Two former Bear Stearns Cos managers whose hedge funds collapsed early in the financial crisis lied to investors to save their bonuses and reputations, a U.S. prosecutor said on Wednesday.

But during opening statements in the trial at the U.S. District Court in Brooklyn, a lawyer for one of the defendants, Ralph Cioffi, countered his client did not know how things would turn out.

Fund managers 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. The defendants saw their successes coming to an end ... to save their bonuses and their reputations they decided to commit a crime..

Cioffi, 53, and Tannin, 48, dressed in dark suits and white shirts, sat impassively taking 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.

Sinclair cited e-mails in his opening statement that he said would be presented in evidence showing the pair wrote privately about their fears for the subprime mortgage market even as they promoted such funds to investors.

Together, the men collected bonuses of nearly $20 million in 2005 and 2006, the prosecutor said.

Cioffi's lawyer Dane Butswinkas told jurors that even the best minds in the financial industry could not have predicted the credit crisis that precipated the worst U.S. recession since the Depression of the 1930s.

Ralph Cioffi did not know how things would turn out, said Butswinkas, pacing before the jury. He didn't have hindsight like the government has today.

Real trials are not like the movies, Butswinkas said. What matters is not the soundbite, but the details ... not cherry picking from thousands of thousands of emails.

In addition to the charges that carry a possible prison sentence of 20 years, Cioffi, 53, 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.

Tammim's lawyer was also expected to make an opening statement.

SOPHISTICATED INVESTORS

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

The funds' investors were wealthy, sophisticated and from all over the world, Sinclair said.

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.

They lied about their personal investments in these funds and they lied about the level of redemptions in these funds, Sinclair said.

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 on 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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