Friday, June 20, 2008

Ex-Bear Stearns Fund Mgrs Indicted On Fraud Charges.



NEW YORK -(Dow Jones)- The former managers of two Bear Stearns Cos. funds encouraged investors to continue to put money in the funds, while privately expressing concerns about their outlook months before their collapse, costing investors more than $1 billion, prosecutors said. Thursday.
Ralph Cioffi, 52 years old, and Matthew Tannin, 46, the former managers of two high-profile bond portfolios in Bear Stearns' asset-management unit, were charged with conspiracy, securities fraud and wire fraud in a nine-count indictment Thursday. Cioffi also was charged with insider trading.

The U.S. Securities and Exchange Commission separately filed civil fraud charges against the men on Thursday.

The men claimed to investors for months that they had "skin in the game," or were investing in the funds, when Cioffi actually moved $2 million out of one of the funds and Tannin never invested during that period, said U.S. Attorney Benton J. Campbell at a press conference Thursday.

"They lied in a futile hope the funds would turn around," said Campbell.
Cioffi and Tannin pleaded not guilty to the charges at a hearing before a U.S. magistrate. Bail was set at $4 million for Cioffi and $1.5 million for Tannin.
The men, who were released on bail Thursday, declined to comment after the hearing.

"Matt Tannin is innocent," said Susan Brune, a lawyer for Tannin. "He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."

Criminal charges against Cioffi and Tannin are the most high-profile ones to emerge so far as regulators and law-enforcement personnel probe financial missteps that fueled a global credit crisis last year.

The funds - the Bear Stearns High Grade Structured Credit Strategies Master Fund and the Bear Stearns High Grade Structured Credit Strategies Enhanced Master Fund - imploded in June 2007 as credit markets contracted, costing investors more than $1 billion.

Edward J.M. Little, Cioffi's lawyer, said, "We are shocked and disappointed" the government decided to bring charges against the men and "look forward to the day they will be vindicated" in court.

"The credit crisis took everyone by surprise," including the Federal Reserve and the Treasury Department, Little said. "Dozens of the largest financial institutions in the world have lost over $300 billion to date on the same investments. Ralph Cioffi's funds lost money in exactly the same way. Because his funds were the first to lose might make him an easy target, but doesn't mean he did anything wrong. Indeed, Mr. Cioffi had no motive to do anything wrong."
The criminal investigation is being handled by the U.S. Attorney's office in Brooklyn, N.Y., and the Federal Bureau of Investigation.


Also,

Prosecutors build Bear Stearns case on e-mails

1 comment:

Anonymous said...

http://www.cbc.ca/money/story/2008/06/19/mortgagefraudsweep.html

Apparently there have been 400 arrests around the country relating to mortgage fraud.