Two former Bear Stearns Cos managers whose hedge funds collapsed early in the financial crisis lied to investors to save their bonuses and reputation, a U.S. prosecutor said in an opening statement at their trial Wednesday on fraud charges.

Fund managers Ralph Cioffi and Matthew Tannin have denied charges of securities fraud and conspiracy in the June 2008 indictment that made them the first high-profile Wall Streeters to be criminally charged in a case stemming from the financial crisis.

These two defendants lied to their investors to save their multimillion dollar bonuses, Assistant U.S. Attorney Patrick Sinclair told the jurors in federal court in the New York City borough of Brooklyn.

The defendants saw their successes coming to an end ... to save their bonuses and their reputations they decided to commit a crime, Sinclair said.

Sinclair, in a dark suit, white shirt and red tie, stood directly in front of the jurors to make his statement.

Cioffi and Tannin, also dressed in dark suits and white shirts, sat impassively and took notes at a long wooden table with their lawyers in the courtroom.

Their wives and some relatives sat in the public seats of the courtroom.

In addition to the charges that carry a possible prison sentence of 20 years, Cioffi is also accused of insider trading by taking $2 million out of one fund and investing it in another. He has also denied that charge.

Lawyers for Cioffi, 53, and Tannin, 48, were expected to make their opening statements later Wednesday.

The two funds run by Cioffi and Tannin collapsed in June 2007. They were crammed with risky subprime mortgage-backed securities and lost investors $1.4 billion.

Prosecutors contend that in March 2007 -- more than 18 months before the full extent of the crisis became clear -- the pair promoted the funds to investors while privately emailing their fears about a possible calamity in the subprime market.

Neither man is charged with contributing to the collapse of Bear Stearns Cos less than a year later, when it was sold to JPMorgan Chase & Co in a government-backed deal.

Twelve jurors were selected Tuesday after answering written and oral questions about whether they could be fair and impartial in an era of lost jobs, government bailouts of banks and the Wall Street financial crisis.

U.S. District Judge Frederic Block rejected two potential jurors at the request of the defense for expressing bias in a written questionnaire about wrongdoing on Wall Street and financial firms that try to bend the rules to make money.

Some potential jurors were rejected because their spouses have mortgage-related jobs.

The case is USA v Cioffi & Tannin, U.S. District Court for the Eastern District of New York, No. 08-415.

(Reporting by Grant McCool; Editing by Gerald E. McCormick and Richard Chang)

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