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Bear Stearns Arrests

POSTED: 01:15 PM ET, 06/19/2008 by Derek Kravitz

The arrests today of two former Bear Stearns managers in the wake of the Wall Street's firm collapse and the subprime mortgage crisis comes after a year-long investigation.

Matthew Tannin and Ralph Cioffi became the first executives to be criminally charged in the subprime market debacle. The federal investigation has focused on whether the men misled investors about the risky subprime mortgage market, The Associated Press reports.

The 85-year-old New York investment bank was the fifth-largest U.S. securities firm when it was sold off to J.P. Morgan in March after being bailed out by the Federal Reserve in an unprecedented emergency move by the central bank.

Looking at the firm's collapse, analysts and observers pointed to Bear Stearn's exotic securities, which were linked to subprime mortgages. In June, two Bear-controlled hedge funds helped spark the worldwide credit squeeze.

The Post's Alec Klein and Zachary A. Goldfarb examined the market crisis in a three-part series, "The Bubble," published last week.

And The Wall Street Journal looked at Bear Stearns's downfall in a three-part series published in May.

The company had long been one of Wall Street's smaller, but most profitable firms. Fortune magazine called it "the Rodney Dangerfield of investment banks. It made money but never got much respect."

Federal securities regulators and the U.S. attorney in Brooklyn were said to be investigating what Bear executives told investors about the health of its hedge funds in a pivotal April 25, 2007 conference call.

Investigators are also looking at the transfer of personal funds by two Bear managers into safer investments about the same time. The executives have, through their attorneys, denied wrongdoing, and Bear Stearns said it has cooperated with the investigation.

By Derek Kravitz |  June 19, 2008; 1:15 PM ET
Previous: GAO Sides With Boeing in Tanker Deal | Next: How Abramoff Pulled White House Strings

Comments

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If there guilty lock them up and throw away the Key's, I have read articles in the past were it's not easy getting a conviction on this type of greed,I hope there wrong.

Posted by: Dan | June 19, 2008 9:42 PM

Since they defrauded a bank, not just individual investors, there is a better chance of conviction. Government attorneys need help in order to get a conviction. In this case, it looks like the perpetrators of fraud admitted their double-dealings in emails, which always helps. I wonder if the emails were deleted from the computers, then the hard drives, or if they had to be retrieved from the network. That would be interesting to know.

Posted by: karma | June 20, 2008 11:34 AM

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