Bear Stearns Ex-Managers to Pay $1 Million to Settle Fraud Case

How to get rich - defraud people out of a lot of money.

http://dealbook.nytimes.com/2012/02/13/bear-stearns-ex-managers-to-pay-1-million-to-settle-s-e-c-case/?scp=2&sq=bear%20stearns&st=cse

February 13, 2012, 4:24 pm
By PETER LATTMAN

Two former Bear Stearns hedge fund managers have agreed to pay about $1 million to settle a civil lawsuit brought by the Securities and Exchange Commission, avoiding a second trial over whether they defrauded investors.

As part of the deal with the agency, neither of the former Bear executives, Ralph R. Cioffi and Matthew M. Tannin, will admit any wrongdoing. The agency has been sharply criticized in the courts and in Congress for allowing defendants to settle fraud cases without admitting or denying the charges.

The settlement is still subject to approval by Frederic Block, the federal judge in Brooklyn presiding over the civil case. In Monday’s hearing, he raised his eyebrows over what seemed to him to be a rather small sum of money being paid by Mr. Cioffi and Mr. Tannin to resolve the lawsuit.

“This case is being settled for, relatively speaking, chump change,” Judge Block said at the hearing. But he said he “was inclined to sign off on it.”

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Mr. Cioffi and Mr. Tannin were indicted almost four years ago on criminal charges that they lied to their clients about the health of their hedge funds, which were largely invested in subprime mortgage-backed securities that plummeted in value when the housing market collapsed.

Federal prosecutors asserted that the former executives, who earned millions while at Bear, publicly promoted the fund’s prospects while privately fretting about the state of their portfolio and the housing market.

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