Printer Friendly

Bear Stearns hedge fund pair arrested over sub-prime crisis; INTERNATIONAL.

Two hedge fund managers yesterday became the first financial executives arrested over the US sub-prime mortgage scandal.

The men, ex-employees of Bear Stearns, were held at their homes in NewYork and New Jersey by the FBI.

Matthew Tannin and Ralph Cioffi both worked for Bear Stearns hedge funds that collapsed last year.

They are suspected of misleading investors about the risky sub-prime mortgage market, an FBI official said.

Tannin's lawyer Susan Brune said he was innocent. "He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."

The fall-out from defaults on US mortgages rattled the global economy and the American housing market. Sub-prime mortgages, those issued to people with shaky credit, were repackaged as securities and sold worldwide.

The implosion of the hedge funds foreshadowed Bear Stearns' demise, with the Federal Reserve having to intervene this year to bail out the beleaguered bank. Their collapse revealed how much damage had been done to the companies that bought, repackaged and sold the loans. Despite positive assessments by Cioffi and Tannin, the Bear Stearns hedge funds failed in June 2007. The funds had more than EUR20 billion in assets before crashing.

Cioffi, 52, and Tannin, 46, already have been named in lawsuits last year by hedge fund investors, including Barclays Bank, who allege they were purposely misled.

Barclays accused Bear Stearns of knowing for months that certain assets in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund were worth "far less" than their stated values.

The bank alleged Bear Stearns managers "hatched a plan to make more money for themselves and further to use the Enhanced Fund as a repository for risky, poor-quality investments."

The complaint said Bear Stearns told Barclays that the enhanced fund was up almost six per cent through June 2007 - when "in reality, the portfolio's asset values were plummeting."

The FBI said it has arrested about 300 estate agents since March, including dozens over the last two days, in its crackdown on incidences of mortgage fraud that have contributed to the country's housing crisis.
COPYRIGHT 2008 Birmingham Post & Mail Ltd
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2008 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:The Birmingham Post (England)
Date:Jun 20, 2008
Previous Article:Tributes to 'Angel of North' killed in Helmand; INTERNATIONAL.
Next Article:All quiet on the Gaza front as only barrages of scepticism hit home; INTERNATIONAL.

Related Articles
'US rates would need to fall to zero for stability' ECONOMY.
US fund managers arrested for fraud.
Bear Stearns executives arrested.
Former Bear Stearns fund managers acquitted of charges in subprime fraud probe.

Terms of use | Copyright © 2018 Farlex, Inc. | Feedback | For webmasters