Lanny Breuer (USDOJ)
Justice Department Criminal Division chief Lanny Breuer on Thursday told Reuters that the acquittal earlier this week of two former Bear Stearns hedge fund managers will not deter the department from prosecuting fraud cases in the future. On Tuesday, a New York jury acquitted Matthew Tannin on charges of conspiracy, securities fraud and wire fraud. And Ralph Cioffi was found not guilty of the same charges and an additional charge of insider trading.
The U.S. Attorney’s office for the Eastern District of New York had alleged that Tannin and Cioffi misled investors about the risks involved in the subprime mortgage market. Reuters reports that the trial “was seen as a test case for prosecuting people for their alleged roles in the financial crisis and some have questioned whether the acquittals would give the department pause in pursuing such cases.”
Breuer told Reuters, “When the laws and the facts dictate that we should bring charges we will, and we will ultimately always abide by the judgment and verdict of the jury,” adding, “I don’t think it’s a setback. We have to be vigilant and move forward and we’ll do just that.”
Glen Donath, a former Senior Assistant U.S. Attorney in the Fraud and Public Corruption Section of the U.S. Attorney’s office for the District of Columbia, told Reuters that the Tannin-Cioffi case was difficult to make because of how quickly the markets change. Donath, now a partner at Sonnenschein Nath & Rosenthal LLP, told Reuters, “The fact that these two guys had a negative view of the subprime market at a particular point in time is close to meaningless in terms of how they viewed a particular trading opportunity at another moment,” adding, “The government had a herculean task of proving intent in this case and didn’t seem to come close to meeting that burden.”
