Defense lawyers made their final arguments Friday on behalf of both Matthew Tannin and Ralph Cioffi, the former Bear Stearns managers accused of securities fraud largely on the basis of the e-mails they sent one another.
Mr. Tannin, for example, emailed to Cioffi on the basis of a recent market research report, saying that if the report is "ANYWHERE CLOSE to accurate, I think we should close the funds now." But soon thereafter, he told investors he was "comfortable" with the funds' performance. According to the prosecution, this crosses the line between permissible puffing and criminal lying.
In final argument, Tannin's attorney, Susan Brune, said that in the context of the whole email the "anything else" comment ceases to seem incriminating. She asked the jury to "send Matt home to his family."
Was she crying when she said this? I wasn't there, but apparently somebody heard or thought that they heard a quaver in her voice. The rule for a professional advocate is: what works, within the law. And there is no question but that a quavering voice is within the law. we'll see how it works.
Showing posts with label Ralph Cioffi. Show all posts
Showing posts with label Ralph Cioffi. Show all posts
Sunday, November 8, 2009
Wednesday, October 28, 2009
Texas Industries and others
1. What happened with Texas Industries?
Texas Industries (TXI) the supplier of cement and other building materials (not to be confused with Texas Instruments) held its annual meeting of shareholders Thursday October 22d.
Yesterday, the Inspectors of Election certified the results. [Wait for it. Isn't this moment exciting? I feel like I'm ripping open an envelope for you.]
The results represent a sweeping victory for the dissidents, led by Shamrock. Their three nominees were elected to the board, and their resolutions passed. The three new directors are: Marjorie L. Bowen, Dennis A. Johnson and Gary L. Pechota. The resolutions involved: the declassification of the board of directors; the submission of the company's poison pill plan to a vote of shareholders next year.
2. Evidentiary Ruling from the trial of Matthew Tannin
Meanwhile, the trial of Ralph Cioffi and Matthew Tannin on securities fraud charges moves ahead in the US federal court for the eastern district of New York.
It intrigues me that Judge Frederick Block has ruled that the jury cannot see a personal email Tannin wrote in 2006 expressing anxieties about work and the state of the market. Tannin had written an email to himself, in which he said, quote "we could blow up". I haven't had the chance to do more than scan Block's ruling, which is 21 pages long, but it seems to have focused on the scope of the warrant that was used to seize these e-mails, which "did not, on its face, limit the items to be seized from Tannin's personal email acount to emails containing evidence of the crimes charged in the indictment, or, indeed, any crime at all. It was, therefore, unconstitutionally broad ...."
3. Carl Icahn Quits the Yahoo board.
Icahn has left the Yahoo! board of directors. He first assumed his post there back when he was pressing then-CEO Jerry Yang to accept a takeover bid from Microsoft. That didn't happen, and meantime Icahn's attention has wandered to the CIT matter.
On CIT: Icahn has announced a 30 day tender offer for small CIT bondholders' securities at 60 cents on the dollar. Here's what Bloomberg has to say.
Can I find some connection between any one of these points and the year 1987? What was Icahn doing in '87? I'd like to use that year as a post label again.
Texas Industries (TXI) the supplier of cement and other building materials (not to be confused with Texas Instruments) held its annual meeting of shareholders Thursday October 22d.
Yesterday, the Inspectors of Election certified the results. [Wait for it. Isn't this moment exciting? I feel like I'm ripping open an envelope for you.]
The results represent a sweeping victory for the dissidents, led by Shamrock. Their three nominees were elected to the board, and their resolutions passed. The three new directors are: Marjorie L. Bowen, Dennis A. Johnson and Gary L. Pechota. The resolutions involved: the declassification of the board of directors; the submission of the company's poison pill plan to a vote of shareholders next year.
2. Evidentiary Ruling from the trial of Matthew Tannin
Meanwhile, the trial of Ralph Cioffi and Matthew Tannin on securities fraud charges moves ahead in the US federal court for the eastern district of New York.
It intrigues me that Judge Frederick Block has ruled that the jury cannot see a personal email Tannin wrote in 2006 expressing anxieties about work and the state of the market. Tannin had written an email to himself, in which he said, quote "we could blow up". I haven't had the chance to do more than scan Block's ruling, which is 21 pages long, but it seems to have focused on the scope of the warrant that was used to seize these e-mails, which "did not, on its face, limit the items to be seized from Tannin's personal email acount to emails containing evidence of the crimes charged in the indictment, or, indeed, any crime at all. It was, therefore, unconstitutionally broad ...."
3. Carl Icahn Quits the Yahoo board.
Icahn has left the Yahoo! board of directors. He first assumed his post there back when he was pressing then-CEO Jerry Yang to accept a takeover bid from Microsoft. That didn't happen, and meantime Icahn's attention has wandered to the CIT matter.
On CIT: Icahn has announced a 30 day tender offer for small CIT bondholders' securities at 60 cents on the dollar. Here's what Bloomberg has to say.
Can I find some connection between any one of these points and the year 1987? What was Icahn doing in '87? I'd like to use that year as a post label again.
Wednesday, October 14, 2009
Cioffi and Tannin on trial
The trial of Cioffi and Tannin on charges of securities fraud, while managing hedge funds operated under the brand of the late Bear Stearns broker-dealer, has begun.
As I have indicated before in this blog, I believe that this prosecution is misguided and hope for a defense victory. But the usual conflict is playing itself out here. I believe I owe this considerable attention, but I just do not have the time to pay it that attention right now. What to do? When all else fails ... link farm.
Here's an account that appeared in the New York Times more than a year ago, of the prominent role e-mails play in the prosecution's case.
The wonderful blog "Houston's Clear Thinkers" was on the case in those days (though its presiding genius, Tom Kirkendall, seems to have been distracted since): here's what you can find there.
For more recent news, here is a discussion of a crucial evidentiary hearing.
Bess Levin has used the case as a vehicle for some humor at the expense of the defendants' former bosses, Cayne and Schwartz at Dealbreaker.
And then there is jury selection, which hasn't gone all that smoothly.
And let us not forget the Wall Street Law Blog.
Gee, I hope some of these guys link to this blog some day. Is that so much to ask?
As I have indicated before in this blog, I believe that this prosecution is misguided and hope for a defense victory. But the usual conflict is playing itself out here. I believe I owe this considerable attention, but I just do not have the time to pay it that attention right now. What to do? When all else fails ... link farm.
Here's an account that appeared in the New York Times more than a year ago, of the prominent role e-mails play in the prosecution's case.
The wonderful blog "Houston's Clear Thinkers" was on the case in those days (though its presiding genius, Tom Kirkendall, seems to have been distracted since): here's what you can find there.
For more recent news, here is a discussion of a crucial evidentiary hearing.
Bess Levin has used the case as a vehicle for some humor at the expense of the defendants' former bosses, Cayne and Schwartz at Dealbreaker.
And then there is jury selection, which hasn't gone all that smoothly.
And let us not forget the Wall Street Law Blog.
Gee, I hope some of these guys link to this blog some day. Is that so much to ask?
Sunday, July 19, 2009
Insider Trading: Three Cases
1. SEC v. Mark Cuban
On Friday, July 17, 2009, Judge Sidney Fitzwater, of the US District Court, Northern District, Texas, in Dallas, ruled in Favor of Mark Cuban, dismissing a lawsuit that the SEC had brought against him. Fitzwater found that the SEC had failed to state a claim on which relief could be grantred.
It did so without prejudice, i.e. the SEC may replead.
The case involved Cuban's knowledge of a forthcoming PIPE -- a private investment in public equity. When all other things are equal, a PIPE will cause a reduction in a stock's price, simply because it increases the supply of that company's stock in the marketplace. Without some corresponding increase in the demand for it, the price should fall.
Cuban was an investor in the company in question but he was not an "insider" to it in the strictest sense -- he was not a board member, officer, etc. On the SEC's theory, he was a fiduciary, and the insider trading was thus a breach of a fiduciary responsibility, i.e. his agreement to keep confidential the information that an issuer's CEO provided to him about a forthcoming PIPE.
But the agreement to keep the information confidential that the SEC alleges does not amount, the court said, to an agreement to refrain from a sale of stock. A sale may hint, to those who learn of it, that the seller has just received some information, but it is hardly a clearcut case of communication. "The complaint asserts no facts that reasonably suggest that the CEO intended to obtaion from Cuban an agreement to refrain from trading on the information as opposed to an agreement merely to keep it confidential," the court said.
2. US v. Ralph Cioffi
Cioffi, who is a criminal defendant in the case arising from the failure of two Bear stearns affiliated hedge funds in 2007, has not been so fortunate as Cuban. His trial judge has rejected his motion to dismiss.
In New York, on Tuesday, July 14, Judge Frederic Block refused to dismiss the criminal case against him that arose because Cioffi transferred a portion of his own holdings out of one of these funds without telling investors. In contrast to Fitzwater, Block has not prepared a written opinion giving us the reasons for this decision. But hsi situation isinherently different from that of Cuban's, and as I've noted here before, I thought the motion to dismiss was a matter of slicing the Oscar Meyer pretty thin.
It is still a rum business -- prosecuting "insider trading," at all. But thinking within the box of the law as now exists, Cioffi's position is much worse than that of Cuban's so the difference results of their motions was to be expected.
3. SEC v. Anthony Perez et al. This is a new one. The SEC has charged 5 individuals with insider trading on the ground that they learned that Liberty Mutual was about to announce a bid for Safeway Corp., and acted naturally, buying Safeway themselves.
There are actually three separate complaints, because this information leaked out at least that many times. In two of the three complaints arising out of the safeway bid, a tippee as well as the tipper are named.
The first-named defendant of one of these three complaints, Perez, acquired this information through his work at Goldman Sachs. His tippee? His brother. Ach! the government is now criminalizing brotherly love!
It is also enabling Goldman conspiracy theories. Personally, I much prefer Cerberus conspiracy theories, but Cerberus seems to have had nothing to do with Safeway.
On Friday, July 17, 2009, Judge Sidney Fitzwater, of the US District Court, Northern District, Texas, in Dallas, ruled in Favor of Mark Cuban, dismissing a lawsuit that the SEC had brought against him. Fitzwater found that the SEC had failed to state a claim on which relief could be grantred.
It did so without prejudice, i.e. the SEC may replead.
The case involved Cuban's knowledge of a forthcoming PIPE -- a private investment in public equity. When all other things are equal, a PIPE will cause a reduction in a stock's price, simply because it increases the supply of that company's stock in the marketplace. Without some corresponding increase in the demand for it, the price should fall.
Cuban was an investor in the company in question but he was not an "insider" to it in the strictest sense -- he was not a board member, officer, etc. On the SEC's theory, he was a fiduciary, and the insider trading was thus a breach of a fiduciary responsibility, i.e. his agreement to keep confidential the information that an issuer's CEO provided to him about a forthcoming PIPE.
But the agreement to keep the information confidential that the SEC alleges does not amount, the court said, to an agreement to refrain from a sale of stock. A sale may hint, to those who learn of it, that the seller has just received some information, but it is hardly a clearcut case of communication. "The complaint asserts no facts that reasonably suggest that the CEO intended to obtaion from Cuban an agreement to refrain from trading on the information as opposed to an agreement merely to keep it confidential," the court said.
2. US v. Ralph Cioffi
Cioffi, who is a criminal defendant in the case arising from the failure of two Bear stearns affiliated hedge funds in 2007, has not been so fortunate as Cuban. His trial judge has rejected his motion to dismiss.
In New York, on Tuesday, July 14, Judge Frederic Block refused to dismiss the criminal case against him that arose because Cioffi transferred a portion of his own holdings out of one of these funds without telling investors. In contrast to Fitzwater, Block has not prepared a written opinion giving us the reasons for this decision. But hsi situation isinherently different from that of Cuban's, and as I've noted here before, I thought the motion to dismiss was a matter of slicing the Oscar Meyer pretty thin.
It is still a rum business -- prosecuting "insider trading," at all. But thinking within the box of the law as now exists, Cioffi's position is much worse than that of Cuban's so the difference results of their motions was to be expected.
3. SEC v. Anthony Perez et al. This is a new one. The SEC has charged 5 individuals with insider trading on the ground that they learned that Liberty Mutual was about to announce a bid for Safeway Corp., and acted naturally, buying Safeway themselves.
There are actually three separate complaints, because this information leaked out at least that many times. In two of the three complaints arising out of the safeway bid, a tippee as well as the tipper are named.
The first-named defendant of one of these three complaints, Perez, acquired this information through his work at Goldman Sachs. His tippee? His brother. Ach! the government is now criminalizing brotherly love!
It is also enabling Goldman conspiracy theories. Personally, I much prefer Cerberus conspiracy theories, but Cerberus seems to have had nothing to do with Safeway.
Wednesday, July 8, 2009
Insider Trading: Cioffi's Motion to Dismiss
A motion to dismiss is pending with regard to count four of the indictment of Ralph Cioffi (Eastern District, NY, case #08-cr-00415 FB).
Cioffi, as my readers may remember, is one of two men arrested last year in connection with the collapse in 2007 of two hedge funds within Bear Stearns that had made huge bets on subprime mortgages.
Both Cioffi and his alleged co-conspirator, Matthew Tannin, are charged with securities fraud, in that they continued to present their funds to the investing public as an "awesome opportunity" even while privately concerned about their sustainability.
Cioffi, but not Tannin, is also accused of insider trading (Count Four) in that he "sold shares he owned in the Enhanced Fund while in possession of material non-public information regarding the Funds' liquidity," etc.That is the count with which this motion to dismiss deals.
The motion to dismiss itself seeks to make a distinction between the hedge funds themselves as an entity and their investors. Inside trading, it contends, is not an offense against the public at large but against a particular entity with which the insider has a fiduciary relationship. If the hedge fund in question had been a public corporation, Cioffi would have had a fiduciary duty to its shareholders. But as it was a hedge fund, his duty runs to the fund as such, not to its investors, so the government's case is "flawed as a matter of law."
Filing #116 includes this motion (May 22) and its supporting memorandum.
Filing #133 gives the district attorney's reaction (July 7). The DA accepts the defense characterization of Cioffi's duty as running to the fund, and claims that this is the duty that was criminally violated. The violations vis-a-vis the other investors are derivative of that.
Although I oppose the whole idea of "insider trading" as a criminal offense, thinking "within the box" of established legal concepts, I have to say the defense counsel's point seems a bit weak to me here.
Cioffi, as my readers may remember, is one of two men arrested last year in connection with the collapse in 2007 of two hedge funds within Bear Stearns that had made huge bets on subprime mortgages.
Both Cioffi and his alleged co-conspirator, Matthew Tannin, are charged with securities fraud, in that they continued to present their funds to the investing public as an "awesome opportunity" even while privately concerned about their sustainability.
Cioffi, but not Tannin, is also accused of insider trading (Count Four) in that he "sold shares he owned in the Enhanced Fund while in possession of material non-public information regarding the Funds' liquidity," etc.That is the count with which this motion to dismiss deals.
The motion to dismiss itself seeks to make a distinction between the hedge funds themselves as an entity and their investors. Inside trading, it contends, is not an offense against the public at large but against a particular entity with which the insider has a fiduciary relationship. If the hedge fund in question had been a public corporation, Cioffi would have had a fiduciary duty to its shareholders. But as it was a hedge fund, his duty runs to the fund as such, not to its investors, so the government's case is "flawed as a matter of law."
Filing #116 includes this motion (May 22) and its supporting memorandum.
Filing #133 gives the district attorney's reaction (July 7). The DA accepts the defense characterization of Cioffi's duty as running to the fund, and claims that this is the duty that was criminally violated. The violations vis-a-vis the other investors are derivative of that.
Although I oppose the whole idea of "insider trading" as a criminal offense, thinking "within the box" of established legal concepts, I have to say the defense counsel's point seems a bit weak to me here.
Wednesday, March 18, 2009
The Bear Stearns Securities Fraud Case Revisited
Let us revisit the Cioffi and Tannin matter. These two men, former Bear Stearns executives, were arrested June 2008 in connection with the collapse of two hedge funds under Bear sponsorship the preceding summer.
Both defendants are charged with securities fraud in that they made false and misleading statements to the investors about the health of these funds beginning in March. On the prosecution theory, they both understood by March that the funds were "toast" but continued to put on a happy face to the outside world.
The trial date is September 28 of this year.
I bring it up because there has been some motion practice in recent days. For example, Matthew Tannin's attorneys at Brune & Richards have filed a motion for a bill of particulars.
The indictment, as they paraphrase it in the memorandum supporting this motion, quotes selectively from certain e-mails, "apparently in an attempt to give an example of the alleged misstatements and ommissions falling into the categories it identifies."
But the indictment doesn't contain the phrase "to wit". When a bill of indictment says, "John Smith committed offense X, to wit he met in a room on March 10th with five accomplices and...." the phrase "to wit" means that the meeting in that room and what transpired there constitutes the offense X.
The indictment doesn't contain that phrase. The specifics offered are only meant, it appears, as examples of the misstatements, not as a complete account.
Tannin's lawyers understandably don't want to go into trial against an open-ended indictment. They want the government to be specific about each and every act that on its theory constitutes part of the offense. It has been a long long time since I took a Crim Pro course, and I'll be curious to see how this pans out.
There's also the question of Brady material. This relates to a rule announced by SCOTUS in 1963, that the government must disclose all exculpatory material in its possession, including such material as may assist defense counsel in impeaching prosecution witnesses. Apparently as part of the discovery process thus far the government has produced notes of its interviews with Raymond McGarrigal, one of the portfolio managers of the funds, a man who worked side by side with the two defendants during the crucial period and thus at least potentially a crucial witness.
Most of the McGarrigal material provided to the defendats, though, is blacked out. "Redacted," in the fancier term. Defense counsel says there is enough there to indicate McGarrigal made a series of highly exculpatory statements, and it wants to know what they were.
I'm sure the government has offered some justification for the redacting. I haven't done enough searchuing through the PACER materials yet to discover what it is, though.
It sounds as if the judge is going to have to navigate a minefield even to get this case to trial.
Both defendants are charged with securities fraud in that they made false and misleading statements to the investors about the health of these funds beginning in March. On the prosecution theory, they both understood by March that the funds were "toast" but continued to put on a happy face to the outside world.
The trial date is September 28 of this year.
I bring it up because there has been some motion practice in recent days. For example, Matthew Tannin's attorneys at Brune & Richards have filed a motion for a bill of particulars.
The indictment, as they paraphrase it in the memorandum supporting this motion, quotes selectively from certain e-mails, "apparently in an attempt to give an example of the alleged misstatements and ommissions falling into the categories it identifies."
But the indictment doesn't contain the phrase "to wit". When a bill of indictment says, "John Smith committed offense X, to wit he met in a room on March 10th with five accomplices and...." the phrase "to wit" means that the meeting in that room and what transpired there constitutes the offense X.
The indictment doesn't contain that phrase. The specifics offered are only meant, it appears, as examples of the misstatements, not as a complete account.
Tannin's lawyers understandably don't want to go into trial against an open-ended indictment. They want the government to be specific about each and every act that on its theory constitutes part of the offense. It has been a long long time since I took a Crim Pro course, and I'll be curious to see how this pans out.
There's also the question of Brady material. This relates to a rule announced by SCOTUS in 1963, that the government must disclose all exculpatory material in its possession, including such material as may assist defense counsel in impeaching prosecution witnesses. Apparently as part of the discovery process thus far the government has produced notes of its interviews with Raymond McGarrigal, one of the portfolio managers of the funds, a man who worked side by side with the two defendants during the crucial period and thus at least potentially a crucial witness.
Most of the McGarrigal material provided to the defendats, though, is blacked out. "Redacted," in the fancier term. Defense counsel says there is enough there to indicate McGarrigal made a series of highly exculpatory statements, and it wants to know what they were.
I'm sure the government has offered some justification for the redacting. I haven't done enough searchuing through the PACER materials yet to discover what it is, though.
It sounds as if the judge is going to have to navigate a minefield even to get this case to trial.
Wednesday, December 10, 2008
Cioffi and Tannin trial date
I see from the wire services that the US district court, eastern district of New York, has set a trial date for two securities-fraud defendants who once worked for Bear Stearns: Ralph Cioffi and Matthew Tannin.
Jury selection begins September 28, 2009.
Cioffi and Tannin ran two hedge funds within Bear Stearns that made big bets on subprime mortgages. The quick collapse of these funds in the summer of 2007 was one of the first claps of thunder in the storm that continues to this day.
So are Cioffi and Tannin mere scapegoats? They were wrong about the subprime market and those who invested in their ability to be right consequently lost a lot of money. But their investors were grownups (and well heeled grown-ups too -- nobody got evicted from his/her garrett because Tannin and Cioffi lost the rent money).
Both men have pleaded not guilty.
One question you might ask yourself: why is this case going to trial in the eastern district of New York? That district consists of Long Island, Staten Island, the Queens, and Brooklyn. Didn't Tannin and Cioffi work in Manhattan? Manhattan, along ith the Bronx, constitutes the SOUTHERN DISTRICT of New York. Yes, they did.
And there have been times when the US Attorney for the southern district was the big cheese in such matters, the sheriff of Wall Street (that's how Rudi Giuliani first became a national figure after all, back in the 1980s).
Some commentators, like Peter Lattman have read the ED attorney's involvement as an incident in an ongoing rivalry between SDNY and EDNY.
Furthermore, the bill of indictment says little more about the reason for the involvement of the U.S. Attorney for the eastern district than this, beyond, "Some of the fund's investors resided within the eastern district of New York." There's surely more to it than that.
I'm hoping for an embarrassment for the prosecution. I hope Cioffi and Tannn's attorneys can make the ED guys wish they had left Wall Street alone. Leave it to the SD forever after, I imagine them telling one another when this is all done.
I'm sure I'll have more to say about this at some point in the nine months between now and trial.
Jury selection begins September 28, 2009.
Cioffi and Tannin ran two hedge funds within Bear Stearns that made big bets on subprime mortgages. The quick collapse of these funds in the summer of 2007 was one of the first claps of thunder in the storm that continues to this day.
So are Cioffi and Tannin mere scapegoats? They were wrong about the subprime market and those who invested in their ability to be right consequently lost a lot of money. But their investors were grownups (and well heeled grown-ups too -- nobody got evicted from his/her garrett because Tannin and Cioffi lost the rent money).
Both men have pleaded not guilty.
One question you might ask yourself: why is this case going to trial in the eastern district of New York? That district consists of Long Island, Staten Island, the Queens, and Brooklyn. Didn't Tannin and Cioffi work in Manhattan? Manhattan, along ith the Bronx, constitutes the SOUTHERN DISTRICT of New York. Yes, they did.
And there have been times when the US Attorney for the southern district was the big cheese in such matters, the sheriff of Wall Street (that's how Rudi Giuliani first became a national figure after all, back in the 1980s).
Some commentators, like Peter Lattman have read the ED attorney's involvement as an incident in an ongoing rivalry between SDNY and EDNY.
Furthermore, the bill of indictment says little more about the reason for the involvement of the U.S. Attorney for the eastern district than this, beyond, "Some of the fund's investors resided within the eastern district of New York." There's surely more to it than that.
I'm hoping for an embarrassment for the prosecution. I hope Cioffi and Tannn's attorneys can make the ED guys wish they had left Wall Street alone. Leave it to the SD forever after, I imagine them telling one another when this is all done.
I'm sure I'll have more to say about this at some point in the nine months between now and trial.
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