Feds eye more charges for Bear Stearns executives

At a hearing in Brooklyn, Assistant U.S. Attorney Patrick Sinclair told a judge the government "is indeed contemplating additional charges" against Ralph Cioffi and Matthew Tannin. He didn't give specifics about the potential new charges but said they likely would be filed in the fall.

U.S. District Judge Frederic Block put off setting a trial date because of the ongoing investigation and because the case is so sprawling: Evidence includes an estimated 1 million pages in documents.

"There will definitely be a trial," said Cioffi's attorney, Edward Little. "The question is: What year?"

Cioffi, 52, and Tannin, 46, pleaded not guilty last month to conspiracy and fraud charges--the first criminal case to hit Wall Street amid the housing market meltdown. They have accused prosecutors of making them scapegoats for the market crisis.

The eventual implosion of the defendants' hedge funds cost investors $1.8 billion and started a domino effect that led the demise of Bear Stearns itself. The firm barely avoided bankruptcy in a rescue buyout by JP Morgan Chase & Co.

The indictment naming Cioffi and Tannin was based heavily on a series of e-mails that reveal behind-the-scenes alarm at the hedge funds as their investments began to slide.

"The subprime market looks pretty damn ugly," Tannin wrote to Cioffi in April 2007. If Bear's internal reports were accurate, Tannin suggested, "I think we should close the funds now," and "the entire subprime market is toast."

The situation became so dire that Cioffi pulled $2 million of his own cash from the fund, but the pair still told investors that they should stay in and that the outlook was good, prosecutors said.

Both former executives are free on bond. They face up to 20 years in prison if convicted.