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June
18, 2008 -- After nearly two
decades of Clintonian lying poisoning our culture, perhaps
some dampening is in sight. |
FBI Director Robert Mueller and Deputy
Attorney General Mark Filip announced a national arrest and
prosecution labeled Operation Malicious Mortgage.
According to the announcement, over 400 people will be
arrested in connection with alleged mortgage fraud over schemes in locations from Chicago to Dallas to Miami. |
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Two BSC former hedge fund
managers, Ralph Cioffi and Matthew Tannin, were arrested at
their homes regarding their roles in the collapse of hedge
funds that contributed to the subprime mortgage crisis. |
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A spokesman for the Federal
Bureau of Investigation's New York office said that Ralph
Cioffi, 52, was taken into custody at his Tenafly, New
Jersey home and that Matthew Tannin, 46, was taken into
custody at his Manhattan apartment. |
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Attorney Steve Caruso is
representing investors in arbitration claims against the
funds. He said, "The arrests are appropriate given the
magnitude and the egregiousness of their alleged
misconduct... Cioffi and Tannin engaged in a "gross
violation of the public trust". |
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Cioffi was a senior portfolio
manager of two BSC funds which collapsed. Tannin served as
his COO. The hedge funds invested nearly all their assets in
subprime-mortgage-related securities. US prosecutors are
focusing on an e-mail allegedly sent by the two suggesting
that their funds were headed for trouble. That was four days
before they stated to investors that their holdings were in
satisfactory condition. |
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Tannin allegedly e-mailed
Cioffi. In his email, he identified his concern that the
market for bond securities -- as the types they had invested
in -- were "toast". He suggested that they shut the funds. |
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Former prosecutor Robert
Bunzel is now a white-collar criminal lawyer with Bartko,
Zankel Tarrant & Miller in San Francisco said that these
indictments may be the harbinger of additional criminal and
civil suits. He added that, "The floodgates could open". |
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The charges are the first
from a federal investigation regarding fraud by banks and
mortgage companies' investment in subprime loans and
securities which plunged in value and caused losses now
totaling $396.6 billion. The US SEC may sue the two men,
claiming they committed fraud when they told investors that
the hedge funds they were managing were in good condition at
the same time that they knew the funds were having valuation
problems. |
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Cioffi left Bear Stearns
during investigations by prosecutors and the SEC into
whether Cioffi withdrew $2 million from two funds before
they collapsed. The funds that managed filed for bankruptcy
two weeks after BSC told investors they would get little to
no money back. |
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Allegations in a Barclays'
suit cite an e-mail to Barclays wherein Tannin allegedly
said the fund is, "having our best month ever" and our
"hedges are working beautifully". However, at that time the
fund was having "severe" liquidity problems, Barclays
claims. Barclays said it lost "hundreds of millions of
dollars" in these funds. Allegedly, Cioffi and Tannin
discussed internally the "wipe out" of the fund. |
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Robert Bunzel said that these
indictments "signal a new chapter in the subprime debacle". |