Matthew Tannin

Lehman Brothers regulatory woes mount

Jim Kim — Fri, 17 Oct 2008 13:52:26 -0400

Nothing gets prosecutors worked up quite like financial scandals. So far, we've seen sporadic action only--notably charges against two Bear Stearns hedge fund executives for misleading investors. A big Enron-like enforcement action has yet to be filed. But Lehman Brothers may be a good bet. Bloomberg reports that the bankrupt firm is the target of three grand jury investigations, and has received at least 12 subpoenas. It's unclear what prosecutors are thinking. Would they try to nail some executives for misleading the public? You can imagine the defense: hey, what we reported was true, but short sellers didn't believe us. They tanked out the company. You can bet that prosecutors are going over every email sent by every executive. There's also a massive amount of private suits underway, which may bubble up some interesting accusations.

For more:
- here's the Bloomberg article
- The New York Post says CEO Richard Fuld has been subpoenaed. Article

Big debate rages about charges against Bear Stearns execs

Jim Kim — Mon, 18 Aug 2008 18:35:35 -0400

Recall that Ralph Cioffi and Matthew Tannin, portfolio managers of the two Bear Stearns hedge funds that collapsed a little over a year ago, have been charged with fraud--essentially for not disclosing the true extent of the funds' portfolios to clients. As TheDeal.com notes, a big debate has erupted over the legitimacy of the charges. One line of thought has been that the two were charged as scapegoats for the entire mess. Another line suggests that the two were charged to alleviate the pressure to charge others higher up the food chain. It starts sounding a little conspiracy oriented. We may not have seen the last of the charges, though you get the feeling the top execs will not be charged with anything. However, if the Bear Stearns managers decide to go to trial, we may hear a lot about the higher ups and what they did or did not do.

For more:
- here's some commentary from TheDeal.com

More Bear Stearns charges coming?

Jim Kim — Mon, 30 Jun 2008 11:35:57 -0400

NPR reports that there could be new indictments against Ralph Cioffi and Matthew Tannin, the two Bear Stearns execs who have already been charged with misleading investors. The new charges reportedly would deal with the funds relationship with the banks that provided credit and various guarantees. NPR notes that prosecutors already have spoken with Barclays, Merrill Lynch and Bank of America. Barclays sued Bear Stearns, though I'm not sure where that stands. Clearly, the government would like to make an example of these two men. There are a lot of probes going on. My sense is we're more likely to see more states take action sooner. The feds will pick their cases carefully. Consider the case by Massachusetts regulators against UBS over its auction-rate securities sales practices.

For more,
- here's the article

Lessons from Bear Stearns hedge fund fiasco?

Jim Kim — Mon, 23 Jun 2008 21:29:02 -0400

Fortune weighs in on the indictments of Ralph Cioffi and Matthew Tannin, who ran those two infamous Bear Stearns hedge funds, with an interesting piece that raises the issue of accountability. The two men apparently were operating with a high degree of freedom that surprised some. The failure of oversight now is pretty obvious. Fortune suggests that the same paltry oversight by management was evident when it came to the larger crisis of confidence that engulfed the whole company. "In both instances, the firm's management failed to act quickly enough to keep big problems from ballooning out of control." Regarding hedge funds anyway, the game has changed a bit. Investors are taking a more aggressive approach to ensuring how risk is monitored and the like. If Cioffi and Tannin takes this to trial, it will be fascinating. A lot of dirty laundry may get aired.

For more:
- here's the article

Prosecutorial floodgates about to open?

Jim Kim — Fri, 20 Jun 2008 07:22:43 -0400

The arrests of Bear Stearns portfolio manager Ralph Cioffi and hedge fund exec Matthew Tanin stand as an omen of sorts. We've said before that prosecutorial activity always follows upheaval and mayhem, and the on-going credit crunch qualifies. Of course, it was those two now infamous Bear Stearns hedge funds with the long names that started it all. The issue is whether the arrested former managers deliberately lied to investors, saying that they were comfortable with the assets even as they knew they were tanking. Prosecutors say Cioffi moved $2 million of his own money out of one fund while he still had a rosy face on for customers. As usual, email will figure prominently. This seems to be part of a larger probe of the whole credit crunch. There may be others in similar straights. You have to wonder if we will see more criminal indictments. We don't how high up the food chain the government wants to go. You can bet they've gotten an earful from investors who felt wronged. Hang on.

For more:
- here's an AP article