Ex-Bear Stearns manager did not lie: lawyer
NEW YORK (Reuters) - Former Bear Stearns hedge fund manager Matthew Tannin, on trial for charges of alleged fraud and lying to investors early in the financial crisis, might have made strategic mistakes but he did not conspire with colleagues to commit a crime, his lawyer said on Thursday.
Fund managers Tannin and Ralph Cioffi have denied charges of securities fraud, wire fraud and conspiracy in the June 2008 indictment that made them the first high-profile Wall Streeters to face criminal charges stemming from problems with subprime mortgages and overall market liquidity.
Emails written by Cioffi, 53, and Tannin, 48, are key to the government's charges, which were brought months after U.S. law enforcement announced a crackdown on mortgage fraud.
"No one can lie about what the future will bring because nobody knows what the future will bring," Tannin's lead lawyer, Susan Brune, told the jury in an opening statement in a New York court.
"He tried to foster debate, think through all the options and he used emails to foster that kind of debate," Brune said.
Cioffi and Tannin managed two hedge funds that collapsed in mid-2007, costing investors between $1.4 billion to $1.6 billion. The funds were crammed with subprime mortgage-backed securities such as collateralized debt obligations (CDOs).
Neither man is charged with contributing to the demise of Bear Stearns Cos less than a year after the funds collapsed. The company was sold to JPMorgan Chase & Co in a government-backed deal.
FEAR IN EMAILS
Prosecutors contend that by March 2007 -- more than 18 months before the full extent of the global financial crisis became clear -- the pair promoted the funds to investors while privately emailing their fears about a possible market calamity.
Brune addressed a lengthy April 22, 2007 email by Tannin to Cioffi and another colleague, one paragraph of which was highlighted in the indictment. Tannin presents two extreme positions of either closing the funds or aggressive investment following an internal company report on CDOs.
He wrote that if the report was at all accurate "then the subprime market is toast" and the funds should be closed.
"Matt is trying to think about difficult things and he's getting some things wrong," Brune told the jury. "That's not a crime, at least it shouldn't be."
If Cioffi and Tannin are convicted by the jury at the end of the five to six week long trial before U.S. District Judge Frederic Block in Brooklyn, they face prison sentences of up to 20 years.
Brune told the jury that the case was about risks inherent in hedge fund management and about her client "worrying" and "being anxious" for investors, some of them large banks.
At a long wooden table in the courtroom, Tannin sat calmly listening and sometimes taking notes. His wife and son sat nearby on a bench in the courtroom.
Brune said Tannin sought advice from a colleague Steven van Solkema, the funds' credit analyst and expert in collateralized debt obligations.
"Please tell me if there is something I'm not saying ... that's not right or not clear" to investors, Brune quoted Tannin as asking van Solkema in a March 30, 2007 email.
"This is not an email of a guy who is trying to commit a crime," Brune told the jury. He "is trying to do his job."
Prosecutor Patrick Sinclair said in an opening statement to the jury on Wednesday that the two men repeatedly lied to investors in March and April 2007 "to save their bonuses and their reputations."
Cioffi's lawyer, Dane Butswinkas, told the jury in his opening statement on Wednesday that his client, "did not know how things would turn out" and "didn't have hindsight like the government has today."
The case is USA v Cioffi & Tannin, U.S. District Court for the Eastern District of New York, No. 08-415.
(Reporting by Grant McCool; Editing by Maureen Bavdek, Bernard Orr)