Are Bear indictments fair?

Hmmm, good question. In looking over the indictment, there's not much question that Ralph Cioffi and Matthew Tannin were flat-out lying to investors on any number of fronts - the amount of redemptions that came in, Cioffi's claims on how much he had in the funds, and Tannin's assurances during an investor conference call that "There's no basis for thinking this is one big disaster." The feds have the emails, and the emails are pretty damning. But that still begs the question: Are the indictments fair? More to the point, should these two guys be singled out for stoking the subprime disaster? From the NY Sun:

Much of the case comes down to what some in the industry say is a fine line between the salesmanship that is common among brokers and traders on Wall Street, and fraud. "Marketing, advertising, salesmanship is part of the Wall Street, the American, DNA," the founder of Ritholz Research & Analytics, Barry Ritholz, said. "I think this will wake up a lot of people in the industry that it is one thing to spin it positive, and another to tell something to investors that defrauds them, and you end up going to jail."

Columbia Law School prof Merritt Fox describes a doctrine called "puffing," where sellers of securities "put things in a good light, which is perfectly legal unless they say something dishonest." Again, we get back to that fine line between selling and fibbing - and does fibbing constitute a criminal offense worthy of perp walks and serious jail time? U.S. Attorney Benton Campbell, trying to keep it simple for the sake of a jury trial, says that "honesty and integrity are important to this business. The defendants chose to breach this trust." Yeah, but it's hard not to bring up other key players in the meltdown, including, dare I say, Countrywide CEO Angelo Mozilo (who is under investigation). Need we be reminded of Mozilo's comments during an Oct. 26, 2007 conference call:

During the quarter, we incurred a loss -- the first quarterly loss in 25 years or approximately 100 consecutive quarters. The loss was primarily attributable to the extraordinary volatile market conditions that we experienced during the quarter. However, as you have seen from our press release this morning, we expect to return to profitability in the fourth quarter and we anticipate that 2008 will also be profitable. Perhaps more importantly, Countrywide and our very capable management team have taken the steps we believe that are necessary to position Countrywide to continue our long-term track record of success. In addition, as the industry leader, we continue to be bullish about the long-term prospects of both Countrywide and our industry.

Oops. Didn't quite work out that way. Countrywide wound up losing $422 million in the fourth quarter, and with bankruptcy rumors flying, agreed to be acquired by Bank of America. So it comes down to what guys like Angelo knew and when did they know it. Angelo claims that he was a victim of an out-of-control market. Other players are likely to say the same thing. And what if there's no incriminating email to prove otherwise?