The first of the big trials this go around just ended in a bust:
The two men, Ralph Cioffi and Matthew Tannin, were accused of lying to investors -- telling them they were optimistic about their funds, while privately worrying they were all but dead. The funds collapsed in 2007, in a prelude to the mortgage crisis that eventually felled Bear Stearns itself less than a year later and heralded the arrival of a full-blown credit crisis. (Bear Stearns was bought by J.P. Morgan Chase & Co.)
The acquittals are a setback for the U.S. attorney's office in Brooklyn, N.Y., which along with several other offices is investigating Wall Street for possible criminal wrongdoing stemming from the credit crisis, including at Lehman Brothers Holdings Inc. and American International Group Inc. In Tuesday's case, the question boiled down to this: Were the two men misleading investors, or simply putting a positive spin on sagging returns?
Jurors in Brooklyn found there was no evidence beyond a reasonable doubt that the defendants had criminal intent and conspired to mislead their investors. There "was nothing that was clear and convincing," said juror Tabasam Bhatti, a 31-year-old civil servant. The prosecution didn't provide "enough information," he said.
Messrs. Cioffi and Tannin were the first and so far only Wall Street executives to face criminal securities-fraud charges stemming from the crisis, underscoring the difficulty of assigning criminal liability for Wall Street's mistakes.
From what I understand, this seems like the right result. The evidence against them seems to have been pretty thin--a few passages from emails that didn't sound nearly so bad when the entire email was read, and the simple fact of the fund's decline.
The government put on display what appeared to be incriminating emails by Mr. Tannin in which he expressed his fear about the markets in 2007. In an email he wrote to Mr. Cioffi in April, Mr. Tannin said there was "simply no way for us to make money -- ever," and that they should consider closing the funds. Then, several days later, he told investors in a conference call that he was "comfortable" with the funds' performance.
Defense lawyers said the prosecutors were taking the emails out of context. What the April email showed, when read in its entirety, is that Mr. Tannin also said the men could choose to make aggressive bets rather than close the funds, the lawyers argued.
The public wants big criminals to take the fall. But the bankers, while stupid--in many cases irresponsibly so--didn't necessarily break any laws. The clear-cut fraud was at the mortgage broker level, but those are regulated by the individual states, and also, pulling some guy out of his office in a strip mall and putting him on the dock isn't nearly as impressive as sticking the princes of Wall Street at the defense table.
In other news, Obama decides to do something about unemployment.
But, no hurry, it can wait until next month.
Hey let's get a committee together to talk about this soon!
http://www.msnbc.msn.com/id/33881432/ns/business-stocks_and_economy/
Pretty quick threadjack. You just couldn't help spurting all over the keyboard I guess.
I can't understand why you've not gained gainful employment yet.
PS - why are you obsessed with rules for radicals? Since it's publication more republicans than democrats have been elected. Doesn't seem to be quite as powerful as your paranoia suggests.
You seem obsessed with my posts ... almost like a stalker.
Don't you have a job?
I own a company so I have other people to work for me. Perhaps you should try starting one rather than bitching all the time.
We're hiring under affirmative action - you're bound to come under some category somewhere.
Tom Kirkendall at Houston's Clear Thinkers blog has written extensively about the criminalization of bad luck and/or bad judgement. Jamie Olis' story is at least as sad as any case you'll hear.
http://blog.kir.com/
Quite frankly, it's things like that and the whole SOX headache that are pushing more good ideas into club deals with a few QIB's or Accredited Investors. What this means to Mom-n-Pop is that they get fewer, and worse, investments to choose from. They never hear about the GOOD ideas. This at a time when they need better, not worse investments since obvioulsy Social Security is about to implode.
All so some grasping, power hungry panderer like Eliot Spitzer can reach for public office some day.
Heh, I just put these on my Corvette today. Now I know the answer!
Think of it this way.
We all get together and invest in McArdle's Vegan Irish Pub. McArdle has piles of market research that show the Vegan Pub market is poised to take off and we'll all make a fortune.
Well, we pony up the money and the first McArdle's opens and intially people are interested and we start making some good money. As the money rolls in more investors pile in and we start to expand.
Then, the Vegan Pub fad starts to fizzle and McArdle's starts to loose money. Some start to argue that we should get out, but Megan is convinced that if they just increase the marketing budget and change a few things, the customersd will be back.
But, late one night she e-mails Peter and says, "Honey, I really don't think this is going to work, maybe we should just cut our losses." In the morning, she realizes that a big marketing push is all she needs and she presses forward and informs the investors that once the new print and radio spots hit the market - all will be well.
Well, the customers never do come back and it turns out all that marketing money was wasted and McArdle's files for Chapter 11.
Should Megan go to jail?
I fail to understand how what the Bear guys did was any different.
Should she go to jail? No. Having spent all that time in a vegan pub would be punishment enough.
"You pays your money, and
you takes your choice/chance."
As long as the changing odds
are honestly reported,
no blame attaches.
This is the other side of TBTF moral hazard: if you're too big to fail, you're essentially betting with taxpayer money, and the taxpayers will demand that Someone Be Punished when things go south.
They tried to round up a few to blame for the .com bubble and that didn't involve any government bailout.
Don't remember that. Who was charged?
I remember the telco eq makers taking a 90%+ loss in value (they were on the hook for a lot of seller financing) because I was chasing Corvis from $20 to .77, but I don't remember anyone actually being tried for anything. Possibly I just missed it.
Dave,
I was thinking people like Frank Quattrone.
http://en.wikipedia.org/wiki/Frank_Quattrone
Hmmm, true enough. Milken, too, come to think of it.
Still, while taxpayer funds aren't a necessary condition, I do think they exacerbate the "get the torches and pitchforks" mentality.
Dave,
Nah, I think this crisis is just bigger and that's why people are more angry. I also think people knew in their heart of hearts that Pets.com was a crap shoot. But, the vast majority of people who are 200k upside on their homes never in a million years thought something like that was possible.
When Eliot Spitzer went to trial, he lost;
Those must have been rough days for the working girls.
Civil suits to determine whether material information regarding risk was disclosed, rather than criminal show trials are the way to go. Wall Street fund managers are much more attuned to and afraid of the former given the lower burden of proof involved.
I had predicted a few weeks ago that they would be convicted. Federal prosecutors have become almost unbeatable in these types of cases, and I was happy that, for once, a jury actually looked at the evidence rather than just swallowing the government's dishonest characterizations of snippets of information. Even worse, was the behavior of the media covering this case.
"The evidence against them seems to have been pretty thin--a few passages from emails that didn't sound nearly so bad when the entire email was read, and the simple fact of the fund's decline."
Change 'fund' to 'market', and you just described most if not all of Eliot Spitzer's cases from the dot.com bubble.