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Bank of America Sues Bear Stearns Execs
The American Lawyer
October 31, 2008
Ralph Cioffi and Matt Tannin have become household names in the Am Law 100 world since June, after the feds indicted them for fraud for allegedly lying to investors about the state of two Bear Stearns hedge funds that collapsed in June 2007.
The case has now spilled into civil court, with Bank of America filing suit Wednesday against Cioffi, Tannin and a third Bear Stearns exec for hiding the funds' poor health in order to the draw the bank into a complicated $4 billion transaction in which mortgage-backed securities controlled by the funds were pooled to support the sale of other securities.
The bank has retained Robbins, Russell, Englert, Orseck, Untereiner & Sauber for the suit, which was filed Wednesday in federal court in Manhattan. Name partner Lawrence Robbins signed the complaint.
The complaint repeats many of the allegations against Cioffi already outlined by prosecutors and the SEC, including this gem: Cioffi allegedly told a Bear Stearns economist in March 2007, "Don't talk about [the funds' February results] to anyone or I'll shoot you."
Such messages, the complaint says, continued internally throughout the spring, including in a May 26 e-mail in which Tannin warned that the funds were "in danger of a wipe out." It was then that Bank of America was agreeing to take on about $2.9 billion collateral to finance the $4 billion securitization, the complaint says. That collateral became worthless when the funds collapsed in June.
One note of interest: the third ex-Bear Stearns executive named in the complaint, Raymond McGarrigal, now works at JPMorgan Chase.
This article first appeared on The Am Law Daily blog on AmericanLawyer.com.
