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Bear Stearns Fraud Verdict: E-mails As Proof of Guilt? That's So 20th Century

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Reprinted from The Smart Asset

The reliance on e-mails as definitive, incriminating evidence of chicanery was once a given, but that didn't last long. Social media have now damaged the credibility of such e-mails, as the monumental Bear Stearns fraud verdict shows.

E-mails shooting back and forth during 2007 between Ralph Cioffi and Matthew Tannin looked like bullets that hit the target, damning the two hedge-fund goniffs on charges of securities fraud. (See my previous item for details from the indictment.)

Such careless and stupid e-mails revealing crooked behavior doomed previous goniffs, like Jack Abramoff and his henchmen in the infamous Wampumgate corruption scandal of the Bush era. (The unmasking of that scandal was one of John McCain's finest moments, if you recall.) The e-mails wove a fascinating web of corruption extended to the religious right, several congressmen, and Karl Rove. And the e-mails not only brought Abramoff and crew to justice, but they forced congressmen out of their jobs.

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But this is a new time, and texting and twittering have now convinced many people that e-mails are also thoughts on the fly that aren't necessarily proof or even strong evidence. That's obviously because we all now rue some of the thoughts on the fly that we text and twitter. And texting and twittering are even more careless and less thought-out than e-mails.

So cases built on e-mails no longer have the cred they once had.

But the problem is this: Those thoughts on the fly are often really good evidence of malicious or illegal intent. Twittering and texting have merely inured the common folk, blinding them to that fact. Just because someone twitters, texts, or e-mails incriminating statements doesn't make those statements not incriminating.

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In any case, John Hueston, who prosecuted Enron's top crooks, Ken Lay and Jeff Skilling, says it best in this morning's New York Times:

"The texting, twittering, BlackBerry-toting jurors of today understand that an e-mail capturing a concern, doubt or momentary distress does not reflect thought over time, much less a vetted public statement."

The NYT story, by Zachery Kouwe and Dan Slater, cannily puts the Cioffi/Tannin e-mails in context:

One of the main documents in the case was an e-mail message that Mr. Tannin sent from his private Gmail account to the e-mail account of Mr. Cioffi's wife. He wrote that the subprime market -- the market to which the funds were tied -- "looked pretty damn ugly," and that if a recent report was correct, "then the entire subprime market is toast." Days later, during a conference call, Mr. Tannin told investors that"we're very comfortable with exactly where we are."

When the defense asked that the entire e-mail be read before the jury, a different picture emerged, according to a juror, Aram Hong, the director for food and beverage at a hotel. The complete e-mail, said Ms. Hong, suggested that the defendants were considering two options. The first was to close the funds, and the other was to approach the flagging subprime mortgage market as a buying opportunity. "They decided, 'We need to make a decision now. And we need to be aggressive whichever way we go,' " Ms. Hong said.

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Ward Harkavy is currently Senior Editor at the Village Voice, for which he writes The Smart Asset.

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