Ex-Bear Stearns Hedge Fund Execs Acquitted Today on All Charges
When concerns are expressed that authorities are targeting the small fry rather than the big fish in mortgage-related fraud cases, a criminal prosecution of two former Bear Stearns hedge fund managers has repeatedly been cited as a rare exception.
But today the case ended with the acquittal of both defendants, reports the New York Times.
A Brooklyn federal jury found Ralph Cioffi, 53, and Matthew Tannin, a 48-year-old law school graduate, not guilty of securities and wire fraud charges. The two had been accused of painting a too-rosy picture for investors while failing to disclose that the two hedge funds they managed were dropping in value. Both funds were heavily invested in subprime mortgages, and some 300 investors allegedly lost $1.6 billion.
Cioffi also was acquitted of insider trading based on allegations that he told investors he was adding to his own position in a failing hedge fund when in fact he had moved $2 million out of the fund.
The three-week trial, as the Wall Street Journal (sub. req.) points out, tested “the boundary between putting a positive spin on bad results and outright fraud.”
Cioffi and Tannin are, the newspaper reports, the sole Wall Street executives criminally charged in connection with the credit crisis that hit hard last year, emphasizing the difficulty of pursuing such cases against financial executives.
The four-man, eight-woman predominantly working-class jury apparently found persuasive defense arguments that the “ridiculous” case was based on the government’s “cherry-picking” of e-mails and after-the-fact claims that the two men should have foreseen a financial storm no one could have predicted, according to the Financial Times.
If convicted, they could have faced decades in prison.
Earlier related coverage:
ABAJournal.com: “New FBI Targets: Real Estate Brokers”
ABAJournal.com: “Will Prosecutors Get Help From ‘Toast’ E-Mail by Bear Stearns Manager?”
