Ohio State says Les Wexner shouldn't be deposed in Strauss case

Ohio State University attorneys filed a Dec. 10 motion in federal court opposing a subpoena to depose former trustee Les Wexner in litigation over sexual abuse by ex-team doctor Richard Strauss, arguing discovery to date shows Wexner has no relevant information or documents. Wexner has told parties he possesses no responsive letters, texts, emails or other materials, while survivors seeking testimony say he resisted the subpoena at a Dec. 4 Board of Trustees meeting; Strauss died by suicide in 2005.

Analysis

Market structure: This is an idiosyncratic governance/legal shock concentrated on one major public university, benefiting plaintiffs’ lawyers, D&O and liability brokers (greater demand/pricing power), and compliance/remediation vendors while directly pressuring OSU’s balance sheet and Ohio-specific credit. If headline-driven settlements breach ~$250–500M, expect acute reputational and budget stress for the university and potential 10–50bp widening in Ohio muni spreads versus national municipals over 1–3 months.

Risk assessment: Tail risks include a multi-school class expansion or discovery that forces Wexner/testimony into a broader conspiracy narrative — low probability but high impact (>$500M). Immediate window (days) is headline risk; short-term (weeks–3 months) brings depositions and potential settlement windows; long-term (6–24 months) will show premium repricing in D&O markets and reserve adjustments in insurers. Hidden dependencies: reinsurance recoverables, university bond covenants, and donor/fundraising flows that can tighten liquidity unexpectedly.

Trade implications: Favor selective exposure to firms that capture higher placement fees (brokers) and long-term higher D&O pricing (large-cap insurers) while hedging near-term headline risk. Tactical actions: reduce Ohio-specific municipal weighting, use short-dated options to hedge insurer names against reserve hits, and prefer broker revenues over insurers’ underwriting until reserve clarity (90 days). Monitor deposition schedule, subpoena enforcement, and any judge-ordered disclosures as 30–90 day catalysts.

Contrarian angles: The market often overprices idiosyncratic university scandals into systemic fears; historical parallels (e.g., Penn State) show large short-term volatility but limited long-term credit contagion. If major insurer equities fall >8–12% on headlines without reserve announcements, that is a tactical buy window for 6–12 month exposure; conversely, if settlement rumors cross the $300M threshold, re-rate insurers and Ohio munis immediately.

Key Decisions for Investors

• Within 7 days, reduce Ohio-specific municipal exposure by 50% (sell or underweight Ohio GO and university-backed munis) and re-evaluate after 30–90 days or after any court order producing testimony/documents; avoid replacing with longer-duration munis until spreads stabilize.
• Establish a 1–2% portfolio long in Marsh & McLennan (MMC) or Aon (AON) for 6–12 months — brokers should capture higher placement fees and have lower reserve risk; trim if shares rise >15% or if D&O rates fail to reprice by month 12.
• Tactically hedge insurer equity tail risk: purchase a 3-month put spread on Travelers (TRV) sized to 0.5–1% of portfolio (buy 5% OTM puts and sell 10% OTM puts) to protect against headline-driven reserve hits; if TRV falls >10% with no reserve charge, sell protection and redeploy.
• If a major insurer (e.g., Chubb CB or AIG) drops >8–12% on headlines without commensurate reserve changes within 30 days, initiate a 1–2% position via a 9–12 month 20% OTM call spread (target asymmetrical upside capture).