Shots Fired in Bear Stearns Case; Spotlight Shifts to Defense Counsel

[WSJ Law Blog]

The criminal case against former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin is set to begin in a couple of weeks in Brooklyn. But the pre-trial litigation has been, in a word, fascinating. In recent weeks the government has leveled new accusations against both defendants, who are charged with lying to investors as their mortgage-related funds fell apart in 2007.

Prosecutors are trying to admit evidence at trial that:

• Cioffi and Tannin effectively committed bank fraud .
• Cioffi tried to physically obtain documents in Florida that were the subject of a government subpoena.
• Tannin’s Tablet PC, which he used as an electronic notebook, and a handwritten trading notebook used by Cioffi between January 2007 and June 2007 — which includes the period of the alleged fraud — are missing.
• Tannin allegedly shut down his personal Google email account in March 2008, several months before he was charged, after he was aware the government had interest in the account and after it ordered that all emails and documents relevant to the hedge funds be preserved.

That’s where the lawyers come in. Prosecutors say the closure of the Gmail account, which led to the erasure of its contents by Google a month or so later, isevidence of Tannin’s consciousness of guilt.

Not so, said Tannin’s lawyers from Brune & Richard. In fact, Susan Brune wrote this week that the firm told Tannin to shut down the account, but that his computers have been electronically copied and preserved and the contents of any Gmail accounts or other documents would likewise have been preserved.

But prosecutors said even if Tannin did preserve the contents of the Gmail account, his lawyers have refused to produce those contents to the government. Brune & Richard says it has no legal obligation to turn over the emails, and if they did turn them over it would infringe upon their client’s “Fifth Amendment right to silence.”

Why is the Gmail account so important? The government is planning to introduce as evidence an email Tannin wrote from his Gmail account during the period of the alleged fraud, which prosecutors say they obtained from another witness in the case. They say Tannin may have written other allegedly damning emails that could be used as evidence.

Next week the judge in the case will to determine whether a conflict of interest now exists for Brune & Richard because prosecutors may call the firm as a witness to explain why the personal email account was shut down.