The swift acquittal of two Bear Stearns executives in the government's criminal case tied to the financial meltdown likely will force prosecutors to rethink the evidence they planned to present in a raft of cases that have yet to go to trial, legal experts say.
Criminal cases may be percolating against executives at fallen mortgage lender Countrywide Financial Corp. and bailed-out insurance giant American International Group Inc., among others. The Bear Stearns acquittals show how tough it can be to prove that bank executives committed fraud by lying to investors.
The government must show that executives were actually committing fraud and not simply doing their best to manage the worst financial crisis in decades, said Michael Levy, a white-collar defense attorney at Bingham McCutchen in Washington.
Fraud is "a very difficult theory for the government to prevail on in the context of an unprecedented financial crisis," Levy said.
The jurors in federal court in Brooklyn, N.Y., were not swayed by e-mails the government presented in the case against two Bear Stearns executives, Ralph Cioffi and Matthew Tannin, who ran hedge funds that collapsed after they bet heavily on the shaky subprime-mortgage market.
Jurors said the e-mails didn't prove intent to deceive investors and acquitted the pair of conspiracy and other charges in an alleged scheme that cost investors about $1.6 billion.
The e-mails written by the two showed anxiety over the slide in the subprime market and what it could do to the hedge funds' investments
Jurors said the e-mail evidence was contradictory, taken out of context.
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