Quote from: JoelKatz on November 09, 2012, 12:11:15 AM

Both parties agreed that Patrick's loan portfolio was significantly free from correlated risk. Patrick concluded, based on that agreed fact, that he would have enough equity in his portfolio to cover a Pirate default. However, Patrick's loan portfolio was not significantly free from correlated risk, and thus he didn't have enough equity in his portfolio to cover a Pirate default. The parties never discussed what would happen if the portfolio had significant correlated risk -- it was something neither party considered.

For example:

A: My house is 1,200 square feet.
B: I'll paint it for $2,500.
A: Deal.
-
If the house isn't 1,200 square feet, A is responsible.

B: I measured your house, it's 1,200 square feet. I can paint it for $2,500.
A: Deal.
-
If the house isn't 1,200 square feet, B is responsible.

A: My house is 1,200 square feet.
B: I know, I measured it. I can paint it for $2,500.
A: Agreed.
-
Common mistake. If the house isn't 1,200 square feet, A and B are jointly responsible.

This is like the last case. Both parties, with sufficient information to realize otherwise, concluded that the loan portfolio was free from correlated risk. Patrick's agreement was based on that shared mistaken conclusion.

This is where you're consistently getting yourself confused. From everything I've seen in this thread MP didb't measure the house but took PH's word for it. Nowhere have I seen any evidence (or even suggestion) that PH gave MP a list of all his deposits so that they could be verified as Pirate risk-free. PH made an assertion which MP accepted - nothing more than that.

The basis of a common mistake is common knowledge. In your house example that's access to the house to measure it (what if the house owner offers the builder access but the builder declines and says they'll take the home-owner's word for it?). In this instance no such access existed - there was no public list of PH's deposits and no access to such was offered.

If your argument then mutates into "well MP didn't ask for access so it's still MP's fault" then you move into the area of sheer lunacy. Imagine the following conversation with your bank:

Bank: Sorry, we can't return any of your deposits as we made some bad investments.
JK: But you told me my money was safe with you!
Bank: Well if you'd looked at our books you'd have seen it wasn't safe.
JK: But you never showed me your books!
Bank: You didn't ask to see them.
JK: If I'd asked would you have showed me them?
Bank: No.
JK: So why don't you owe me the money?
Bank: You didn't ask for the books - so it was a "common mistake" as we both assumed (or, in our case, asserted) that your money was safe with us. Sorry - but we'll give you a little bit if/when we can, however we aren't in default as you're as much to blame as us.

That appears to be what you're arguing.

PH had access to significantly more relevant information than MP (details of his deposits). No offer to share that information was made. PH made an assertion about that information (that the deposits were pirate-free) which MP accepted, being unable to verify it. Without (substantially) equal information there can't be a common mistake - and details of the deposits was, by far, the most important information in making that assessment here.

Let's take your argument to the extremes of ridiculousness - why has pirate got a scammer tag? After all, it was obvious it was going to go bust. So isn't that a "common mistake" between pirate and his investors - as they all knew (or should have known) that it wasn't going to end well?

There's some irony in the fact that you seem to have come here to defend PH yet, by your argument, are actually making the worst case against him. MP''s (or MPOE-PR - same person as far as I'm concerned) case is that PH had the credibility and repuation to deserver having his word taken on something as basic as how he'd invested the funds under his control. You, on the other hand, appear to be arguing that his reputation was so bad back then (forget now) that anyone who believed an assertion he made about how his funds were deployed deserved blame for being naive enough to take him seriously and enter into a contract with him. To be crystal clear, your argument only holds water IF it was common knowledge and readily apparent that PH was unfit to give accurate representations about how the funds he managed were deployed (e.g. he was KNOWN not to do proper diligence). Is that actually your argument? More to the point is it PH's? Is he actually going to post saying "Look - sorry but you should have known I didn't have a clue what I was doing and shouldn't have taken my word on anything, so you're as much to blame as me."?

Not sure why all the crap about written/verbal contracts arose (not from you JK). The form of a contract only matters if its content is disputed. All of the citations from various wikis etc are only of relevance when there's an argument over what was agreed - there appears to be no such difference here.

Unless PH disputes the terms of the contract (or claims it's in some way invalid -e.g. by JK's argument of incompetence) it's hard to see any option but to consider that he owes the obligations under it and is in default. Whether that deserves a scammer tag is a seperate issue - there appears little consistency in how these are given out and he didn't offend a moderator so likely he's safe from that. From my perspective I'd like to see scammer tags given to anyone who defaults on an obligation (whether through malice or misfortune) with the tag removable where it was just misfortune after repayment in full or an agreed settlement. I accpet that the tag should likely be renamed were that to be the case -or split into two (Scammer and Defaulter maybe?).