Wednesday, May 7, 2008

Captain Renault Returns-2

"The [federal] probe is moving forward on two fronts, looking at whether the managers deliberately misled investors about the funds' health and whether [Ralph] Cioffi and his team conjured up fraudulent values for the funds' risky subprime securities. The latter is what matters most to other investment banks. ... 'If the valuations become a criminal issue [for] Bear Stearns, it would send a warning shot across the bow of every firm that marketed these exotic products,' says Steven B. Caruso, a litigator representing several Bear investors. ... Prosecutors need evidence that the managers intentionally put a false price on a security. In other words, it usually comes down to a smoking-gun-e-mail. 'You need a debate that ends with someone saying: "I don't care what the facts are, we are going to use this valuation",' says former top federal prosecutor David Esseks, now a partner at Allen & Overy in Manhattan. ... 'This was a Streetwide failure,' says another former federal prosecutor", my emphasis, BusinessWeek, 5 May 2008.

I don't know who represents Cioffi, but it looks like Cioffi is the victim of a selective prosecution. Suppose, don't think it, Goldman Sachs (GS) and Citigroup used Bear's valuation techniques. Let Benton Campbell explain why no actions have been brought against GS and Citi executives. Sure. See my 27 April 2008 post. Cioffi's prosecution looks like another instance of Captain Renault at work, "Round up the usual suspects". See my 18 September 2007 post. Esseks thinks he needs a "smoking gun e-mail". Huh? Esseks, did you ever hear of an "ostrich" or "wilful blindness" instruction? I believe you can find it at West's criminal law key 782 or thereabouts. Or does the DOJ only use them in small drug distribution cases? Esseks used to work for Mike Garcia and went to the University of Michigan Law School. Does Michigan teach evidence?

1 comment:

Anonymous said...

So many maggots, most will fly away free as a bird. The looting of America is almost complete.