Trial to weigh when positive spin becomes fraud

10/12/2009 | Wall Street Journal, The

A federal court will consider whether two former Bear Stearns executives, Ralph Cioffi and Matthew Tannin, committed securities fraud. The defendants tried to keep two hedge funds afloat as mortgage-market prices fell in 2007. Prosecutors said the defendants misled investors about the hedge funds' health. "This case will be viewed by many as a test of where the boundary lies between acceptable, positive spin and outright fraud," said David Siegal, a defense lawyer at Haynes & Boone. "Much of the government's case appears poised to rely on what many previously believed was just spin."

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