Some Misses on the Bear Stearns Acquittals

The only Wall Street executives to be charged in the crisis walked away from a Brooklyn courthouse free men after a jury cleared them of lying to investors and insider trading.

But the stories about Bear Stearns’ Ralph Cioffi and Matthew Tannin are a bit incomplete.

For one reason why, check out financial journalist William Cohan on Bloomberg TV. He says the prosecution focused on the wrong stuff, not emphasizing what he calls the “smoking gun”—a Bear Stearns memo noting that the hedge had 60 percent of its assets in subprime when it had told investors it had just 6 percent.

“I think they misled investors about what original fund was invested in. it wasn’t a safe fund, it was invested in subprime mortgages… and the prosecution for whatever reason didn’t focus on it,” Cohan told Bloomberg.

Here’s how Cohan described it in his book “House of Cards”:

Cioffi was becoming increasingly concerned about the funds’ exposure to the subprime market, even though the monthly statements sent to investors stated that only 6% of the funds’ money was invested in subprime. Cioffi was concerned because he knew that actually the funds had closer to 60% of their money invested in subprime mortgages.

It would have been good to see that noted in today’s stories.

Of The New York Times, Wall Street Journal, Washington Post, and Bloomberg, none tells readers about Matthew Tannin’s “blow-up email.” That’s the one the judge blocked the jury from hearing about after ruling the government issued an overly broad search warrant to Google, which was still able to pull up the emails (in which Tannin had written diary entries) even though Tannin—or, uh, his lawyers—had deleted the account.

Here’s what that diary, written eight months before the actual blowup, said:

“As I sat in John’s office I had a wave of fear set over me that the fund couldn’t be run the way that I was ‘hoping,’ and that it was going to subject investors to ‘blow up risk.’ Spreads are tight and credit is only deteriorating. I was worried that this would all end badly and that I would have to look for work.”

None of this means the two were really guilty, of course, but it’s context that readers should have had.

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Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.