Jake Zamansky's Blog
Cioffi and Tannin's Indictment: Good News for Investors
Posted: 19 Jun 2008 05:25 PM CDT
Ralph Cioffi and Mathew Tannin, the former managers of the Bear
Stearns' hedge funds that collapsed last year, were indicted today.
The SEC also filed civil charges today as well. I appeared on CNBC
this afternoon to discuss whether the evidence will be enough to
show "intent" and whether criminal charges were warranted. The
answer is a resounding yes to both questions, especially given
Tannin's "smoking gun" email from his personal account to Cioffi's
wife's email account where he frets over the funds future
performance just days before making upbeat comments to
investors. Cioffi's withdrawal of $2 million from the funds before
the collapse appears to provide evidence of his "intent".
The criminal and SEC developments could bode well for investors
seeking recovery of losses through the arbitration process. Tannin
and Cioffi will be called to testify in arbitration hearings before
their criminal trials take place and likely will exercise their Fifth
Amendment rights against self incrimination. Attorneys can ask
the arbitration panel to take what's called an "adverse inference",
which means panelists can assume that if the defendants
answered the questions, rather than pleading the Fifth, the
answers would have adversely affected their interest.
It should be noted that JP Morgan has put aside billions of dollars
for litigation costs when it acquired Bear Stearns.”
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With respect to the money JPMorgan set aside for litigation it was originally $6B.
However I did put together a detailed list of fraudulent activity by Bear and EMC
and more specifically arch mortgage fraud criminal Greg Fedler of EMC Mortgage.
Which I sent to JPMorgan Chase CEO Jamie Dimon.
I was both amazed and delighted to receive a personal letter from CEO Dimon
in which he thanked me for my input on Bear/EMC/Greg Fedler and their end game
tactics of simply telling those with problems to “Sue us” in an effort to clear their
desks while leaving JPMorgan Chase a quagmire of extra litigation and endless
I have no official confirmation of this, but based on CEO Jamie Dimon’s
personal letter to me assuring me they would make a thorough examination of my
allegations I believe that Dimon and JPMorgan Chase may have ratcheted up
their original $6B demand from Bear Stearns for litigation coverage. Indeed the
last figure quoted of $10 per share ultimately turned out to be “0.21753 a share for
each Bear share. Based on JPMorgan's current market price of $43, that bid
valued Bear at $9.35 a share, well below the $57 those shares sold for before
traders began their run on Bear.”
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