Bear Stearns pair 'to fight charges'

Two former Bear Stearns employees have been indicted on conspiracy and securities fraud charges over the collapse of two hedge funds.

Managers Ralph Cioffi, 52, and Matthew Tannin, 46, who were paraded in handcuffs in front of reporters and onlookers, have pleaded not guilty and will fight the charges, according to their lawyers.

The High Grade Structured Credit Strategies Master Fund and the Enhanced Master Fund helped spark the global credit crisis by stoking widespread fears about investments linked to risky sub-prime mortgage loans.

The two managers allegedly lied about the funds' prospects, despite concerns over liquidity and the outlook for the market.

An email from April 22 last year showed Tannin warn Cioffi the sub-prime market could be "toast" but at the same time the pair were touting their funds as an "awesome opportunity" for investors.

Prosecutors said Cioffi is facing an additional insider trading charge for transferring a portion of his own investments from one of the funds without telling investors.

The crumbling of the two funds also spurred questions about the oversight and risk management operations at Bear Stearns. The bank was sold in March to JPMorgan Chase & Co in an emergency takeover deal brokered by the US Federal Reserve.

The US Securities and Exchange Commission also filed civil securities fraud charges against the pair, accusing them of misrepresenting the funds' investments.

If convicted of securities fraud, Cioffi and Tannin face maximum sentences of 20 years of imprisonment. If convicted of conspiracy, they each face a maximum sentence of five years.

Both men were granted bail.

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