2 Former Bear Stearns Executives Are Arrested By LANDON THOMAS Jr. Published: June 20, 2008 Two former managers of hedge funds at Bear Stearns were arrested and charged with securities fraud on Thursday, a year after the collapse of the funds signaled the onset of a credit crunch that shows little sign of abating. Matthew Tannin, a former investment bank Bear Stearns hedge fund manager, was arrested in New York. The indictments, which will be detailed this afternoon by federal prosecutors in Brooklyn, are the first to be brought against senior Wall Street executives linked to a tight credit market that has rattled global markets, led to more than $350 billion in write-offs, cost numerous executives their jobs and culminated in the demise of Bear Stearns. The two funds had names as abstruse as the complex subprime securities in their portfolios — High Grade Structured Credit Strategies Fund, and its riskier sister offering, the High Grade Structured Credit Strategies Enhanced Leverage Fund. And on Thursday, the two fund managers, Ralph R. Cioffi, 52, and Matthew Tannin, 46, who just 18 months ago reveled in their status as top hedge managers in a firm at the vanguard of the mortgage boom, surrendered to federal agents. Like Enron several years ago and the insider trading scandals two decades earlier, the prosecution of the Bear Stearns executives is expected to become a test of the government’s ability to make successful prosecutions of highly complex financial transactions. Yet, despite the high drama, there is no guarantee that cases that rely on e-mail exchanges and unclear states of mind result in jail time. In one prominent case involving e-mail exchanges, for example, charges were ultimately dropped against Frank P. Quattrone, the high-level Credit Suisse banker accused of interfering with a government investigation. Now, the government’s case will hinge on persuading a jury that Mr. Cioffi and Mr. Tannin knew that their funds were losing money and kept pertinent details from large investors. The collapse of the two funds early last summer became the first visible sign that a brewing crisis with the market for subprime mortgages was ready to explode. Top Wall Street firms like Bear, Merrill Lynch and Citigroup had bolstered their profits by diving into the hot mortgage business in 2006. But in early 2007, the market began heading south and Mr. Cioffi and Mr. Tannin began receiving worried calls from investors and their lending banks. Mr. Cioffi was a well-regarded Bear Stearns veteran with a history of generating top-tier returns. Within Bear’s small management division, he was given free rein raising money for a second, even riskier fund that borrowed as much as $20 for every dollar it invested just as the mortgage market was peaking in August 2006. Like many Wall Street executives at the time, he would not concede that the market was ready to crack, and according to transcripts reviewed by prosecutors, told investors on several occasions that he was optimistic about a recovery, culminating with a conference call on April 25 last year. Prosecutors will probably make the case that Mr. Cioffi, in conversations and exchanges with employees, had his own doubts about the subprime market and thus deceived investors by giving them an overly optimistic view of the markets. Prosecutors are also expected to assert that Mr. Cioffi’s decision in March to move $2 million of the $6 million that he had invested in one of the funds to a less risky Bear Stearns fund is proof that he was putting his interests ahead of investors to whom he owed a fiduciary duty. In its defense, Bear Stearns has said that Mr. Cioffi moved the funds to provide support for a third fund in which he had no stake and that if he was truly worried about a fund collapse he would have pulled out all his money. Bear Stearns, now part of JP Morgan, has also said that the fund managers did not deceive investors and kept them informed of the risks involved.
lets try to figure out which part of the code of ethics they broke
I was sort of wondering if any of the “glorious duo” had the charter.
highparkcfa Wrote: ------------------------------------------------------- > I was sort of wondering if any of the “glorious > duo” had the charter. easy enough to look them up in the member directory