NEW YORK (Reuters) - U.S. prosecutors said on Tuesday that two former Bear Stearns Cos hedge fund managers facing trial on fraud charges are trying to impede the government’s access to documentary evidence.
Lawyers for one of the accused, Ralph Cioffi, described the allegations as “false and inflammatory” as the government asked a judge for a hearing to review Cioffi’s pre-trial release on $4 million bond and travel restrictions.
A lawyer for the other defendant, Matthew Tannin, declined comment on Tuesday but has rejected other accusations made by prosecutors over the past week in court papers in Brooklyn federal court in New York.
Tannin and Cioffi were indicted in June last year on numerous fraud charges over their role in the 2007 collapse of two Bear Stearns hedge funds. The funds’ failure cost investors $1.4 billion and helped lead to the credit crisis and the sale of Bear to JPMorgan Chase & Co (JPM.N).
Cioffi was also charged with insider trading, and prosecutors and lawyers are sparring over what evidence should be admitted at their trial, which is scheduled to start on October 13 with jury selection.
Both men are out on bail and face up to 20 years in prison if convicted.
In a letter filed with the court on Tuesday, the government said that on September 18 “Cioffi, without a subpoena or the assistance of counsel, flew to Florida and attempted to obtain original bank documents, which he knew were the subject of a pending government subpoena.”
Lawyers for Cioffi said the government made the allegation because it faced evidence that Bear Stearns Asset Management had vetted and approved Cioffi’s pledge of interests in one fund as collateral for a loan on a Sarasota, Florida, condominium he was building.
“The government threw out yet another baseless allegation,” Cioffi’s lawyers wrote to U.S. District Judge Frederic Block. “It is preposterous for the government to suggest that it was ‘obstruction’ for Mr. Cioffi to seek a copy of bank records that vindicate him.”
Prosecutors cited Cioffi’s Florida trip as part of their arguments in court papers that the disappearance of both men’s trading notebooks and other evidence was not a coincidence.
In Tuesday’s letter, the government said Cioffi’s trip, the missing notebooks and other actions by the two men “provide further evidence of the defendants’ efforts to impede the government’s access to documentary proof.”
On Monday, Tannin’s lead lawyer, Susan Brune, wrote to the judge that a government allegation that Tannin erased an email account was “an eleventh-hour smear” before trial.
The case is U.S. v. Cioffi and Tannin 08-415 in U.S. District Court, Eastern District of New York (Brooklyn).
Reporting by Grant McCool and Jonathan Stempel; editing by John Wallace and Steve Orlofsky