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Bill Radke: The first criminal trial to come out of the financial crisis gets underway today. Two former Bear Stearns hedge-fund managers are charged with misleading investors about how their funds were doing. Marketplace’s Amy Scott has that.
Amy Scott: Think back to the summer of 2007, when the mortgage meltdown was just beginning. Losses on subprime mortgages wiped out two hedge funds at investment bank Bear Stearns.
Ralph Cioffi and Matthew Tannin managed those funds. The government accuses them of telling clients their money was safe when they knew otherwise.
ROBERT MINTZ: Essentially what the government has charged here is that these defendants were telling their investors one thing, but privately believed something very different.
Robert Mintz is a former federal prosecutor, now with the law firm McCarter and English. He says the collapse of the hedge funds didn’t bring down Bear Stearns. But he says the case has become symbolic.
MINTZ: There will be a temptation by some to hold these two responsible for what was really a much larger problem. And the defense is going to argue that they’re really being made scapegoats.
If convicted, Ciaffi and Tannin could spend up to 20 years in prison.
Peter Henning teaches law at Wayne State University. He says the defense may have a hard time finding jurors impartial to a pair of rich guys from Wall Street. New York Magazine recently reported that Ciaffi had to sell two of his three sports cars.
PETER HENNING: There is certainly in the United States a natural bias against the wealthy. And someone who has to sell two Ferraris is certainly going to come across as wealthy and less sympathetic.
On the other hand he says the government has a tough case to make. That the defendants intentionally defrauded their investors.
I’m Amy Scott for Marketplace.
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