Bear Stearns duo lied 'over and over again', court hears.

It's the first case to come to court concerning the recent credit crunch, and it puts on trial two Bear Stearns managers who, the prosecution allege, hid from their investors the scale of the nightmare which was unfolding to prevent them from deserting their funds when the sub-prime mortgage problem began to emerge.

The prosecution are relying heavily on emails between Ralph Cioffi, 53, and Matt Tannin, 48, in which they refer to the market as "toast", whilst assuring their investors that all was fine. It is claimed that they maintained this deception in order to protect their own income and bonuses.

They "violated a special relationship of trust" between fund managers and investors, he added. "They lied to investors to save their multimillion dollar bonuses. In the US, that is a crime, a serious crime. It's called securities fraud." The prosecution plans to lean heavily on private emails written by the men which suggest they knew much earlier that the sub-prime market was – in a word used by Mr Tannin – "toast". Yet the men glossed over the situation and deceived investors in two ways, it is alleged.

First, Mr Tannin said he was putting more of his own money into the funds, when in fact he did not invest a single cent of the $1m that was available in his bank account. Mr Cioffi, meanwhile, secretly withdrew $2m of his money. Second, Mr Cioffi denied any major investor was planning to pull out, when he had already received a major redemption request.

But, this was not the story they were selling to their clients:

Privately, the pair exchanged emails describing the market as "toast" and "pretty damn ugly". But on conference calls with clients, they are accused of lying about the number of investors pulling out of funds, and of hiding the truth about the amount of personal money they had at stake.

"They lied over and over again to lull investors into a false sense of confidence," said Sinclair, highlighting one anxious message sent one morning from Tannin's personal Google Mail account to a Hotmail account in the name of Cioffi's wife. "By lying, they stole from their investors the opportunity to make fully informed decisions."

I found myself thinking yesterday about Nick Leeson, the former derivatives broker who ended up jailed for his role in bringing about the collapse of the Barings Bank. In Leeson's case it was quite clear that he had, single-handedly, brought about the downfall of the UK's oldest investment bank.

Is the same true of these two? I think not.

They are merely examples of a corporate greed which is prevalent amongst a culture which exists purely to produce profit rather than produce.

But it would be wrong to scapegoat these two for sins which the entire banking system has indulged in. By which I don't mean that these trials shouldn't be taking place, but I do think that there should be many more than these two in the dock.

Where Leeson acted individually, the recent scandal was brought about by a collective act of madness.

Attempting to cloud the prosecution's picture of the two men running the funds virtually single-handedly, Butswinkas produced tables of Bear Stearns' management structure, bulky disclosure documents and a picture of the brokerage's busy trading floor. He said Cioffi and Tannin were not simply conspiring in a "bat cave" of their own.

I happen to agree with that. These two individuals didn't bring about the recent collapse; that was caused by the kind of corporate greed which Reaganism fostered and by the "deregulation" which the Republican party made their reason for existing.

So, whilst I have no particular sympathy for these two if they are guilty of the crimes which the prosecution accuses them off, I can't help but feel that they are being offered up as scapegoats for a systemic failure caused by the sins of, literally, thousands of others.

Why are they the only two in the dock?

Tags: Bear Stearns, credit crunch, financial collapse, Ralph Cioffi, Matt Tannin, Reaganism, deregulation