Not Guilty

by Art Woolf

I've written about Vermonter Ralph Cioffi on VT before.  Back in the summer of 2007, the two hedge funds that he ran for Bear Stearns went belly up, losing 1.6 billion dollars for its investors, and contributing to its bankruptcy.  That was the first indication of the coming financial crisis.

Mr. Cioffi was duly arrested and put on trial, and I wrote that certain people who should know better presumed that those Wall Street executives were of course guilty.   

Now the jury has delivered a verdict of not guilty of securities fraud:

The jury of eight women and four men, drawn mostly from working-class neighborhoods, essentially found that while Mr. Cioffi and Mr. Tannin may have made bad investments, making a bad investment was not a crime.

How difficult was the case?

The jurors, who waded through a stack of financial lingo and complex investments, reached their verdict after six hours of deliberation.

Apparently, it was close to a slam dunk.  For the defense.

What lesson can be learned from this case?  One is to beware of a few loose quotes from emails taken out of context.  Or, as one of the Enron prosecutors who was not involved in this case noted:

the texting, twittering, BlackBerry-toting jurors of today understand that an e-mail capturing a concern, doubt or momentary distress does not reflect thought over time, much less a vetted public statement.

Another is to beware of prosecutors who try to enhance their image with pictures of Wall Street executives doing the perp walk in handcuffs (see photo above).

Finally, we should beware of politicians who assume guilt and try to simplify a complicated story and blame the financial crisis on greedy Wall Street executives.

Comments

[Bruce Shields]

Art is absolutely right. For anyone wishing to understand better how Federal prosecutors have attempted to criminalize business dealings, I would recommend last month's publication by Boston attorney Harvey Silverglate, "Three Felonies A Day: How the Feds Target the Innocent." Silverglate documents a dozen or more cases where exactly that has happened. We often hear of the indictment, with the now infamous "perp walk," or "frog walk," where the accused business man is arrested in front of dozens of cameras in his place of business. The acquitals are more often never noticed by most media.