Bear Hug? Jury to Get Fraud Case Soon

[WSJ_law_blog]

With all the bustling around Thursday on the blockbuster Galleon hedge-fund news, one could almost be forgiven for forgetting about the other big hedge-funders in trouble — the Bear Stearns duo currently in the midst of their fraud trial over in Brooklyn.

The NYT has a report out Friday on how just how things are shaping up over there. According to the story, federal prosecutors spent nearly three hours on Thursday things up with their closing remarks. The gist of the argument is simple: the pair, Ralph Cioffi and Matthew Tannin (pictured) knew their funds were in trouble in the spring of 2007 and had lied to investors.

“If you are trusted with other people’s money on Wall Street, you can’t defraud them,” said AUSA Ilene Jaroslaw, to the jury. Cioffi and Tannin acted like “masters of the universe” and “thought the laws and rules applied to everyone else but them,” she added. Click here for earlier LB coverage of the Bear Stearns trial.

The case is the first against prominent Wall Street executives charged with fraud stemming from the financial crisis. But it hasn’t gone entirely well for the government. Government evidence has been ruled in admissible; government witnesses have provided testimony not entirely helpful to the government’s case.

Much of the government’s case has focused on emails sent by the defendants. But Williams & Connolly’s Dane Butswinkas, Cioffi’s main lawyer, said prosecutors have taken the e-mail out of context and provided “misleading sound bites” to try to prove a criminal conspiracy when there was none. According to the NYT, Butswinkas said the details of the strategies used by the two hedge funds run by the men and the context of the communications from Cioffi and Tannin raised doubts about the prosecution’s case.

“If you look at some of the tactics I just showed you, do they make you pause?” Mr. Butswinkas asked the jury. “If they would, then that’s reasonable doubt.” Butswinkas is expected to continue his closing remarks on Friday followed by a statement by Tannin’s lawyers. The case would then head to the jury.

On Thursday, reports the Times, Cioffi “seemed confident he would be exonerated as he chatted with family members and friends before closing statements.”