Cioffi Trial - Whole Lotta Lyin' Going On...

By Brett Sherman; The Sherman Law Firm

Securities Fraud Trial of Former Bear Stearns Hedge Fund Managers Ralph Cioffi and Matthew Tannin Begins; Prosecution Delivers Clear Message in Opening Statement.

United States v. Cioffi and Tannin, the Wall Street trial of the century (so far) is underway.  The former Bear Stearns hedge fund managers are charged with conspiracy, securities fraud, and wire fraud. 

Assistant U.S. Attorney Patrick Sinclair told the jury that defendants Ralph Cioffi and Matthew Tannin "lied to their investors ... to save their multimillion-dollar bonuses" and their careers.

Mr. Sinclair described the former Bear Stearns hedge fund managers as serial liars who misled customers and clients about the performance and prospects of two leveraged Bear Stearns hedge funds. The majority of holdings in the two funds were CDO's packed with subprime mortgage-backed securities. 

The trial is in the cross-hairs of the financial services industry because it is the first (and could be the only) criminal prosecution of executives from a major investment bank based on alleged misconduct tied to the subprime meltdown and credit crisis. 

During the prosecution's opening statement, Mr. Sinclair described a long string of lies Cioffi and Tannin allegedly told the funds' investors.  Because of their actions, the prosecutor told jurors that Cioffi and Tannin were guilty of committing “a [federal] crime ... called securities fraud.” 

The two Bear hedge funds collapsed in the summer of 2007.  Investors reportedly lost nearly $2 billion.   

Facing “sinking markets, the certain collapse of their funds and [knowing four years of] success [were] coming to an end."

Mr  Sinclair explained to the jury thart  "[Ralph Cioffi and Matthew Tannin] decided to commit a crime.”  Facing “sinking markets, the certain collapse of their funds and [knowing four years of] success [were] coming to an end...,"  the two defendants "lied to their investors to buy more time..." 

Apparently, Cioffi and Tannin went into stall mode - hoping for a miraculous recovery in the market for subprime mortgage-backed securities before the funds unraveled.  The miracle failed to materialize.  The hedge funds imploded.  

Our view at WSLB is that defendants' enormous lies other serious misconduct  knocked down one of the first dominoes that led to the collapse of Bear Stearns and, ultimately,  the global financial crisis.  This trial should shine a significant amount of light on the validity of our opinion.  

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The lawyer for Ralph Cioffi also made an opening statement Wednesday.  Tannin's counsel is scheduled to do the same on Thursday. 

Be sure to follow the trial on Wall Street Law Blog (you can even subscribe and/or follow us on twitter).. 


Disclaimer-

The Sherman Law Firm represents institutional
and individual investors in sophisticated securities
fraud cases. Therefore, the posts on this blog may reflect our opinions and biases.  Readers should always consider stories posted on the Wall Street Law Blog as commentaries rather than news reports. 

We welcome your comments and will post them regardless of you agree with our views.  

Readers who prefer to submit confidential comments may do so by emailing Brett Sherman - Brett.Sherman@ShermanLawyers.net 
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Comments

[Sally]

"This trial should shine a significant amount of light on the validity of our opinion."

Indeed, it certainly did. Now we know that your opinions are worthless. Well, I guess we knew that already. But now we have proof.

[Wall Street Law Blog]

RESPONSE TO READER COMMENTS

Dear Sally - Thank you for commenting. We wish you had done so before the verdict.

We did not (at least as far as we can recall) predict that defendants would be found guilty. Nor did we have any desire to see these men put in prison. The prosecutors certainly did not prove defendants guilty beyond a reasonable doubt (this was clear to us, as it was to the jury). However, we do believe that the trial (including evidence kept from the jury) showed that defendants were less than truthful and that the collapse of the Bear Stearns subprime hedge funds was the first major domino to fall in the financial crisis (which is different than saying the failure of the funds was the cause of the financial crisis).

We stand by our opinions and respect your right to call them worthless.

Sincerely,

Wall Street Law Blog