Tuesday, June 24, 2008

Bear Stearns Execs Indicted and 400 Charged in Mortgage Fraud

While Ralph Cioffi and Matthew Tannin, former Bear Stearns hedge fund managers, were indicted and charged with conspiracy, securities fraud and wire fraud on Thursday, more than 400 people were also charged in a wide-ranging probe of mortgage abuses during the U.S. housing boom.

The indictment accuses Cioffi and Tannin of marketing the Bear Stearns hedge funds as low-risk when in fact they were made up mostly of risky sub-prime mortgages. Cioffi and Tannin are also accused of making misrepresentations to keep investors from redeeming their shares and failing to let investors know the funds were collapsing. The funds lost $1.4 billion dollars when it collapsed last summer and triggered global panic in the financial markets.

Meanwhile, between March and June, the Department of Justice and the FBI has charged 406 people for engaging in a variety of schemes related to housing fraud. They're calling this national probe Operation Malicious Mortgage.

Just as Cioffi and Tannin were arrested, officials also arrested 60 some people in 144 separate cases related to mortgage fraud. FBI estimates the cases have resulted in one billion in losses.

These arrests show that the Justice Department and the FBI are being vigilant in punishing those who engaged in mortage fraud. The Operation Malicious Mortgage task force is investigating a variety of tactics including lending fraud, foreclosure rescue scams and mortgage-related bankruptcy schemes. The task force will also look into fraudulent misrepresentations about the borrower's financial status, the use of false or fictitious employment records or the inflation of property values. Foreclosure schemes usually involve criminals who target legitimate homeowners in dire circumstances and collect fees for supposed foreclosure prevention services.

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