Legal News

?Who?s the Client?? Tannin Allegedly Raised Classic Legal Question

By Dan Slater

Indicted former Bear Stearns fund manager Matthew Tannin being escorted to the courthouse. (Credit: Associated Press)

Most of our Bear coverage today has been on the white-collar side. But buried in the indictment is a tidbit that brings to life that chestnut issue: “Who’s the client?” (See the Law Blog’s full Bear Stearns coverage here.)

In the same paragraph in the indictment that cites Tannin’s now infamous “the entire submprime market is toast” e-mail, prosecutors describe a later part of the e-mail in which Tannin allegedly notes the hurdles he and Cioffi would meet if they were to adopt a “very aggressive” investment strategy. In the e-mail, Tannin allegedly asks: “Who do we talk to about this? [BSAM’s president]? [Bear Stearns’ co-president]? Outside counsel? (And here we have to be careful because our outside counsel is BSAM’s outside counsel — This is another big issue we at least need to think about.)”

That’s some legal presence of mind for a mere fund manager. But, then again, Tannin’s got a law degree. (Folks, we’re learning this as we go, too, but BSAM stands for Bear Stearns Asset Management.)

Would Tannin and Cioffi have been protected if they spoke to Bear counsel — inside or outside? We called up Ropes & Gray’s Michael McGovern, a former SDNY prosecutor, to get his take. “If counsel is Bear Stearns counsel, representing only the company, then [Cioffi and Tannin’s] communications to Bear Stearns counsel may well be privileged from disclosure, should the company invoke its privilege,” said McGovern. “But the individual would have no privilege to stop the company from discussing it with the authorities.”

He called Tannin’s question “very perceptive – especially since senior executives often labor under the misunderstanding that when they talk to company counsel they’re engaging in a privileged discussion pursuant to their own individual privilege.”

Okay, now back to white-collar crime. The government must have included this query for a reason. McGovern says it could suggest “the possibility of consciousness of guilt.” He says: “When the defendant’s actions suggest they’re aware of wrongdoing, it makes it easier to convince a jury that the defendants knew they were doing something wrong.”

Full post as published by Law Blog - WSJ.com on June 19, 2008 (boomark / email).