Legal News

Bear Fund Manager Litigation, Part Deux: The Civil Suits Are Coming

By Dan Slater

In June, former Bear fund managers Ralph Cioffi and Matt Tannin were indicted on fraud charges in connection with their funds’ collapse last year. On an April 25 conference call, shortly before the funds’ implosion, Tannin allegedly told investors “we’re comfortable with exactly where we are” — when, perhaps, they weren’t.

Now, Bank of America is getting in the game. The WSJ reports that BofA filed a suit against the asset-management unit of Bear, Cioffi,Tannin, and a new name — former Bear portfolio manager Raymond McGarrigal, who now works at J.P. Morgan. Lawyers for Cioffi and McGarrigal and a spokesman for Tannin declined to comment to the WSJ. A J.P. Morgan spokesman also declined to comment.

Here’s the suit.

The civil suit, like the criminal indictment, alleges they misled BofA about the financial health of the two funds. BofA structured and marketed a $4 billion securitization in May 2007 — the month before the implosion — of mortgage-backed assets primarily owned by the two Bear funds, according to the suit, which was filed in the Southern District of New York.

The suit, which alleges breach of contract and fraud, claims the Bear unit and its managers concealed from BofA that the funds were suffering substantial withdrawal requests from investors and were in imminent danger of collapse in the spring of 2007.

Full post as published by Law Blog - WSJ.com on October 30, 2008 (boomark / email).