AI
Bear Stearns Hedge Fund Manager Departs Amid Probes (Update3)
By Yalman Onaran
Dec. 19 (Bloomberg) -- Ralph Cioffi, the manager of Bear Stearns Cos. hedge funds that invested in subprime mortgages, left the firm as U.S. prosecutors investigate whether he withdrew money from two funds before they collapsed in July.
The U.S. Attorney in Brooklyn and the Securities and Exchange Commission are investigating Cioffi's withdrawal of money from the funds, three people with knowledge of the matter said. The probe is part of a broader regulatory review, according to the people, who declined to be identified because the examination isn't public. Investors in the two funds, which filed for bankruptcy in July, lost $1.6 billion.
``This hits three hot buttons for the government right now: insider trading, hedge funds and subprime,'' said Michael Missal, a former SEC enforcement lawyer who oversees the regulatory practice at Kirkpatrick & Lockhart Preston Gates Ellis LLP in Washington. ``They've said those are their highest priorities, so the target gets that much more focused.''
Cioffi, 51, stopped working for New York-based Bear Stearns last week, said company spokeswoman Elizabeth Ventura in an interview yesterday. She declined to say why he exited the company, the second-biggest underwriter of bonds backed by mortgages, or comment on the federal probe.
Cioffi declined to comment on his departure. He stayed on as an adviser after being relieved of his duties as a fund manager in June, when his subprime mortgage investments began to unravel. He left because his role in unwinding the funds was completed, a person close to the firm said.
$2 Million Withdrawal
The Wall Street Journal reported the probe of Cioffi yesterday. He hasn't been accused of wrongdoing by the SEC or the U.S. Attorney.
Cioffi pulled $2 million, or one third of the amount he had in one of the funds, before March so he could commit it to another fund he set up, one of the people said. The withdrawal occurred before the investments ran into trouble, the person said.
The two Bear Stearns funds failed when prices for collateralized debt obligations linked to subprime mortgages plummeted as late payments among U.S. borrowers with poor credit histories or heavy debts increased. Bear Stearns said last month it would write down the value of CDO holdings by $1.2 billion in the fourth quarter, including some seized from one of Cioffi's funds.
CDOs are created by packaging assets including bonds and loans and using their income to pay investors. The securities are divided into different portions of varying risk and can offer higher returns than the debt on which they are based.
Subprime Loss
Chief Executive Officer James ``Jimmy'' Cayne ousted Co- President Warren Spector in August, blaming him for the hedge- fund blowup.
Bear Stearns, the fifth-largest U.S. securities firm by market value, will report its latest financial results tomorrow. Analysts predict the decline in the value of subprime-related investments and a drop in fixed-income trading revenue mean the company will report its first quarterly loss since going public in 1985. The mean estimate is for a loss of $1.82 per share, according to data compiled by Bloomberg.
Bear Stearns declined 43 percent this year in New York Stock Exchange composite trading, more than its four larger rivals.
No Bonuses?
Senior executives at Bear Stearns, including the 73-year-old Cayne, will forgo bonuses this year, the Wall Street Journal said today in its ``Heard on the Street'' column, citing people familiar with the matter. The firm is discussing a succession plan for Cayne, CNBC reported yesterday, citing people it didn't identify.
Cioffi's first fund, the High Grade Structured Credit Strategies Fund, generated a 46.8 percent return from October 2003 to March 2007. The second, started in August 2006, earned investors about 7.5 percent in its first seven months before losing 5.4 percent in March.
A native of Burlington, Vermont, Cioffi joined Bear Stearns in 1985, selling so-called structured products such as bonds backed by mortgages or other loans. Before transferring to asset management in 2003, Cioffi was the head of structured credit products.
To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net .
Last Updated: December 19, 2007 07:00 EST
http://www.bloomberg.com/apps/news?pid=20601087&sid=a85FZamrgPrQ&refer=home
By Yalman Onaran
Dec. 19 (Bloomberg) -- Ralph Cioffi, the manager of Bear Stearns Cos. hedge funds that invested in subprime mortgages, left the firm as U.S. prosecutors investigate whether he withdrew money from two funds before they collapsed in July.
The U.S. Attorney in Brooklyn and the Securities and Exchange Commission are investigating Cioffi's withdrawal of money from the funds, three people with knowledge of the matter said. The probe is part of a broader regulatory review, according to the people, who declined to be identified because the examination isn't public. Investors in the two funds, which filed for bankruptcy in July, lost $1.6 billion.
``This hits three hot buttons for the government right now: insider trading, hedge funds and subprime,'' said Michael Missal, a former SEC enforcement lawyer who oversees the regulatory practice at Kirkpatrick & Lockhart Preston Gates Ellis LLP in Washington. ``They've said those are their highest priorities, so the target gets that much more focused.''
Cioffi, 51, stopped working for New York-based Bear Stearns last week, said company spokeswoman Elizabeth Ventura in an interview yesterday. She declined to say why he exited the company, the second-biggest underwriter of bonds backed by mortgages, or comment on the federal probe.
Cioffi declined to comment on his departure. He stayed on as an adviser after being relieved of his duties as a fund manager in June, when his subprime mortgage investments began to unravel. He left because his role in unwinding the funds was completed, a person close to the firm said.
$2 Million Withdrawal
The Wall Street Journal reported the probe of Cioffi yesterday. He hasn't been accused of wrongdoing by the SEC or the U.S. Attorney.
Cioffi pulled $2 million, or one third of the amount he had in one of the funds, before March so he could commit it to another fund he set up, one of the people said. The withdrawal occurred before the investments ran into trouble, the person said.
The two Bear Stearns funds failed when prices for collateralized debt obligations linked to subprime mortgages plummeted as late payments among U.S. borrowers with poor credit histories or heavy debts increased. Bear Stearns said last month it would write down the value of CDO holdings by $1.2 billion in the fourth quarter, including some seized from one of Cioffi's funds.
CDOs are created by packaging assets including bonds and loans and using their income to pay investors. The securities are divided into different portions of varying risk and can offer higher returns than the debt on which they are based.
Subprime Loss
Chief Executive Officer James ``Jimmy'' Cayne ousted Co- President Warren Spector in August, blaming him for the hedge- fund blowup.
Bear Stearns, the fifth-largest U.S. securities firm by market value, will report its latest financial results tomorrow. Analysts predict the decline in the value of subprime-related investments and a drop in fixed-income trading revenue mean the company will report its first quarterly loss since going public in 1985. The mean estimate is for a loss of $1.82 per share, according to data compiled by Bloomberg.
Bear Stearns declined 43 percent this year in New York Stock Exchange composite trading, more than its four larger rivals.
No Bonuses?
Senior executives at Bear Stearns, including the 73-year-old Cayne, will forgo bonuses this year, the Wall Street Journal said today in its ``Heard on the Street'' column, citing people familiar with the matter. The firm is discussing a succession plan for Cayne, CNBC reported yesterday, citing people it didn't identify.
Cioffi's first fund, the High Grade Structured Credit Strategies Fund, generated a 46.8 percent return from October 2003 to March 2007. The second, started in August 2006, earned investors about 7.5 percent in its first seven months before losing 5.4 percent in March.
A native of Burlington, Vermont, Cioffi joined Bear Stearns in 1985, selling so-called structured products such as bonds backed by mortgages or other loans. Before transferring to asset management in 2003, Cioffi was the head of structured credit products.
To contact the reporter on this story: Yalman Onaran in New York at yonaran@bloomberg.net .
Last Updated: December 19, 2007 07:00 EST
http://www.bloomberg.com/apps/news?pid=20601087&sid=a85FZamrgPrQ&refer=home
Solar Stocks #board-11148
Peak Oil #board-6609
Coal #board-2809
Real Estate Bubble #board-7285
Lender Implosion #board-10076
HomeBuilders #board-1680
Your Economy #board-1948
Global Warming #board-11877
Discover What Traders Are Watching
Explore small cap ideas before they hit the headlines.
