Sentence first; verdict finally

Posted by Marc Hodak on November 12, 2009 under Reporting on pay, Scandal | Read the First Comment

But the verdict was not at all what the prosecutors were looking forward to when they tried a pair of Bear Stearns traders in the press, using what we now know to have been highly selective leaks.  Once the jury saw the leaked material in context, in a forum that consisted of more than soundbites and press outrage, they came to their own conclusion:

In the indictment, the prosecution quoted from a note Mr. Tannin sent in April 2007 from his personal Gmail account to Mr. Cioffi’s wife. The government made much of the fact that Mr. Tannin chose not to send it to Mr. Cioffi himself or from his Bear Stearns’ e-mail account, suggesting he was trying to hide something. “The subprime market looks pretty damn ugly,” Mr. Tannin wrote, adding that if a recent financial report was correct, “I think we should close the funds now …. The entire subprime market is toast.”

But the jury eventually saw the entire message, in which Mr. Tannin ruminated at length about various courses of action and seemed to be striving to make the soundest financial choice. In other words, it was just what you would hope your fund manager would be worrying about in a precarious time. In the end, he concluded he was feeling “pretty damn good” about what was happening at the funds and that “I’ve done the best possible job that I could have done.” Any wonder the jurors came away with reasonable doubt?

The Bear Stearns executives are smiling now, but that’s what one does when the authorities threaten to take your life away, and you suddenly get it back.  The jury made it clear this case was not close:

“They were scapegoats for Wall Street.”

“The entire market crashed,” one juror explained. “You can’t blame that on two people.”

But you can try if you’re a young prosecutor with the press, public, and political bosses cheering you on.  And unlike these traders who lost their jobs, their firms, and much of their personal fortunes on their gamble, the prosecutors lost nothing personally on their gamble.  Like the traders, though, the prosecutors did lose millions of dollars of other people’s money–ours, the taxpayers.

And even now, most commenters are assuming that this an unfortunate outcome, that the prosecution was merely incompetent rather than opportunistic.