Bear Stearns Fraud Verdict: E-mails As Proof of Guilt? That's So 20th Century.

The reliance on e-mails as definitive, incriminating evidence of chicanery was once a given, but that didn't last long. Social media have now damaged the credibility of such e-mails, as the monumental Bear Stearns fraud verdict shows.

E-mails shooting back and forth during 2007 between Ralph Cioffi and Matthew Tannin looked like bullets that hit the target, damning the two hedge-fund goniffs on charges of securities fraud. (See my previous item for details from the indictment.)

Such careless and stupid e-mails revealing crooked behavior doomed previous goniffs, like Jack Abramoff and his henchmen in the infamous Wampumgate corruption scandal of the Bush era. (The unmasking of that scandal was one of John McCain's finest moments, if you recall.) The e-mails wove a fascinating web of corruption extended to the religious right, several congressmen, and Karl Rove. And the e-mails not only brought Abramoff and crew to justice, but they forced congressmen out of their jobs.

But this is a new time, and texting and twittering have now convinced many people that e-mails are also thoughts on the fly that aren't necessarily proof or even strong evidence. That's obviously because we all now rue some of the thoughts on the fly that we text and twitter. And texting and twittering are even more careless and less thought-out than e-mails.

So cases built on e-mails no longer have the cred they once had.

But the problem is this: Those thoughts on the fly are often really good evidence of malicious or illegal intent. Twittering and texting have merely inured the common folk, blinding them to that fact. Just because someone twitters, texts, or e-mails incriminating statements doesn't make those statements not incriminating.

In any case, John Hueston, who prosecuted Enron's top crooks, Ken Lay and Jeff Skilling, says it best in this morning's New York Times:

"The texting, twittering, BlackBerry-toting jurors of today understand that an e-mail capturing a concern, doubt or momentary distress does not reflect thought over time, much less a vetted public statement."

Bear Stearns Fraud Verdict: Breathe Easy, Wall Street Execs. Lies Get the Jury's Blessing.


The verdict in the Bear Stearns fraud case has far-reaching implications for Wall Street execs, and it's all good — for them.

Ralph Cioffi and Matthew Tannin were found not guilty in Brooklyn federal court of fraud and other charges related to their blatant lying about their hedge funds, which were built on the subprime-mortgage house of cards.

In the only federal prosecution so far of any of the goniffs who helped cause last year's Wall Street meltdown, they got away with murder (of their investors' money), if you read the last year's indictment. Even their participation in the homicide of Bear Stearns (their funds lost almost $2 billion) was blessed by the jury, which said the prosecutors didn't give them enough evidence.

According to the indictment, back on March 2, 2007, Cioffi and Tannin were freaked out by their funds' extremely shaky — even doomed — liquidity because the subprime mortgages underlying the CDOs they were peddling were collapsing. They drank "a vodka toast" privately just for surviving the previous month without having to fold their huge hedge funds, and they kept their worries to themselves, not even telling their bosses, apparently. To investors, however, they lied, saying everything was hunky-dory (lie) and that they were putting their own money into their funds (lie).

The next day, March 3, according to the indictment, Cioffi told Tannin that things could be worse: "[W]e have our health and families ... [w]e are not a 19-year-old Marine in Iraq. ..."

Bear Stearns Duo Cioffi and Tannin Found Not Guilty of Securities Fraud in Subprime Case

The only real prosecution for securities fraud relating to the subprime crisis has flopped: Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin were acquitted today of fraud charges. A federal jury in Brooklyn took less than six hours to reach the verdict, after a month-long trial.

They were indicted in June 2008, a year after two funds they managed failed, costing investors a cool $1.6 billion. The duo were accused of not telling investors about the the shaky subprime-mortgage foundation of their funds.

The WSJ notes that the trial "trial was viewed a test of the boundary between putting a positive spin on bad results and outright fraud."

As my colleague James Lieber recently noted in a Voice cover story, Cioffi and Tannin were the targets of a Bush-era prosecution (and they were hardly big fish), and Barack Obama's crew has yet to launch a major securities fraud prosecution of its own.

In any case, the not-guilty verdict makes such prosecutions even more unlikely now.

Yet Another Federal Judge Angrily Rips Obama Administration's Dealings With Crooks


It wasn't long ago when Frank DiPascali was called the "key" to the "global intrigue" of Bernie Madoff's Ponzi scheme.

That was when his lawyer (Marc Mukasey, son of Bush era Department of Terror chief Michael Mukasey) crowed that DiPascali would be a snitch ""of a historic nature, somebody who can pull the curtain back on a fraud and answer a lot of questions" — questions that "the whole world wants to be answered."

You want answers? You want financial crooks brought to justice? Barack Obama's administration isn't doing it, as my colleague James Lieber points out this week. The best steps toward justice so far in both the Madoff scandal and Wall Street's meltdown are being taken by 2nd District federal judges in lower Manhattan. They're talking the talk and walking the walk.

In the murky Bank of America/Merrill Lynch affair, federal judge Jed Rakoff previously blasted both the bankers and Obama's SEC, rejecting their suspiciously kid-gloved settlement and ordering the case to trial. And now, in the Madoff scheme, federal judge Richard Sullivan has rejected a joint request by Obama's Justice Department prosecutors and DiPascali's lawyers to grant bail to the Madoff flunky.

Convicted New Jersey Pols Get to Vote Before Going to Jail

Humorous fallout from the New Jersey corruption scandal involving politicians, rabbis, body parts, public works and contractors: Former Bergen County Democratic Chairman Joseph Ferriero, convicted about a week ago on federal corruption charges, gets to vote Tuesday because he hasn't yet been sentenced.

As a good Democrat, he would probably vote for Jon Corzine in the gubernatorial race, because Corzine's foe, Chris Christie, was the U.S. attorney who prosecuted Ferriero. But neither Corzine nor Christie is much of a bargain, so what's a crook to do?

Matt Friedman explains at that New Jersey law allows felons to vote until the time of their sentencing. Ferriero isn't the only pol on this list. So if Republican Christie were to lose the gubernatorial race against incumbent Democrat Corzine by only a few votes, the goniffs would have the last laugh.

Madoff Pal Picower Found Dead, Was Accused of Making Billions in Scheme

Jeffry Picower, accused of raking in billions from pal Bernie Madoff's Ponzi scheme, was found dead in the bottom of his Palm Beach swimming pool today.

The 67-year-old goniff and philanthropist got more than $2.4 billion from the fraud in just the past six years, according to court documents. Far from being a victim, authorities say, Picower "earned" up to 950 percent a year — not a bad return on Madoff's zero investments. (See the May 12 complaint.)

When he wasn't doing buyout deals, Picower did a lot of good with some of the gelt, through his foundation, which now is supposedly broke. It wasn't immediately known whether Picower's death was an accident, suicide, murder, or just bad karma. He was said to have been suffering from Parkinson's and other maladies.

Madoff Trustee Demands $200 Million Clawback From Bernie's Brother, Sons, and Niece


Trustee Irving Picard slapped a $200 million suit today on Bernie Madoff's brother, Peter; sons, Mark and Andrew; and niece Shana. Give back those ill-gotten gains, said Picard, going where no Madoff-related lawsuit had gone before.

Check out the official announcement at Picard's site.

Maybe this will finally shake loose some real information on the likelihood of the Madoff clan's involvement as more than clueless bystanders.

Peter Madoff definitely was more than a bystander, though whether he was clueless about Bernie's scam hasn't been determined. Why say that about Peter? Because he was a high muckety-muck (even higher than Bernie) in the securities industry's powerful lobbying group. For years. During the scam.

And as we already know, Peter Madoff invested a student's money in Bernie's scheme, was sued, and reached a settlement with the kid.

This new suit by Picard should shake loose a bunch of new facts, and then we'll probably see that, in the Madoff scandal, the apples didn't fall very far from the tree.

This A.M.: Markets Rise Toward Record; Winnie the Pooh Goes Online; Underarm Spray for Sex Drive Revealed

Big Merger Deals Signal Restored Confidence (NYT)

N.Y. Poverty Data Paint Mixed Picture (NYT)

Actually, the same grim picture with a desperate attempt to paint at least a faint smile on it.

Deals Drive Push Back Into Stocks (WSJ)

"The Dow industrials rose 124 points and are on course for the best quarter since 1998 amid a burst of deals and analyst upgrades."

Obama Enters Olympics Race (WSJ)

Going to Denmark this week to use his charm to try to get the costly Olympics in Chicago in 2016.

Exelon to Quit Chamber Over Climate Bill (NYT)

"The carbon-based free lunch is over," says the CEO of one of the nation's biggest utilities, rebelling against the U.S. Chamber of Commerce's head-in-sand stance against global-warming legislation.

Sex Drive Boosted by Testosterone Spray, Study Says (Bloomberg)

Bailout of Wall Street execs gets personal: Aussie drug company Acrux will ask FDA to let it sell Axiron, an underarm spray that boosts testosterone. Global markets for testosterone treatments, story says, is $1 billion a year and has risen up, up, up by more than 20 percent in the U.S. Meanwhile, "U.S. Drug Companies Chase Vaccines," WSJ says of impending flu profits.


This A.M.: Recession Over, Bernanke Says; Celebration Starts in Unemployment Lines; Senate Floats Health-Care Trial Balloon

Bernanke: Recession 'Likely Over' (WSJ)

Says it's over "from a technical perspective," though unemployment, a predictor and result of recession, is still increasing and up to 10 percent. More than 5 million Americans lost their jobs from December 2007 through March 2009. Now it's up to Americans who still have jobs to spend more money to pull Wall Street completely free of the recession.

Is the Recession Really Over? (Seeking Alpha, Jeff Miller)

"The announcement marks the start of a new 'silly season' where people argue about recession dating, and misconstrue statements, taking them out of context."

Vance Is Winner in Primary Vote to Replace Morgenthau (NYT)

Son of a powerful international pol (Cyrus Vance) succeeds the son of a powerful international pol (Henry Morgenthau Jr.). None of the three candidates for Manhattan D.A. (Cy Jr., Leslie Crocker Snyder, Richard Aborn) seemed to give a damn about Wall Street shenanigans or other white-collar crime, so it'll be business as usual.

Return of Day Traders Drives Rise in Volume (WSJ)

They're trying to cash in on volatile financial stocks, while the big, long-term money stays on the sidelines.

Senate Health Bill Draws Fire on Both Sides (NYT)

Liberals and conservatives hate it, so it might be pretty good.

Allen Stanford claims he cannot afford a lawyer (Times U.K.)

Thin and unshaven like an anorectic supermodel guy, Sir Allen cuts quite a figure in his off-the-rack classic orange prison jumpsuit. Forget about the pro bono stuff: High-priced firm Patton Boggs will represent him only if an insurance policy covering Stanford is applicable. In the meantime, a Houston public defender is stuck with the deadbeat.

Diamonds Post-Lehman Have No Aura (Bloomberg)

Speaking of the collapsed diamond-market bubble, Boston investment banker Christopher Ellis says:

"It is possible to pull too many diamonds out of the ground and cut and polish too many of them and try to cram them down the gullets of the American customer. It's like making foie gras. You wind up with a very unhappy goose."

Tories accuse Gordon Brown of lying to Parliament on cuts (Times U.K.)

Historically rude pols in parliamentary democracies have no problem with accusations of lies and other telling-it-like-it-is. Apparently, neither does at least one American: Barack Obama called Kanye West a "jackass."

A Derivatives Myth Exposed (Seeking Alpha, Jeff Nielson)

Fascinating, fear-mongering assessment of the global derivatives market, the bankers' private "casino," which has an extremely shaky, "notional" value of $1.1 quadrillion, which Nielson notes is more than 20 times the size of the entire global economy.


This A.M.: The Art of the Madoff Scam; Investment Bankers Are Back, Baby!; Commies Are Coming

Madoff Investor's Art Dealer Got $26.5 Million in Rothko Sale (Bloomberg)

Madoff pal Ezra Merkin sells off art for $310 million to unknown buyer. Fee to mysterious agent (believed to be Kyra Sedgwick's stepfather) dwarfs mysterious buyer's agent fee. Cuomo skims off $191 million, puts it in escrow for Madoff's/Merkin's victims.

Two years of pain and mega bonuses are back (Times U.K.)

Investment-banking is back in a big way, and investment bankers are popular once again. "Guaranteed multi-year bonuses, which have been attacked as the worst kind of banking excess, are back. ... It wasn't meant to be like this. Regulators were meant to change the rules to make sure that such bonuses would never be paid again. We had the Walker report on executive pay, and Barack Obama's strictures on remuneration in America. Funnily enough, they do not seem to have curbed banks' behaviour one bit."

US food groups warn of sugar shortage (Telegraph U.K.)

If you consider Hershey, Mars, and Krispy Kreme "food groups."


Frank DiPascali's deal "shut the door on other skeletons in his closet, including guns and drugs."