2 Bear Stearns Fund Leaders Are Acquitted

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It was, prosecutors claimed, a clear case of Wall Street crime — and a chance to bring to account two culprits of the subprime age.

But jurors disagreed, and on Tuesday, two former Bear Stearns hedge fund managers were found not guilty of securities fraud in federal court in Brooklyn, in what legal experts called a setback for prosecutors hoping for easy victories in this era of bailouts and foreclosures.

The verdict, the first in a major criminal case stemming from the current financial crisis, brought to an end a two-year ordeal for the managers, Ralph R. Cioffi and Matthew M. Tannin. They had been led away in handcuffs in June 2008 and accused of lying to their investors about the precarious state of the funds they oversaw.

Investors lost $1.6 billion when the funds, heavily invested in mortgage securities, collapsed in the summer of 2007. The fiasco presaged the financial turmoil that would later upend Wall Street and the broader economy.

The three-week trial riveted the financial and legal communities, which viewed it as a bellwether for other cases, both criminal and civil, involving the financial industry. The jury of eight women and four men, drawn mostly from working-class neighborhoods, essentially found that while Mr. Cioffi and Mr. Tannin may have made bad investments, making a bad investment was not a crime.

http://www.nytimes.com/2009/11/11/business/11bear.html?th&emc=th