Mortgage Servicing Fraud
occurs post loan origination when mortgage servicers use false statements and book-keeping entries, fabricated assignments, forged signatures and utter counterfeit intangible Notes to take a homeowner's property and equity.
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H. Gosh

Ex-Bear Stearns managers surrender in NYC, face charges in subprime loan crisis

By

Associated Press Writer

June 19, 2008 8:48 AM

NEW YORK (AP) — Two former Bear Stearns managers have surrendered to face criminal charges linked to the collapse of a hedge fund that bet heavily into subprime mortgages before the market collapsed, federal authorities said Thursday.

Authorities in Brooklyn are expected to give details later Thursday on the case against Ralph Cioffi and Matthew Tanin, who would become the first executives to be charged criminally in the wake of the subprime market debacle.

A law enforcement official told The Associated Press on Wednesday that an indictment naming the men was the result of a yearlong federal securities fraud investigation.

The former executives are suspected of misleading investors about the risky subprime mortgage market, the official said, speaking on condition of anonymity because the outcome of the investigation is pending.

Tannin “is innocent,” said his attorney, Susan Brune. “He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal.”

Cioffi’s attorney declined comment on Thursday and the U.S. attorney’s office did not return a call for comment.

 


http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20080619/NEWS/80619003

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from Bloomberg this morning:
http://www.bloomberg.com/apps/news?pid=20601087&sid=aZjI.EgNDuFQ&refer=home

Indictments against Cioffi and Tannin might lead to a cascade of criminal cases and civil suits, said former prosecutor Robert Bunzel, who is now a white-collar criminal lawyer with Bartko, Zankel Tarrant & Miller in San Francisco.

``The floodgates could open,'' he said.

More than 400 people have been charged in a separate U.S. Justice Department mortgage-fraud sweep, two law enforcement officials said today.

Called Operation Malicious Mortgage, the arrests are to be announced this afternoon by FBI Director Robert Mueller and Deputy Attorney General Mark Filip at the Justice Department in Washington. A number of arrests were made earlier this week and the FBI is still tallying the final numbers, said the officials who requested anonymity so as not to overshadow the formal announcement.

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Babs

Charges at Bear Stearns linked to subprime debacle

By TOM HAYS, Associated Press Writer 1 hour, 45 minutes ago

 

Link to story: http://news.yahoo.com/s/ap/20080619/ap_on_bi_ge/bear_stearns_investigation

NEW YORK - Two former Bear Stearns managers were arrested Thursday on securities fraud and other charges linked to the collapse of a hedge fund that bet heavily on subprime mortgages before the market collapsed, federal authorities said.

Matthew Tannin was taken into custody outside his New Jersey home on Thursday morning and Ralph Cioffi was arrested at his New York City home, the FBI said. They became the first executives to be charged criminally in the wake of the subprime market debacle.

Yet the fall out is beginning to spread.

The FBI announced Thursday that it had arrested about 300 real estate industry players since March — including dozens over the last two days — in its crackdown on incidents of mortgage fraud that have contributed to the country's housing crisis.

One law enforcement official put the losses to homeowners and other borrowers who were victims in the schemes at more than $1 billion.

The Justice Department and FBI plan to announce the recent arrests — including apprehensions in Chicago, Atlanta, Miami, and suburban Maryland — at a news conference set for Thursday afternoon in Washington.

An indictment unsealed in federal court charged both men with securities and wire fraud, and Cioffi with insider trading. The U.S. attorney's office in Brooklyn planned a news conference later Thursday.

In a separate complaint also filed Thursday, the Securities and Exchange Commission alleges that in the first five months of 2007, Tannin and Cioffi "deceived their own investors, as well as the fund's institutional counterparts, by fraudulently concealing from them the full extent of the fund's deepening troubles."

The complaint says that in March 2007, Cioffi withdrew $2 million of his own money from a hedge fund without revealing to investors that he was substantially reducing his exposure to the toxic loans.

"Cioffi's clandestine redemption caused the Enhanced Leverage Fund to pay out $2 million at a time when the markets were weak and the fund was facing another month of losses, as well as escalating margin calls and forced sales," the SEC said.

"Although Cioffi had lost faith in the funds, as evidenced by his own redemption from the Enhanced Leverage Fund, he nonetheless falsely expressed his supposed confidence in the funds, encouraging investors to add money to the funds and attempting to dissuade them from redeeming," the complaint said.

The complaint alleges Cioffi and Tannin revealed their secret doubts about the survival of the funds in internal e-mails.

Tannin, the complaint says, sent one e-mail last March to a third fund manager with only question marks in the subject line. The e-mail said, "Is Ralph doing what he should be doing right now?"

Around the same time, it adds, Cioffi wrote to a team economist, saying, "I'm fearful of these markets. ... As we discussed it may not be a meltdown for the general economy but in our world it will be. Wall Street will be hammered with lawsuits."

The complaint alleges violation of security laws and seeks an unspecified fine.

A law enforcement official told The Associated Press on Wednesday that an indictment naming the men was the result of a yearlong federal securities fraud investigation. The official spoke on condition of anonymity because the outcome of the investigation is pending.

Tannin "is innocent," said his attorney, Susan Brune. "He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."

Cioffi's attorney declined comment on Thursday.

The fallout from defaults on U.S. mortgages has rattled the global economy and the American housing market.

Subprime mortgages, those issued to people with shaky credit, were repackaged as securities and sold across the globe.

The implosion of the hedge funds foreshadowed Bear Stearns' own demise, with the Federal Reserve having to intervene earlier 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 $20 billion in assets before crashing.

Cioffi, 52, and Tannin, 46, already have been named in lawsuits brought last year by hedge fund investors, including Barclays Bank PLC, 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 6 percent through June 2007 — when "in reality, the portfolio's asset values were plummeting."

Last month, Bear Stearns shareholders approved JPMorgan Chase & Co.'s $2.2 billion buyout at about $10 a share. Back in January 2007, before mortgage defaults began clobbering banks and draining demand from the debt markets, Bear Stearns had traded at $171 a share.

  

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Perp Walk

"OPERATION MALICIOUS MORTGAGE"

FBI Announces National Takedown Of Mortgage Fraud Schemes... 144 Mortgage Fraud Cases... 406 Defendants Charged... First Executives Indicted In New York... Video Of The Arrests

http://www.huffingtonpost.com/

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The Indictment

Cioffi and Tannin indictment

 

http://amlawdaily.typepad.com/amlawdaily/files/TanninCioffiIndictment.pdf

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Ah, the pictures of them in handcuffs.

Hey Jack!

Are you grinning?

Dee
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 The SEC also filed civil charges yesterday as well:

http://sec.gov/news/press/2008/2008-115.htm

Litigation Release No. 20625

SEC Complaint


Prosecutors must determine if highly leveraged short positions in these funds were based on insider knowledge of mortgage servicing fraud.  Both Cioffe and Tannin had been around BS long enough to know about EMC and other investment bank subsidiary servicers' egregious activity.  At least one often quoted analyst has questioned whether there exist appropriate firewalls between trading desks and subsidiary servicers.  If not, this would take allegations of Cioffe and Tannin's conscious deception of investors to a whole new level, ultimately providing mortgage servicing fraud victims a stronger basis in court. 

 

These Bear Stearns funds failed due to margin calls and redemption requests based on declining subprime CDO values which were over valued and misrepresented to begin with.  Furthermore, in March 2007 Cioffe placed highly leveraged short bets on ABX, an index that tracks subprime-mortgage securities, confident that it would continue to decline due to subprime mortgage defaults.  When ABX unexpectedly recovered ground Cioffe moved 2 mil of his personal investment out of the fund, without ever informing investors of his move, suspect timing at the very least.  Adding insult to injury, while gathering documents and materials investigators learned that Tannin's laptop which he had used to take notes during 2007 and one of Cioffi's notebooks, in which he had taken handwritten notes for the period WERE BOTH MISSING.  Could these have containing insider servicing information?

 

Though prosecutors are endeaving to keep their cases as simple as possible

focusing entirely on 'conscious deception',  it is these alleged insider bets, credit default swaps, ABX shorts based on known mortgage servicing fraud that lurk beneath and continue to be a driving force behind mortgage servicing fraud.

 

If anyone here has more to add MSF victims everywhere stand to benefit if you will direct information and comments to:

                                       

JOHN D. WORLAND, JR.
ANTONIA CHION
DANIEL CHAUDOIN
JEFFREY WEISS
JONATHAN COWEN
BRIAN SANO
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Phone: (202) 55 1-443 8 (Worland)
 Fax: (202) 772-9246 (Worland)
E-mail: worlandj@sec.gov

Website: http://sec.gov/index.htm
 
and:
 
Sean Patrick Casey, Assistant U.S. Attorney (71 8-254-6065)
John A. Nathanson, Assistant U.S. Attorney (718-254-7492)

Patrick Sean Sirtclair Assistant U.S. Attorney (71 8-254-6402)
Benton J. Campbell, United States Attorney
United States Attorney's Office - Eastern District of New York
147 Pierrepont Street
Brooklyn, NY 11201

Website: http://www.usdoj.gov/usao/nye/index.html

 

 

 
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Who's NEXT?

Lawyers and hedge fund experts say that more indictments surrounding Bear Stearns are possible.

"It is unlikely that only two people were involved with concealing this information," said a hedge fund professional who, because of the ongoing legal case, requested anonymity. "I wouldn't be surprised if this is just the beginning of a bigger story for Bear Stearns."

A professor of law at New York University's School of Law, Harry First, pointed out that a former Bear Stearns CEO, James Cayne, told investors the bank had no liquidity issues just days before it went bankrupt. "He could be in deep trouble," he said.

"This was a clear shot over the bow at Bear Stearns's senior management," Mr. Stoltmann said. "There are some real, real nervous senior executives at Bear Stearns right now."

http://www.nysun.com/business/us-sees-crime-in-the-credit-crisis/80408/
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O -

US Federal Prosecutors Charged More Than 400 People With Mortgage Fraud

Analysis by Robert Mueller, FBI Director.

Source: BLOOM
Date: Jun. 20, 2008. 12:36 AM EST    -   Return To Video Index

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The Unindicted

The Unindicted Co-conspirators in the Wall Street Hedge Fund Cases

By Bill Singer  6/20/08

(BrokeandBroker.com) New York - Wow! It always amazes me when I appear on radio or television how much of a response I get. This morning I was on Bloomberg Radio: The First Word at 8:20 AM (ET) discussing the high-profile indictments of Cioffi and Tannin (the Bear Stearns' Hedge Funds collapse). No sooner did the interview conclude, then a few folks let me know how much they enjoyed my comments. Although I can't recreate verbatim my responses during the live show, I've set forth my general points below.

What will the prosecutors likely argue against Cioffi and Tannin?

Much like Carl Sagan's famous lines for his astronomy show, this case is about billions and billions and billions of dollars lost in the credit market. This prosecution is about criminal misconduct that contributed to that historic market collapse, which has devastated Wall Street and robbed the life savings of many investors. Cioffi and Tannin are low-life con-artists dressed in Wall Street bankers' suits--these crooks are not victims of any subprime fraud; to the contrary, they're just run of the mill fraudsters who lied in order to make more money and hide their mismanagement of the funds. We don't have to guess what they really knew or thought because we have emails from them. It's all there in lurid detail: What they knew, when they knew it, and how they conspired to hide the truth from their investors. It's time to send a message to Wall Street that the public is sick and tired of this culture of dishonesty.

What will the defense lawyers likely say about their clients?

Cioffi and Tannin had the misfortune to be standing on the beach and seeing a Tsunami wave coming right at them. They didn't cause that wave, they couldn't prevent it from hitting, and they had no way to survive in its path. These defendants were victimized by the collapse in the credit markets that took everyone by surprise, and did so with incredible speed. None of the vaunted computer models sounded the alarms. Show me a regulatory agency that issued warnings in 2006. As to the emails, those are "thoughts," and last we looked, you can't convict folks for crimes of thought. However, if you really read those emails, you will see that these defendants were petrified that the market was headed for catastrophe and they tried to do everything they could to protect their funds. In their panic, they may have done some stupid things, but stupidity is not a crime -- thankfully, otherwise we would all be in jail. At the end of the day, don't let the government make these two men scapegoats for the failure of Wall Street's regulators to do their jobs.

Stripped down to its basics, those are the battle lines on which the U.S. Attorney's and the SEC's cases will be fought. Without question, the criminal indictment and the civil complaint present compelling cases replete with troubling emails. On the other hand, more than a bit of what I read smacks of 20-20 hindsight, and I will need far more convincing that these defendants made material misrepresentations that a reasonable investor would have relied upon in deciding to remain in the funds or to invest further dollars. I am mindful that most of the investors in the two hedge funds were either high net worth individuals or financial institutions.

So, what's the Bill Singer take on this developing story?

In my opinion we've had a major fire on Wall Street. The first question is whether it was one of natural causes or arson. However, regardless of whether you determine that the fire was natural (the hedge funds simply collapsed from normal, cyclical market forces) or was arson (Cioffi and Tannin criminally mismanaged the fund and defrauded investors into adding dollars or staying put), let me add a twist.

What if I were to tell you the following?

As to the building that burned down, the building inspector was paid off to permit housing code and fire code violations. Many of the necessary inspections were late or done half heartedly. Also, the contractors were corrupt and didn't do legally acceptable construction work. Alarms were not properly installed. Sprinklers were not connected to a water supply. When 911 got the first call about "smoke," they delayed contacting the fire department. When the fire department got the call, the truck was broken and couldn't quickly respond. When the firefighters got to the fire, the hydrants weren't working.

Regardless of whether Cioffi and/or Tannin are guilty, I still say there is an unindicted co-conspirator here. The entire U.S. regulatory system has to share much of the blame for the allegations in the complaints and for the damage done to the overall economy. Our regulators are a pathetic bucket brigade with one leaky bucket trying to put out a blazing inferno. There are just too many overpaid executives not getting the job done. There are too many cronies appointed to perform critical tasks, and those folks are not up to the task. None of the lessons of Hurricane Katrina were learned. It's time to overhaul the failed system of regulating Wall Street; and "no," we don't need more regulations--you can get a hernia carrying the existing securities laws and regulations. What we need is more effective regulation, and that starts with hiring more effective regulators.

What infuriates me with the handling of this crisis is best explained by quoting two statements:

1. June 17, 2008 Press Release: Two Senior Managers of Failed Bear Stearns Hedge Funds Indicted on Conspiracy and Fraud Charges (the United States Attorney's Office/Eastern District of New York), page 4: The United States Attorney for the Eastern District of New York is a member of the Corporate Fraud Task Force, a multi-agency group formed by President Bush in July 2002 to restore public and investor confidence in America's corporations following a number of major corporate scandals. In the past five years, the task force has yielded more than 1,200 corporate fraud convictions.

And yet this high-powered task force didn't spot the subprime crisis or the collapse of the credit markets, which have cost at least $500 billion in losses? Why didn't the Bear Stearns Hedge Fund meltdown pop up on that radar screen? What red flags did the Task Force see and what warning did they send? Is this how we restore confidence?

2. United States of America v. Ralph Cioffi, et al., at paragraph 56 of the Indictment: The United States Securities and Exchange Commission ("SEC") and others began investigating the Funds' collapse in the Summer of 2007 ...

Absolutely incredible! The top regulatory cops in our regulatory scheme only first go into action in the summer following the hedge funds' collapse? How did they not hear of anything troubling beforehand and start an earlier investigation? And if the answer is "because ... " then why wouldn't those same explanations excuse Cioffi and Tannin? And folks wonder what's wrong on Wall Street. Nineteen pages into the indictment, and only after 55-paragraphs of allegations, do we first learn that the SEC "and others" did anything about anything.

While we're prosecuting Cioffi and Tannin, how about we investigate those who were supposed to prevent this type of catastrophe and apparently were asleep on the job?

Quis custodiet ipsos custodes?   "Who watches the watchmen?"

Editor's Note: Bill Singer is a prominent New York securities lawyer and is often called upon by the press for his opinion and views on high-profile developments on Wall Street.  This story was reprinted from Singer's blog, "brokeandbroker.com".


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Mutant Capitalism

Did Bear Stearns Fool the Street, Too?
BusinessWeek - June 25, 2008

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Ah, the pictures of them in handcuffs.

Hey Jack!

Are you grinning?

Dee


Oh Dee, you know I am not only grinning, but laughing.  I have had that picture in my mind for years and I KNEW "someday" I would see it. Even better, it happened on my birthday. 

There are more to come that will bring a much bigger smile to all of us.

The tables are turning everywhere now that the truth is coming out and the criminals AND their lawyers don't know what to do.  I am witnessing it daily.

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4 justice now
Thank God!

Good will always triumph over evil. I certainly hope the arrests will keep coming.
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Bear Scat
http://www.finalternatives.com/node/4744

Indicted Ex-Bear Managers Facing New Charges

Two former Bear Stearns hedge fund managers indicted last week may face additional charges.

Ralph Cioffi and Matthew Tannin have already been accused of misleading investors in their High Grade Structured Credit Fund and its more highly-levered sister offering. Now, federal prosecutors may add allegations that the two misled the banks that lent money to and invested in the funds, which collapsed last summer after being battered by the credit crisis.

Charges could be added to the indictments as early as next week.

Investigators have spoken to Bank of America, Barclays, Merrill Lynch and other banks that had relationships with the two funds. They are especially interested in BofA, which guaranteed and sold $4 billion in collateralized debt obligations last spring.

BofA is reportedly telling authorities that it believes it was misled.

Barring new charges, Cioffi faces 40 years in prison if convicted, and Tannin 20 years.

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Now if they follow the money and accounts set up by LITTON LOAN, maybe the co mingling of drug money?  IRS/DEA out of Houston maybe looking at Litton Loan accounts.  Being found  at Bank of America?

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Bear Scat

http://www.vanityfair.com/politics/features/2008/08/bear_stearns200808


Bringing Down Bear Stearns

 

If you can get past author's angle portraying Bear Stearns in victim light, suggesting sinister forces at play in its demise, admittedly very difficult for me to do, while barely mentioning Chioffi/Tannin indictment, this lengthy Vanity Fair piece presents broad brushstokes along with suspect spin.  

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