How the prosecutors must have wished to have a go at Ralph Cioffi in the flesh! If only Cioffi and Matthew Tannin, the two Bear Stearns fund managers acquitted yesterday of insider trading and other charges, had had the gall to take the stand in their own defenses and to submit to what the Feds must have hoped would be a withering cross-examination. Well, no such luck.
White-collar crime is by its nature often not the stuff of high drama in the courtroom, but what makes it fun is that so many defendants, convinced they can impress a jury with their authority, sincerity, and intelligence, take the stand. Then, most often, they go to jail. There were the grand pooh-bahs of Enron, Jeffrey Skilling and (RIP) Ken Lay. There was the awful performance of Tyco's Dennis Kozlowski. There was one-time billionaire Bernie Ebbers of Worldcom, who lost the white-collar trial lottery with a 25-year sentence. There was Martha. All of them decided it was best that a jury should hear their story their way, and all of them went to jail.
Cioffi and Tannin didn't testify. Neither did HealthSouth chief Richard Scrushy, who managed to elude conviction on charges linked to financial shenanigans at HealthSouth despite the testimony of no fewer than five of the chief financial officers who'd served under him. (He did, however, eventually go to prison on an unrelated and very controversial bribery charge.) Frank Quattrone, the king of Silicon Valley investment banking, came within a hairsbreadth of turning an obstruction-of-justice case he was close to winning into a loss when, on the stand, he gave the prosecutors an opening with a rehearsed and evasive performance"”though he finally ended up with a slap on the wrist after a mistrial and an overturned conviction.
It's arguable that some of the folks who did testify had little choice: They were so well-known that they needed to try, at least, to dispel the jury's assumption that they were monsters. But, then, Cioffi and Tannin weren't exactly the best candidates for acquittal by a Brooklyn jury: millionaire Wall Streeters facing trial in an environment in which the reigning assumption is that everyone on Wall Street is crooked to start. Nonetheless, they chose not to take the stand. The right call, because the last thing white-collar defendants in this kind of trial should want is to give the jury the chance to look inside their heads.
Prosecutors are now grousing that they did everything right; it was just the jury that got it wrong. As Clusterstock's John Carney reports, the prosecutors think the jury just wasn't capable of understanding their airtight case. On the surface, you can see their point: On at least a couple of charges, the evidence that the Bear Stearns managers didn't level with their investors is overwhelming. When investors asked to know whether others were pulling money out of the Bear Stearns funds, they were told, no, that wasn't true.
There's a difference, however, between overwhelming and damning, and that difference comes down to one word: motive. The story that prosecutors have never managed to explain"”not to the press, not to the jury"”is what was going on inside Cioffi's mind when he was trying to keep investors in his funds. Yes, Cioffi did take $2 million of his own out when the mortgage market for his fund's CDOs looked bad. But he left two-thirds of his money in. The connection that prosecutors never made is how Cioffi's dealings with investors put more money in his own pocket.
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