Worldwide — While these people will probably face less jail time than the kids who changed their grades on the computer, this message is clear and sets an ugly precedent for the financial community.

U.S. prosecutors are focusing on an e-mail allegedly sent by the two suggesting that their funds were headed for trouble, four days before they told investors they were comfortable with their holdings, the Wall Street Journal reported today, citing people familiar with the situation.

Tannin allegedly e-mailed Cioffi saying he was afraid that the market for bond securities they had invested in was “toast,” and suggested shutting the funds, the Journal said. The two have told colleagues that they quickly were convinced that Tannin’s concerns were misplaced, according to the Journal.

Indictments against Cioffi and Tannin might lead to a cascade of criminal cases and civil suits, said former prosecutor Robert Bunzel, a white-collar criminal defense lawyer in San Francisco.

“The floodgates could open,” Bunzel said.

Separate U.S. Sweep

In a separate move today, two government officials said more than 400 people have been charged in a U.S. Justice Department mortgage-fraud sweep.

Called Operation Malicious Mortgage, the arrests are to be announced this afternoon by FBI Director Robert Mueller and Deputy Attorney General Mark Filip at the Justice Department in Washington. A number of arrests were made earlier this week and the FBI is still tallying the final numbers, said the officials who requested anonymity.

  1. MikeN says:

    Sounds like some bogus prosecutions after a media firestorm, like what Giuliani did before he was mayor, including Michael Milken, and the frenzy that brought us Sarbanes-Oxley.

  2. Mister Mustard says:

    >>sets an ugly precedent for the
    >>financial community.

    How is this either a precedent or ugly? Financial fraudsters have been around since the dawn of money, and sending them to jail isn’t anything new.

    With the increasing infection of society with CDOs, derivatives, reverse and interest-only mortgages, annuities scammers, predatory credit lenders, hedge fund scammers, government bailouts of promulgaters of risky business, and other parasitic tricks ad nauseum, the financial industry is about as popular as Windows Vista.

  3. moss says:

    Anyone working in licensed, regulated banking and mortgage lending knew about these frauds over the years of sub-prime loans.

    The Feds did absolutely nothing. State governments did absolutely nothing.

    But, hey, it’s election time. Let’s make it look like your government cares.

  4. interested senior says:

    What’s with the headline. This story isn’t about reverse mortgages. It’s about a couple of crooks who were in the sub-prime investment business. Nobody on Wall Street promotes reverse mortgages. They’re a government program for seniors.

  5. moss says:

    #4 – you don’t watch TV commercials, eh? The biggest advertiser for reverse mortgages is good old Countrywide.

    The same dudes who were on their way to belly-up-land from sub-prime until they were bailed out by BankAmerica. Who now owns Countrywide.

  6. Billy Bob says:

    Put ’em in stocks in the town square.

  7. MikeN says:

    When are they going to investigate the Senators who got sweet deals? The media seems a little silent on the story. I wonder if they’d be so silent if it was a McCain advisor, and Republican Senators getting the deals.

  8. Mr. Fusion says:

    #7, Lyin’ Mike,

    I wonder if they’d be so silent if it was a McCain advisor, and Republican Senators getting the deals.

    I guess you never heard of Phil Gramm, former Republican Senator from Texas. He is a top advisor for McCain. He pushed through relaxed regulations and oversight of the banking / securities / trading markets. Today he is also a highly paid lobbyist for a major foreign bank actively lobbying against closing loopholes.

    The Senate Democrats put an amendment in the latest Farm Bill to close the “Enron Loohole”. Gramm, and other lobbyists fought the measure. McCain even voted against the bill while mumbling something about not approving the attachments. Yet he never said a word about the Farm Bill when it was on the floor.

    Democratic Senators declare their loans under disclosure rules. Republicans take theirs in small bills wrapped in newspaper.

  9. BertDawg says:

    #7 – Lyin’ Mike – Gramm also pushed through the Gramm-Rudman Act some years ago, which basically mandated a balanced federal budget. It stood for a while, but has since been repealed by colleagues with ulterior financial motives. Guess he got tired of pissin’ into the wind.

  10. Rick Cain says:

    Too little, too late. The GOP is always about 5 years too late doing anything. I actually prefer they do nothing.

  11. All Reverse Mortgage Company, Senior Lenders serving California & Florida offers Fixed Rate and Jumbo Reverse Mortgage Programs, use our calculator, pros cons

  12. Ronald says:

    My parents have recently taken out a reverse mortgage – At first I thought it was a horrible idea since we have had the home in our family now for many generations but after speaking to my lender they explained that my parents home be mine as long as I can pay off anything that the borrow. Im calculating that the home appreciation alone should cover over the interest costs so it is essentially a free loan for them – I’m glad that they now have more money for their retirement.


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