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E-Discovery Leads to Arrest of Bear Stearns Hedge Funds Managers

June 24, 2008

E-Discovery Leads to Arrest of Bear Stearns Hedge Funds Managers

Wall Street and Technology, June 19, 2008

If we haven’t convinced you that e-discovery is of paramount importance, maybe this news story will change your mind. Two former Bear Stearns employees have been accused of being involved in the collapse of two hedge funds that triggered the sub-prime mortgage crisis…all thanks to a simple e-mail.

An e-mail allegedly sent by Matthew Tannin, COO at Bear Stearns, to Ralph Cioffi, a senior portfolio manager of the two funds, is at the center of the controversy. The communication allegedly said that Tannin was “afraid that the market for bond securities they had invested in was ‘toast,’” and suggested shutting the funds, according to the Wall Street Journal. Ironically enough, the two men told investors four days later that they were comfortable with their holdings.

This high-profile case is raising concerns about e-mail monitoring at financial firms all over the country. More often financial experts are finding themselves in hot water for comments made electronically.

“’We see on a regular basis high-profile individuals finding themselves at the center of a scandal because of communications via electronic means,’ says Marie-Charlotte Patterson, VP of market strategy for AXS-One, a provider of high-performance records compliance management solutions.”

Should financial experts be kept under watch in order to protect the safety of their clients? If you were to ask those affected by the Bear Stearns Hedge Funds managers, the answer would be simple: Yes.

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