Flirting With Disaster: The Bear Prosecution Hits More Roadbumps

[WSJ_law_blog]

As we’ve written before, only two Wall Street executives have been charged with securities fraud stemming from the credit crisis. The two, former Bear Stearns execs, Ralph Cioffi (pictured, left) and Matthew Tannin (pictured, right), are currently on trial now, in Manhattan federal court. Click here for recent LB coverage of the case.

But the prosecutions may not wind up providing prosecutors much of a road map for subsequent trials. That’s because things don’t seem to be going that well for the government lawyers, writes our old colleague Dan Slater, who recently wrote another dispatch for the NYT’s Dealbook on the case.

So what’s happened? According to Slater, government witnesses keep coming unleashed, providing testimony that seems if not exculpatory, at least helpful to the defense. As Slater puts it: “a case built on provocative e-mail excerpts, bereft of context, can teeter when witnesses appear in court to provide a backdrop, for example, or the surrounding context of a seemingly damning e-mail message excerpt is read before a jury.”

On Monday, Slater wrote about an example of this concerning testimony from a credit analyst which seemed to help the defendants. The latest example concerns a so-called “toast” email written by Tannin to the Gmail account of Cioffi’s wife, in which he claimed the whole sub-prime market was “toast.”

But, writes Slater, “in that same e-mail, the entirety of which was read into the trial record this week, a more sympathetic personality emerged.” Tannin also wrote:

Every so often I worry a bit that because you have been so spectacularly successful so far in almost every way, you might be taking this opportunity to second guess yourself. Well, just in case you are, don’t. At the end of the day, I think we will both be able to look at all that happened and all that we have done and learn from what has gone well as well as from what hasn’t … What a shame it would be for us to not take all we have learned and apply it going forward.

According to Slater, it seems the judge in the case, Frederick Block, is growing a bit weary with the government’s rather choppy presentation. Regarding an “ever-growing mountain of evidence,” he commented: “We have a lot of papers here … I doubt jurors are going to read all 530 of those documents. But this is how the government chooses to present its case. Continue.”