Find all School-related info fast with the new School-Specific MBA Forum

It is currently 20 Oct 2014, 14:51

Close

GMAT Club Daily Prep

Thank you for using the timer - this advanced tool can estimate your performance and suggest more practice questions. We have subscribed you to Daily Prep Questions via email.

Customized
for You

we will pick new questions that match your level based on your Timer History

Track
Your Progress

every week, we’ll send you an estimated GMAT score based on your performance

Practice
Pays

we will pick new questions that match your level based on your Timer History

Not interested in getting valuable practice questions and articles delivered to your email? No problem, unsubscribe here.

Events & Promotions

Events & Promotions in June
Open Detailed Calendar

Bear Stearns ex-managers charged

  Question banks Downloads My Bookmarks Reviews Important topics  
Author Message
Director
Director
User avatar
Joined: 18 Dec 2007
Posts: 983
Location: Hong Kong
Concentration: Entrepreneurship, Technology
Schools: Hong Kong University of Science and Technology (HKUST) - Class of 2010
Followers: 11

Kudos [?]: 133 [0], given: 10

Bear Stearns ex-managers charged [#permalink] New post 19 Jun 2008, 17:28
http://news.bbc.co.uk/2/hi/business/7463713.stm


Quote:
Two former managers at investment bank Bear Stearns have been charged with fraud related to two hedge funds which collapsed in June last year.

Ralph Cioffi and Matthew Tannin, who managed the funds, were arrested in New York and later granted bail.

It is alleged they knew of the funds' problems but did not disclose them to its investors, who lost a total of $1.4bn (£709m).

The two men pleaded not guilty at a Federal Court hearing in Brooklyn.

The hedge funds bet on the high-risk sub-prime mortgage market in the US before they collapsed.

Their closure was one of the first signs of the problems in the sub-prime market, which triggered a massive loss of confidence in financial markets.

In a seperate development, more than 400 people have been arrested as part of an FBI investigation into alleged mortgage fraud.

The deputy US attorney general said the two investigations were intended to help restore stability and confidence in the housing market and the credit markets.

'Fraudulent scheme'

FBI spokesman Jim Margolis told the BBC the men faced criminal charges of "securities fraud related to their management of two Bear Stearns hedge funds".


Matt Tannin...is being made a scapegoat for a widespread market crisis

Attorney Susan Brune representing Mr Tannin

According to papers filed with a US District Court in New York, the two men are charged with running what is described as "a fraudulent scheme".

Mr Cioffi and Mr Tannin believed that two of the funds they ran were in "grave condition and at risk of collapse", the charges stated.

"Rather than disclosing the true state of the Funds to investors and lenders, thus allowing an orderly wind-down of the Funds, Cioffi and Tannin agreed to make misrepresentations in the ultimately futile hope that the Funds' bleak prospects would change and that their incomes and reputations would remain intact," the papers said.

The indictment quotes an email Mr Tannin sent to Mr Cioffi in April 2007 which stated that if a report by one of their management team was correct, "the entire sub-prime market is toast".

Two days later, according to the papers, the two men told senior Bear Stearns personnel that the Funds were "in good shape and would continue to be successful".

Attorneys representing the former Bear Stearns managers said they had not foreseen the sub-prime crisis.

"[It] took the whole financial world by surprise," said Mr Cioffi's attorney, Edward Little.

"So our question is, why is Ralph Cioffi being charged in this case?"

Mr Tannin's lawyer, Susan Brune, said he was "being made a scapegoat for a widespread market crisis.

"He looks forward to his acquittal," Ms Brune said.

Demise

Mr Cioffi and Mr Tannin are thought to be the first Wall Street executives to face criminal charges related to the US sub-prime mortgage crisis.

Their arrest could mark the start of a wider campaign by US authorites to hold to account those seen as responsible for the events that gave the world's financial markets their biggest shock since the Great Crash of 1929, according to BBC business correspondent Mark Gregory.

Sub-prime mortgages, loans issued to people with a poor credit history, were repackaged as securities and sold across the globe.

The collapse of these hedge funds preceded Bear Stearns' own demise earlier this year.

In March, JP Morgan agreed to buy Bear Stearns with backing of the US Federal Reserve. The deal was approved by Bear Stearns shareholders last month.

Bear Stearns was one of the most high-profile victims of the credit crunch, which was triggered by bank losses linked to the US housing market.

The Fed took swift action over the situation at Bear Stearns to prevent problems spreading to the rest of the international financial sector.



Is this another case of bankers trying to hide losses and hoping the market turns in their favour? Does banking corrupt people so much that integrity is thrown out of the window in the chase for more $$$$?
Bear Stearns ex-managers charged   [#permalink] 19 Jun 2008, 17:28
    Similar topics Author Replies Last post
Similar
Topics:
Inside the Bear Stearns boiler room pm4553 0 04 Mar 2009, 06:11
1 15882% gain ($270 MM profit) on Bear Stearns put options trader1 3 11 Aug 2008, 11:51
Bear alimad 7 25 Jun 2008, 18:39
Chicago Bears squali83 4 23 Feb 2007, 09:37
4 Grizzly bears mahesh004 19 02 Jun 2006, 11:00
Display posts from previous: Sort by

Bear Stearns ex-managers charged

  Question banks Downloads My Bookmarks Reviews Important topics  


GMAT Club MBA Forum Home| About| Privacy Policy| Terms and Conditions| GMAT Club Rules| Contact| Sitemap

Powered by phpBB © phpBB Group and phpBB SEO

Kindly note that the GMAT® test is a registered trademark of the Graduate Management Admission Council®, and this site has neither been reviewed nor endorsed by GMAC®.