Mangers of Bear Stearns Hedge Fund Collapse Acquitted
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Two former Bear Stearns executives, who headed hedge funds during the 2007 subprime mortgage meltdown, were acquitted today on charges of lying to investors about the pending crisis of the economy.
Ralph Cioffi and Matthew Tannin were found not guilty by a jury of eight women and four men of misleading clients who lost $1.6 billion. The jury deliberated for less than one day before announcing the verdict.
Cioffi, 53, the portfolio manager for the hedge funds, and Tannin, 48, the chief operating officer, each faced up to 20 years in prison if convicted on the charges of conspiracy, securities fraud and wire fraud.
This ruling is the first in a case of the U.S. effort to gain convictions linked to the subprime mortgage crisis and the recession that followed. The precedent being set with the acquittal of Cioffi and Tannin will make it more difficult for the U.S. Justice Department to bring more charges against those linked to the subprime market.
"Any time the government undertakes a major prosecution in a new area, the outcome certainly influences its thinking about the prosecutability of other potential defendants," former SEC lawyer Jacob Fenkel said. "Acquittals force prosecutors to rethink their theories and charges."
The collapse of the subprime market cost investors up to $396 billion and helped to initiate the global recession that is currently being recovered from.
The men still face fraud charges in Manhattan federal court, according to the case's prosecutors.
Bear Stearns was bought by JP Morgan (NYSE: JPM) in 2008 after collapsing due to the subprime meltdown.
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