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Bear Stearns Managers Plead Not Guilty To Fraud

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The Associated Press

Published: June 20, 2008

NEW YORK - It was April 2007, and two Bear Stearns hedge funs run by Ralph Cioffi and Matthew Tannin were piling up losses in the subprime mortgage market. The men were panicking over an internal report showing their funds were tanking.

"The subprime market looks pretty damn ugly," Tannin wrote in an e-mail to Cioffi. "If we believe the report is ANYWHERE CLOSE to accurate I think we should close the funds now. The reason for this is that if the report is correct then the entire subprime market is toast."

The slide only worsened in the ensuing weeks. On June 9, Cioffi wrote that if he couldn't miraculously turn the funds around, "I've effectively washed a 30-year career down the drain," prosecutors said.

On Thursday, Cioffi and Tannin were in handcuffs - arrested on charges of conspiracy and securities and wire fraud for allegedly lying to investors in the hedge funds.The two funds were heavily invested in subprime mortgages.

Both defendants pleaded not guilty, were released on bail, and left court without speaking to reporters. Each faces up to 20 years in prison.

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