| NEW YORK
NEW YORK The government is considering bringing further criminal charges in the case involving two former Bear Stearns executives indicted last month related to the collapse of two hedge funds they oversaw, a federal prosecutor said on Friday.
In a court hearing in U.S. District Court in Brooklyn, Assistant U.S. Attorney Patrick Sinclair said "the government is indeed contemplating additional charges."
He did not provide any details, but said the government is working to make a final decision about bringing additional charges in the next few months.
"We are looking to have that resolved by early fall at the absolute latest," Sinclair told U.S. District Judge Frederic Block.
Ralph Cioffi and Matthew Tannin were charged on June 19 with conspiracy and securities fraud related to the demise of the two funds last year, which spurred questions about oversight and risk management at Bear Stearns. The firm was sold in March to JPMorgan Chase & Co in an emergency takeover brokered by the U.S. Federal Reserve.
Cioffi and Tannin, who were in court for Friday's brief hearing but did not address the judge, have both pleaded not guilty.
A lawyer for Cioffi, Edward Little, told the judge at the hearing "there will definitely be a trial" in the case. A trial date has not yet been set. Judge Block scheduled another hearing in the case for September 26.
The charges marked the first major criminal case announced by federal prosecutors stemming from the subprime mortgage crisis. Cioffi and Tannin are accused of touting the funds' prospects to investors as an "awesome opportunity," while at the same time expressing private concern about an impending subprime mortgage meltdown.
Little has previously said that his client may be "an easy target" for the government because the Bear funds were among the first big blow-ups of the subprime crisis. A lawyer for Tannin, Susan Brune, has called her client "a scapegoat for a widespread market crisis."
According to BusinessWeek magazine last month, prosecutors have also been investigating whether Cioffi and Tannin broke the law in their dealings with banks. Investigators are gathering evidence about possibly misleading comments that the two made to major lending and trading partners, according to the report, which cited people close to the probe.
If convicted of securities fraud, Cioffi and Tannin each face as much as 20 years of imprisonment. If convicted of conspiracy, they each face as much as five years in prison.
Cioffi is facing an additional insider trading charge.
The U.S. Securities and Exchange Commission has also brought civil securities fraud charges against the pair, accusing them of misrepresenting the funds' investments.
(Reporting by Martha Graybow, editing by Phil Berlowitz, Gary Hill)