U.S. District Judge William Alsup said that a 2007 e-mail that a Charles Schwab managing director wrote could prove to be a “mea culpa smoking gun” since the executive says Schwab should tell investors it misrepresented risks in the short-term bond fund.

The plaintiff’s attorney, Reed Kathrein, quoted the e-mail, which Janice Diamond urged a superior to “admit our mistakes and make changes to prevent this from happening again.” Judge Alsup commented, “The jury could certainly construe that to mean, ‘We have not been honest with our investors.’”

However, Schwab spokesman David Weiskopf told Bloomberg the e-mail should not be singled out since, first of all, its author was a junior-level credit analyst and, second, the plaintiffs have filed “millions” of e-mails in the case.

“That e-mail isn’t any smoking gun. The date of that e-mail was after the credit crisis and supports our view that what [Diamond] was commenting on was not that there was anything done wrong, but that we felt badly about the consequence of that this unforeseeable event has caused,” Weiskopf said.

However, the plaintiffs’ attorney also read before the court a September 2006 e-mail from Schwab Chief Investment Officer Liz Ann Sonders in which the CIO wrote, in a "worst-case scenario,” there could be a “seizing up” of mortgage-backed securities, in which buyers and sellers would be “nowhere to be found, regulators having placed them in handcuffs.”

Weiskopf shot back at that e-mail, as well, saying it was only one of “five or six perspectives” that the CIO provided.

The trial is scheduled to begin July 5 in the U.S. District Court for the Northern District of California.