2024. Senior Staff Attorney Felton conducted the Navarrete testimony, and our post-testimony debrief memorandum dated January 19, 2024 (prepared by Jasmine Thornton and attached hereto as Attachment 4) provides detailed insights into the Staff's lines of inquiry, areas of particular focus, and the tone and direction of the examination. The Staff will almost certainly build upon — and in some areas seek to probe or test — representations and testimony provided by Ms. Navarrete. We must ensure that Mr. Chakravarti's testimony is consistent with Ms. Navarrete's where both witnesses have overlapping knowledge, and we must prepare Mr. Chakravarti to address areas where the Staff may attempt to create daylight between the two witnesses.
Mr. Chakravarti's testimony will, in turn, precede the still-scheduled testimony of Raymond Hu, Chief Accounting Officer of BRB, currently set for February 14, 2024. Accordingly, Mr. Chakravarti's testimony will further define the factual landscape against which Mr. Hu's subsequent testimony must be prepared.
The memorandum is organized as follows: Section II provides background on the witness; Section III addresses Upjohn warning protocols; Section IV frames the core investigation issues relevant to this witness; Section V identifies anticipated Staff question areas in detail; Section VI catalogs key documents likely to be used as exhibits; Section VII sets forth recommended themes and messaging; Section VIII identifies potential problem areas and risk-mitigation strategies; Section IX covers testimony logistics and ground rules; Section X provides the preparation session schedule; and Section XI lists attachments referenced but not included herein.
II. Witness Background
A. Professional Role and Responsibilities
Naveen Chakravarti holds the title of Senior Vice President and Division Head, BridgeFin Division, at Belmont Ridge Bank National Association. He reports directly to Marcus R. Ellingham, Chief Executive Officer of BRB, with a dotted-line reporting relationship to Patricia Navarrete, Chief Financial Officer, and Annette Kowalski, Chief Risk Officer. This dual dotted-line reporting structure was established upon BridgeFin's operational launch in Q3 2020 and reflects the division's significance to both the Bank's financial performance and its enterprise risk profile.
Mr. Chakravarti oversees all operations of the BridgeFin digital lending platform, which BRB launched in the third quarter of 2020 as a strategic initiative to expand the Bank's consumer and small-business lending capabilities through technology-driven origination channels. BridgeFin was conceived as a direct-to-consumer and direct-to-small-business digital lending platform designed to compete with fintech lenders by leveraging BRB's balance-sheet strength and deposit-funding advantages while deploying a proprietary artificial intelligence-driven credit underwriting model.
Mr. Chakravarti's responsibilities encompass the following functional areas:
• Origination Strategy: Setting and executing the division's loan origination targets, channel strategy (direct digital, partnership referral, and embedded lending), pricing strategy, and marketing approach.
• Credit Underwriting Policy: Overseeing the development, deployment, and ongoing governance of BridgeFin's proprietary AI-driven underwriting model, including credit-policy parameters, risk-appetite thresholds, approval criteria, and exception processes.
• Loan Servicing: Directing all post-origination servicing activities, including payment processing, borrower communications, collections, loan modification decisions, and re-aging determinations. This is the area of greatest relevance to the SEC's investigation.
• Technology and AI Model Governance: Supervising the technology team responsible for maintaining the underwriting model, coordinating with BRB's enterprise technology function, and ensuring compliance with BRB's model risk management framework (which operates under the oversight of CRO Kowalski and the Board Risk Committee).
• Credit-Quality Reporting: Preparing and delivering periodic reports to senior management — including the CEO, CFO, CAO, and CRO — on BridgeFin's credit performance, delinquency trends, charge-off experience, and modification activity. Mr. Chakravarti's team also provides data inputs for Board and Audit Committee presentations on BridgeFin portfolio performance.
It is critical to note that BridgeFin is not a separate legal entity. It operates as an internal division of Belmont Ridge Bank National Association. BridgeFin loans appear on BRB's consolidated balance sheet, and BridgeFin's financial results are reported as part of BRB's consolidated financial statements. There is no separate BridgeFin board of directors, no separate BridgeFin financial statements filed with any regulatory body, and no separate BridgeFin regulatory charter. All regulatory oversight of BridgeFin — including OCC supervision and SEC reporting obligations — flows through BRB's enterprise-level regulatory framework.
Mr. Chakravarti joined BRB in March 2019, initially as SVP of Digital Strategy within the Consumer Banking Group. He was appointed to lead the BridgeFin initiative in January 2020 and was formally designated Division Head upon BridgeFin's launch in August 2020. Prior to joining BRB, Mr. Chakravarti served as Managing Director, Digital Lending, at Horizon Consumer Finance (a subsidiary of Horizon Financial Group) from 2015 to 2019, and held various positions in consumer credit risk management at Westvale Group from 2008 to 2015. He holds an MBA from the Wharton School of the University of Pennsylvania and a B.S. in Computer Science from the Georgia Institute of Technology.
Mr. Chakravarti's direct reports include approximately 12 senior managers who oversee teams totaling approximately 340 full-time employees across originations, servicing, technology, credit analytics, and operations. The credit analytics team — which is most relevant to this investigation — is led by Priya Dasgupta, Vice President, Credit Analytics, who reports directly to Mr. Chakravarti and who is responsible for producing the internal credit-quality dashboards and reports that are the subject of the Staff's inquiry.
B. BridgeFin Portfolio Overview
BridgeFin originates two primary loan products through its digital platform:
1. Unsecured Personal Loans: Consumer installment loans originated through BridgeFin's direct-to-consumer digital channel. The average loan size as of December 31, 2022 was approximately $18,400, with terms ranging from 24 to 60 months and annual percentage rates ranging from approximately 7.99% to 24.99% depending on borrower creditworthiness as determined by the AI underwriting model. Personal loans constituted approximately 62% of BridgeFin's outstanding portfolio as of year-end 2022.
2. Small-Business Microloans: Unsecured term loans originated to small businesses (generally defined as businesses with annual revenues below $5 million) through BridgeFin's digital business lending channel. The average loan size was approximately $42,000, with terms ranging from 12 to 48 months. Microloans constituted approximately 38% of BridgeFin's outstanding portfolio as of year-end 2022.
Both product types are originated through BridgeFin's proprietary AI-driven underwriting model, which incorporates traditional credit bureau data, alternative data sources (including cash-flow analysis from linked bank accounts, business financial data, and behavioral indicators), and machine-learning algorithms to generate credit-risk scores and approve or decline applications in near-real time.
Key portfolio metrics as reported in BRB's FY 2022 Form 10-K (filed February 28, 2023):
The rapid growth of the BridgeFin portfolio — from initial originations in Q3 2020 to $4.1 billion outstanding in just over two years — is a material fact that will frame much of the Staff's inquiry. The portfolio's relative size (10.7% of total BRB assets) makes it significant but not dominant within BRB's overall balance sheet. However, because BridgeFin loans are unsecured and because the portfolio is composed of relatively recent vintages with limited seasoning, the credit-risk profile of the portfolio is a matter of heightened focus for both the SEC Staff and BRB's prudential regulators.
C. Prior Interactions with Regulators / SEC
We need to confirm with Mr. Chakravarti during Session 1 whether he has ever previously testified before the SEC or any other federal or state regulatory body, including but not limited to the Commodity Futures Trading Commission, the Consumer Financial Protection Bureau, or any state banking or securities regulator. Based on our preliminary understanding, Mr. Chakravarti has not previously provided investigative or examination testimony to the SEC.
We should also confirm whether Mr. Chakravarti has participated in any formal or informal interviews with the Office of the Comptroller of the Currency ("OCC") in connection with the OCC's concurrent supervisory examination of BRB's BridgeFin operations. BRB's OCC examination team, led by Examiner-in-Charge Sandra M. Fitch, conducted a targeted review of BridgeFin's loan modification practices and CECL methodology during the 2023 supervisory cycle. Mr. Chakravarti may have participated in management meetings with OCC examiners during that review. We should ascertain the dates and scope of any such interactions and ensure that Mr. Chakravarti understands the bank-examination privilege considerations discussed in Section IX.B below.
It is important to confirm that Mr. Chakravarti has not been individually identified as a target or subject of the SEC's investigation. Based on all available information, including the Formal Order, the testimony subpoena, and our interactions with the Staff, BRB the entity is the respondent in this investigation. The Staff has not made any Wells notification to Mr. Chakravarti personally, nor has any such notification been received by BRB. However, given Mr. Chakravarti's central role in BridgeFin's operations, including the modification and re-aging practices at the heart of the investigation, we must remain alert to any indications that the Staff's posture may evolve.
III. Upjohn Warnings — Protocol and Reminder
Prior to any substantive preparation session with Mr. Chakravarti, counsel must deliver the standard Upjohn warning in accordance with the firm's Upjohn / Corporate Representation Advisory Memorandum (most recently updated November 2023). The warning must be delivered clearly, without equivocation, and in a manner that ensures the witness's full understanding. The following protocol must be observed:
Timing: The Upjohn warning must be delivered at the very beginning of Session 1, before any discussion of the substance of Mr. Chakravarti's anticipated testimony, the facts of the investigation, or the content of any documents. Victoria Chambers should deliver the warning personally, given her role as the partner responsible for the Bank's representation and her supervisory authority over the engagement.
Key Points to Convey: The following points must be communicated clearly and directly to Mr. Chakravarti:
1. Calderwood & Harkness LLP represents Belmont Ridge Bank National Association, the corporate entity. Calderwood & Harkness does not represent Naveen Chakravarti in his individual capacity. The firm's client is the Bank, acting through its authorized officers, Board of Directors, and General Counsel's office.
2. Communications between Mr. Chakravarti and Calderwood & Harkness during this preparation and during the testimony itself are protected by the attorney-client privilege. However, this privilege belongs to BRB, not to Mr. Chakravarti personally. Only BRB — acting through its authorized representatives — has the authority to assert or waive the privilege.
3. BRB may choose to waive the privilege at any time, including by disclosing the substance of communications between Mr. Chakravarti and Calderwood & Harkness counsel. This could occur, for example, in connection with a cooperation agreement with the SEC, in response to a regulatory request, or in connection with other litigation or regulatory proceedings. If BRB waives the privilege, the substance of these preparation sessions and any advice communicated to Mr. Chakravarti could become available to third parties, including the SEC Staff.
4. If Mr. Chakravarti believes that his personal interests may diverge from BRB's interests — at any time during the preparation process, during the testimony itself, or at any point thereafter — he has the right to retain separate personal counsel at his own expense. Alternatively, Mr. Chakravarti may request that BRB consider advancing legal fees for personal counsel under the Bank's indemnification and advancement provisions set forth in its Amended and Restated Bylaws (Article VII) and any applicable indemnification agreement. Calderwood & Harkness cannot advise Mr. Chakravarti on whether to retain personal counsel; that decision is his alone to make.
5. Notwithstanding the foregoing, Calderwood & Harkness's role in preparing Mr. Chakravarti for testimony is to assist the Bank in presenting truthful, accurate, and complete testimony. Mr. Chakravarti is obligated to testify truthfully at all times. Nothing in these preparation sessions is intended to suggest that Mr. Chakravarti should testify in any manner other than truthfully and completely.
Acknowledgment: Mr. Chakravarti should confirm his understanding of the Upjohn warning orally at the outset of Session 1. In addition, he should sign the firm's standard Upjohn Acknowledgment Form (attached hereto as Attachment 1) before any substantive discussion begins. A copy of the signed acknowledgment form should be retained in the engagement file.
Ongoing Awareness: If at any point during the preparation sessions or during the testimony itself, Mr. Chakravarti expresses concerns about a potential divergence between his personal interests and BRB's interests, counsel must immediately pause the preparation or testimony to address the situation, and must consult with Victoria Chambers before proceeding.
IV. Core Investigation Issues Relevant to Chakravarti's Testimony
A. The Central Issue: ACL Understatement Allegation
The SEC Staff's core contention in this investigation is that BRB's reported Allowance for Credit Losses ("ACL") for the BridgeFin portfolio materially understated expected credit losses as of December 31, 2022, resulting in materially inaccurate financial statements in the Bank's FY 2022 Form 10-K and, potentially, in subsequent quarterly filings.
The specific numerical contention is as follows:
The Staff's preliminary view, as communicated through the course of investigative correspondence and as reflected in the line of questioning during Ms. Navarrete's testimony, is that the appropriate ACL for the BridgeFin portfolio should have been approximately $180.8 million (4.41% of the $4.1 billion in outstanding BridgeFin loans), representing a potential understatement of approximately $37.3 million.
This alleged understatement is significant in relation to BRB's internal materiality threshold. BRB's internal materiality benchmark, used for purposes of assessing the significance of potential misstatements, is 5% of pre-tax income. BRB's FY 2022 pre-tax income was $612 million, yielding a materiality threshold of $30.6 million. The alleged $37.3 million ACL understatement exceeds this threshold by $6.7 million, or approximately 6.1% of pre-tax income. Under both quantitative and qualitative materiality analyses, the Staff appears poised to argue that this understatement was material.
The applicable statutory and regulatory provisions implicated by the Staff's theory include:
• Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. § 78m(a)): Requiring issuers of registered securities to file periodic reports with the Commission that are accurate and not misleading.
• Section 13(b)(2)(A) of the Securities Exchange Act of 1934 (15 U.S.C. § 78m(b)(2)(A)): Requiring issuers to make and keep books, records, and accounts which, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the issuer.
• Rule 13a-1 (17 C.F.R. § 240.13a-1): Requiring the filing of annual reports on Form 10-K.
• Rule 12b-20 (17 C.F.R. § 240.12b-20): Requiring that, in addition to information expressly required to be included in a filing, such further material information as is necessary to make the required statements not misleading shall also be added.
We note that the Staff has not, at this stage, articulated a theory of scienter sufficient to support a fraud charge under Section 10(b) or Rule 10b-5. The current posture of the investigation appears focused on the reporting and books-and-records provisions, which are strict-liability or negligence-based provisions that do not require proof of intent to deceive. However, we cannot rule out the possibility that the Staff may seek to develop a scienter theory based on evidence gathered through the investigative testimony process — particularly if the Staff identifies evidence that senior personnel, including Mr. Chakravarti, were aware of facts suggesting the ACL was understated and failed to act.
B. Re-Aging / Modification of BridgeFin Loans — The Key Disputed Item
The primary driver of the divergence between BRB's reported ACL and the Staff's estimated appropriate ACL is the treatment of re-aged and modified BridgeFin loans within BRB's CECL model.
During FY 2022, BridgeFin modified or re-aged a total of 12,847 loans with an aggregate outstanding principal balance of $236.4 million. These modifications took various forms, including payment deferrals, term extensions, interest-rate reductions, and combinations thereof. In many cases, upon modification, BridgeFin reset the delinquency status of the modified loan to "current," effectively zeroing out the delinquency clock.
BRB's enterprise CECL model, adopted on January 1, 2020 in accordance with ASC 326 (Financial Instruments — Credit Losses), classified loans based on their current delinquency status and vintage origination date for purposes of estimating expected lifetime credit losses. When a loan was re-aged to "current" status following modification, the CECL model treated that loan as a performing loan within its original vintage cohort, rather than retaining the loan in a separate risk category reflecting its modification history.
The SEC Staff contends that this treatment was inappropriate. Specifically, the Staff's position is that re-aged and modified loans should have been retained in their original vintage delinquency buckets for purposes of loss-rate estimation within the CECL model, rather than being reclassified as "current." The Staff's view is that the act of modification — particularly when the borrower was delinquent at the time of modification — is itself indicative of elevated credit risk, and that resetting the delinquency clock artificially suppressed the measured delinquency and loss rates used as inputs to the CECL model.
This treatment is the primary driver of the divergence between BRB's reported credit metrics and the Staff's adjusted figures:
• 90+ Day Delinquency Rate: BRB reported 1.72%. When re-aged loans are placed back into their original pre-modification delinquency buckets, the Staff calculates a 90+ day delinquency rate of approximately 2.38% — a difference of 66 basis points.
• Net Charge-Off Rate: BRB reported 2.14%. The Staff's adjusted net charge-off rate, which accounts for what the Staff views as the elevated loss probability of re-aged loans, is approximately 3.05% — a difference of approximately 91 basis points.
Mr. Chakravarti, as BridgeFin Division Head, is the person with the most direct knowledge of the modification and re-aging policies and their operational implementation. He approved the BridgeFin Loan Modification Policy, he oversaw the servicing team that executed modifications, and his credit analytics team (led by Priya Dasgupta) generated the data that flowed into the CECL model. His testimony on these topics will be critical to the trajectory of the investigation.
C. Underwriting Model Governance
Beyond the re-aging issue, the Staff is likely to probe the governance of BridgeFin's proprietary AI-driven underwriting model. This line of inquiry serves two purposes from the Staff's perspective: (1) it provides context for understanding why certain loan vintages — particularly post-Q2 2021 originations — may have experienced higher-than-expected default rates, and (2) it tests whether the underwriting model's performance metrics were accurately reflected in the loss-rate inputs to the CECL model.
Key areas of Staff interest will likely include:
• The design and architecture of the AI underwriting model, including the data inputs, algorithmic methodology, and output credit scores.
• The model validation process: who validated the model, how frequently, and whether validation was independent of the BridgeFin origination team.
• Back-testing results: how the model's predicted default rates compared to actual observed defaults, particularly for post-Q2 2021 vintage cohorts.
• Whether and when the model was recalibrated in response to observed performance deviations, and whether Mr. Chakravarti's team flagged any performance concerns to the model governance committee, CRO Kowalski, or the Board Risk Committee.
• The relationship between the AI model's credit-risk assessments and the loss-rate assumptions fed into the CECL model — specifically, whether the CECL model relied on the AI model's predicted loss rates or used independently derived historical loss rates.
D. Credit-Quality Reporting to Senior Management
A significant area of Staff focus will be how Mr. Chakravarti communicated credit-quality trends — including delinquency rates, charge-off rates, and modification volumes — to senior management. This line of inquiry is directed at determining whether the information available to decision-makers at BRB was sufficient to alert them to potential credit deterioration in the BridgeFin portfolio, and whether that information was appropriately considered in establishing the ACL.
The Staff will explore Mr. Chakravarti's reporting relationships with:
• CFO Patricia Navarrete, who bore ultimate responsibility for the accuracy of BRB's financial statements.
• CAO Raymond Hu, who was responsible for the design and operation of the CECL model and for the establishment of the ACL.
• CRO Annette Kowalski, who oversaw enterprise risk management, including credit risk, and maintained oversight of the AI underwriting model through the model risk management framework.
• The Audit Committee of the Board of Directors, chaired by Gwendolyn Prescott, which received periodic reports on credit quality and loan loss provisioning.
The Staff will inquire about the frequency, format, and content of Mr. Chakravarti's reports; the escalation protocols in place for deteriorating credit metrics; and whether Mr. Chakravarti specifically flagged rising delinquencies in post-Q2 2021 vintage cohorts to senior management. If Mr. Chakravarti's reports showed deteriorating trends that were not reflected in the ACL, the Staff will seek to establish a disconnect between the information known to BRB's management and the reserves booked in the financial statements.
V. Anticipated SEC Staff Question Areas
The following sections identify the areas in which the Staff is most likely to focus its questioning, based on: (1) the scope of the Formal Order; (2) the document requests and subpoenas issued to date; (3) the lines of inquiry pursued during Ms. Navarrete's January 18, 2024 testimony; and (4) our own assessment of the logical progression of the Staff's investigation. For each area, we provide the likely questions and, where appropriate, guidance on Mr. Chakravarti's anticipated answers or areas requiring further development during preparation sessions.
A. BridgeFin Operations and Organizational Structure
The Staff typically begins investigative testimony with foundational questions designed to establish the witness's role, responsibilities, and knowledge base. We anticipate that Senior Staff Attorney Felton will spend the first 30 to 60 minutes of the testimony exploring BridgeFin's organizational structure and operations.
Anticipated questions include:
• Please describe BridgeFin's role within Belmont Ridge Bank. Is BridgeFin a separate legal entity?
• What is your title, and what are your responsibilities as Division Head?
• To whom do you report? Please describe the reporting structure, including any dotted-line reporting relationships.
• How many employees does BridgeFin have? How is the division organized internally?
• When was BridgeFin launched? What was the strategic rationale for creating BridgeFin?
• Please describe BridgeFin's loan products. What types of loans does BridgeFin originate?
• How does the AI-driven underwriting model work? Who designed it? Who maintains it? Who validates it?
• What data inputs does the underwriting model use? Does it use alternative data sources? If so, what kinds?
• What is the approval and validation process for the underwriting model? How frequently is the model validated? By whom?
• What is the distinction between personal loans and small-business microloans? What is the relative portfolio composition as between the two product types?
• What were BridgeFin's origination volumes from launch through FY 2022? How rapidly did the portfolio grow?
• What was the outstanding BridgeFin portfolio balance at the end of FY 2022?
• What percentage of BRB's total assets did BridgeFin represent at year-end 2022?
Mr. Chakravarti should be well-prepared to answer these foundational questions clearly, concisely, and without over-elaboration. These questions are relatively straightforward, but they establish the record that the Staff will build upon in later, more pointed lines of inquiry. Mr. Chakravarti should avoid volunteering information about credit trends, modification practices, or CECL model inputs during this foundational phase. He should answer what is asked and no more.
B. Loan Modification and Re-Aging Policies
This is the critical line of questioning. We should devote a disproportionate share of the preparation sessions to this topic area. Mr. Chakravarti must be thoroughly prepared to address these questions with precision and confidence, while adhering to the recommended messaging themes outlined in Section VII below.
Anticipated questions include:
• What is BRB's policy for modifying delinquent BridgeFin loans? Is there a written policy?
• When was the modification policy adopted? Has it been amended or updated since adoption? If so, when and how?
• What triggers a loan modification? What criteria must be met for a loan to be eligible for modification?
• Who approves loan modifications? Is there a dollar threshold above which higher-level approval is required?
• What forms do loan modifications take? For example, payment deferrals, term extensions, interest-rate reductions?
• What does "re-aging" mean in the context of BridgeFin's loan servicing? Please define the term as BridgeFin uses it.
• When a delinquent loan is modified, does BridgeFin reset the delinquency status to "current"? Under what circumstances?
• Are there specific requirements that must be met before a delinquent loan can be re-aged to "current" — for example, a minimum number of consecutive on-time payments post-modification?
• How many BridgeFin loans were modified or re-aged during FY 2022?
• What was the aggregate outstanding principal balance of loans modified or re-aged during FY 2022?
• Were there written policies or guidelines specifically governing re-aging? Were those policies separate from the broader modification policy?
• Were the re-aging policies reviewed or approved by anyone outside BridgeFin — for example, CRO Kowalski, CAO Hu, or the external auditor, Whitfield Keane?
• Were the re-aging policies consistent with OCC Handbook guidance on troubled debt restructurings and loan modifications?
• Did the volume of re-aged loans increase over time from FY 2020 through FY 2022? Were there vintage-specific patterns? Were loans originated after Q2 2021 modified or re-aged at higher rates than earlier vintages?
• Were re-aged loans tracked separately in BridgeFin's internal reporting systems? Could BridgeFin's systems distinguish between re-aged loans and loans that had never been delinquent?
• Could the CECL model distinguish re-aged loans from never-delinquent loans?
• Did you or anyone on your team have concerns about the impact of re-aging on reported credit metrics?
• Did you or anyone on your team raise concerns about the volume of re-aging with anyone outside the BridgeFin division?
Preparation Notes: The most sensitive questions in this area relate to (1) whether re-aged loans were tracked separately and identifiable within internal systems, (2) whether anyone raised concerns about the impact of re-aging on credit metrics, and (3) whether the re-aging policies were independently reviewed. Mr. Chakravarti must be prepared to answer these questions truthfully while framing his answers within the context of the recommended themes: that re-aging was a documented, policy-driven servicing practice consistent with industry norms and regulatory guidance, that it was subject to appropriate oversight, and that the policy's application was not motivated by a desire to mask credit deterioration. We will work through the specific factual predicates during Sessions 1 and 2.
C. CECL Model Inputs — BridgeFin's Role
This line of questioning will probe the interface between BridgeFin's operations and the enterprise CECL model maintained by CAO Hu's team. The Staff will seek to establish what Mr. Chakravarti knew about how re-aged loans were treated within the CECL model and whether he had any input into or influence over that treatment.
Anticipated questions include:
• How did BridgeFin feed data into BRB's enterprise CECL model? What data did BridgeFin provide?
• Who was responsible for determining the loss-rate assumptions for the BridgeFin portfolio — BridgeFin's team, CAO Hu's team, or a combined effort?
• Were you aware of how re-aged or modified loans were classified within the CECL model? Specifically, were you aware that re-aged loans were moved to "current" status within the model?
• Did you participate in any discussions about whether that classification was appropriate?
• Were there any internal debates, discussions, or disagreements about the treatment of re-aged loans in the CECL model?
• Did anyone — including members of your team, CAO Hu, CRO Kowalski, or anyone else — suggest that re-aged loans should be treated differently in the CECL model?
• Were you involved in any meetings or working sessions where the CECL model methodology for BridgeFin loans was discussed?
• Did you review the CECL model documentation?
• Did you participate in any quarterly or annual ACL estimation process meetings?
Preparation Notes: This is a particularly delicate area. Mr. Chakravarti's role was primarily operational; the CECL model itself was an enterprise-level accounting construct under the purview of CAO Hu. However, the data inputs came from BridgeFin, and the Staff will try to show that Mr. Chakravarti knew (or should have known) that the way re-aged loans were fed into the model had the effect of understating expected losses. During preparation, we need to ascertain precisely what Mr. Chakravarti knew about the CECL model's treatment of re-aged loans, when he learned it, and what discussions he participated in. His testimony must be truthful on these points, and we should ensure he does not overstate or understate his knowledge.
D. Credit Quality Trends and Internal Reporting
Anticipated questions include:
• What reports did you prepare or review regarding BridgeFin credit quality?
• Please describe the monthly or quarterly credit-quality dashboards that your team produced. What information did they contain?
• Who received these dashboards? Please identify the distribution list.
• Did these dashboards show credit quality by loan vintage? Could a reader of the dashboard see whether post-Q2 2021 vintages were performing differently from earlier vintages?
• Did any of the dashboards or reports show deteriorating credit quality in post-Q2 2021 vintage cohorts?
• If so, what actions were taken in response to observed deterioration?
• How were delinquency rates, charge-off rates, and modification volumes reported internally?
• Were re-aged loans separately identified in internal reports, or were they blended into "current" loan statistics after modification?
• Did you make presentations to the Board of Directors, the Audit Committee, or the Board Risk Committee regarding BridgeFin credit performance?
• If so, please describe the frequency and content of those presentations.
• Did any Board member, Audit Committee member, or Risk Committee member ask questions about loan modification volumes, re-aging practices, or delinquency trends?
Preparation Notes: The key tension here is between Mr. Chakravarti's duty to report credit trends accurately (which he will assert he did) and the Staff's likely contention that the internal reports themselves were deficient because they blended re-aged loans into the "current" category, thereby presenting an unduly favorable picture of credit quality. We need to determine, during preparation, exactly how re-aged loans were reflected in the dashboards and whether there were any supplemental reports or ad hoc analyses that broke out re-aged loan performance separately. If such supplemental materials exist in the production, the Staff likely has them.
E. Communications with External Auditor
Anticipated questions include:
• Did you interact with Whitfield Keane LLP during the FY 2022 audit or during interim quarterly reviews?
• Who at Whitfield Keane did you interact with? Did you interact with engagement partner Lorraine Dupont directly?
• Were there discussions with Whitfield Keane about BridgeFin's re-aging practices or the treatment of modified loans in the CECL model?
• Did Whitfield Keane ask questions about the volume of loan modifications? About re-aging?
• Did Whitfield Keane request data or documentation regarding BridgeFin's modification policy?
• Did Whitfield Keane express any concerns about BridgeFin's re-aging practices or their impact on the ACL?
• Did you provide any representations — oral or written — to Whitfield Keane regarding BridgeFin's credit quality?
Preparation Notes: Mr. Chakravarti's interactions with Whitfield Keane should be carefully delineated. His primary interaction was likely data provision and responding to audit inquiries, rather than making judgments about accounting treatment. We need to verify the extent of his contacts with Whitfield Keane and ensure his testimony is consistent with the documentary record of audit inquiry responses and management representation letters.
F. Post-Filing Developments and Voluntary Disclosure Enhancements
Anticipated questions include:
• Are you aware that BRB added vintage-level delinquency tables to the BridgeFin disclosures in the Q3 2023 Form 10-Q filed on November 9, 2023?
• Were you involved in the decision to add those disclosures? If so, please describe your involvement.
• What prompted the enhanced disclosures? Was it the SEC inquiry? An internal initiative? A recommendation from the external auditor?
• Did you provide data or input for the vintage-level delinquency tables?
• Did the enhanced disclosures reveal information about BridgeFin credit quality that had not been apparent from prior public filings?
Preparation Notes: The voluntary disclosure enhancement is a positive fact for BRB's defense — it demonstrates a commitment to transparency and responsiveness. However, the Staff may attempt to use the enhancement as evidence that prior disclosures were deficient ("if you added this disclosure now, why wasn't it included before?"). Mr. Chakravarti should be prepared to frame the enhancement as a proactive improvement in disclosure granularity driven by a combination of evolving best practices and BRB's commitment to investor transparency, rather than as a remediation of a prior deficiency.
G. Knowledge of Public Filings
Anticipated questions include:
• Did you review or contribute to the BridgeFin-related sections of BRB's FY 2022 Form 10-K?
• Did you review or contribute to the BridgeFin-related sections of the Q1 2023 or Q2 2023 Forms 10-Q?
• What was the nature of your contribution — did you provide data, narrative text, or both?
• Did you sign off on or approve any portions of these filings?
• Did you execute a sub-certification or internal disclosure review form in connection with any of these filings?
• Did Caldwell Pratt & Stein LLP — BRB's securities reporting counsel — consult you during the preparation of these filings?
• Did you interact with Martin Caldwell of Caldwell Pratt & Stein regarding BridgeFin disclosures?
• Were there any discussions about whether additional or different disclosure of BridgeFin credit trends was warranted?
Preparation Notes: Mr. Chakravarti's role in the public-filing process was likely limited to providing data and reviewing BridgeFin-specific sections for accuracy, rather than making disclosure judgments. We should confirm this during preparation and ensure he can clearly describe the division of responsibility between his operational data-provision role and the disclosure decision-making role of the CFO, CAO, and securities counsel.
VI. Key Documents Likely to Be Used as Exhibits by Staff
BRB has produced a total of 284,617 documents to the SEC Staff across six rolling productions, Bates-stamped BRB-SEC-000001 through BRB-SEC-284617. Based on our review of the document production, the lines of inquiry pursued during Ms. Navarrete's testimony, and our assessment of the Staff's investigative priorities, we identify the following categories of documents as most likely to be placed before Mr. Chakravarti as exhibits during his testimony:
1. BridgeFin Loan Modification Policy Documents and Amendments. The Staff will almost certainly introduce the original BridgeFin Loan Modification and Servicing Policy (adopted Q3 2020) and any subsequent amendments. Mr. Chakravarti should be thoroughly familiar with each version, including the specific provisions governing re-aging criteria, approval thresholds, and documentation requirements. These documents are in the production at approximately BRB-SEC-018240 through BRB-SEC-018312.
2. Internal Credit-Quality Reports and Dashboards (FY 2022 and Q1-Q2 2023). The monthly and quarterly credit-quality dashboards prepared by Priya Dasgupta's credit analytics team, showing delinquency rates, charge-off rates, modification volumes, and vintage-level performance data. These dashboards form the core evidentiary record of what Mr. Chakravarti knew about BridgeFin credit trends and when he knew it. The FY 2022 dashboards are in the production at approximately BRB-SEC-042100 through BRB-SEC-044890.
3. Emails and Memoranda Between Chakravarti and Navarrete, Hu, or Kowalski Discussing BridgeFin Credit Trends. Any email correspondence in which Mr. Chakravarti reported, escalated, or discussed credit-quality trends with senior management will be of particular interest to the Staff. The Staff will focus on any emails that show awareness of deteriorating credit quality and will probe whether that awareness was translated into appropriate reserving action. These communications are dispersed throughout the production but were collected from Mr. Chakravarti's custodial files.
4. Board, Audit Committee, and Risk Committee Presentation Materials. Presentation decks, talking points, and supporting materials prepared by or including input from Mr. Chakravarti for meetings of the Board of Directors, the Audit Committee (chaired by Gwendolyn Prescott), or the Board Risk Committee. These materials establish the information flow to the highest level of corporate governance.
5. CECL Model Documentation. The technical documentation for BRB's enterprise CECL model, including methodology descriptions, data-input specifications, and the specific provisions addressing the treatment of modified and re-aged loans. While this documentation was primarily maintained by CAO Hu's team, Mr. Chakravarti may have reviewed portions of it or participated in discussions about the BridgeFin-specific components.
6. Communications Between BridgeFin and Whitfield Keane (FY 2022 Audit). Any emails, memoranda, data request responses, or meeting notes reflecting interactions between Mr. Chakravarti's team and the external audit team led by engagement partner Lorraine Dupont. Particular focus will be on any inquiries or discussions regarding modification volumes or re-aging treatment.
7. Draft Sections of Public Filings. Draft sections of the FY 2022 Form 10-K and Q1/Q2 2023 Forms 10-Q relating to BridgeFin that Mr. Chakravarti may have reviewed, commented on, or provided data for. The Staff will be interested in any comments or revisions Mr. Chakravarti made or suggested.