The two men, Ralph Cioffi and Matthew Tannin, were accused of lying to investors
-- telling them they were optimistic about their funds, while privately worrying
they were all but dead.
The fact that the Bear managers were acquited even though they held two different opinions on their funds should come as an endorsement to chief executives everywhere that they can buoy their firms by being openly optimistic about the future, while privately worrying about the short term.
Last year there were a number of articles written that decried managers who went onto CNBC, looking into the camera and telling America their company had strong fundamentals. The articles practically indicted them by saying they were commiting fraud. But that isn't what they were doing. What they actually did was try to lower their borrowing costs to propel their companies through the rough patch of 2008. By pitching their stock on TV they may have prevented heavy losses from turning into even heavier losses which kept an extra pad of equity on their balance sheets. This, in turn, made their companies' commercial paper easier to roll over (arguably the most dangerous and worrisome aspect of the crisis last year for executives). These actions, though, are ultimately in the shareholders interest. A complement to a manager's duty of creating shareholder value is to maintain that value when the market turns sour.
I for one am glad these fund managers were acquitted, because it allows executives to place their investors interests at the forefront without worrying about contingent liabilities by potential litigants if the wheels fall off.
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