Prosecutors are probing whether two hedge fund managers misled banks as well as investorsFederal prosecutors may not be done with former Bear Stearns hedge fund managers Ralph Cioffi and Matthew Tannin, who were charged on June 18 with lying to investors about the precarious state of their once-giant portfolios. BusinessWeek has learned that authorities are examining the funds' dealings with Wall Street banks to determine whether the managers misled them as well.
Investigators are gathering more evidence about possibly false statements Cioffi and Tannin made to major lending and trading partners, according to people close to the probe. Among them: Bank of America (BAC), Barclays (BCS), Dresdner Bank, and Merrill Lynch (MER).
Prosecutors are particularly interested in the toxic $4 billion collateralized debt obligation that the pair enlisted BofA to guarantee and sell in the spring of 2007—when the market for such risky mortgage-backed securities teetered on the brink of implosion. A spokesman for Cioffi and Tannin declined to comment.
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