For a few months I’ve been fighting behind the scenes to get a private civil fraud lawsuit against Bear Stearns and its senior leaders Jimmy Cayne and Warren Spector unsealed. I won that battle last month in Manhattan federal court and discovered a war chest of internal emails by over a dozen Bear Stearns executives and confidential communications to its regulator, the Securities and Exchange Commission, that showed these men have misled the public for 8 years on the how, when, and why Bear Stearns really failed. I then chose to partner with one of my favorite and highly respected investigative journalist Roddy Boyd to report a story on how the SEC knew as far back as 2005 that something wasn’t right about the way Bear Stearns was disclosing its risk in the fixed income-mortgages department, run by Tom Marano, that eventually took down the bank. Shockingly the unsealed emails showed Bear’s CFO and public face to investors, Sam Molinaro, tell his team “we need liquidity ASAP” on the same day (Aug 3rd 2007) he held a public investor call reassuring Bear Stearns investors capital levels and liquidity was just fine.
The fact pattern I uncovered, which shows the depth of internal awakening by Bear Stearns executives back in the summer of 2007 that their beloved 100-year-old bank was in serious trouble and they planed to keep it quite from The Street and investors, is beyond troubling. But when I realized the SEC could have published a letter Molinaro sent them detailing what their real subprime risk was (and not disclosed in their financial statements) months before the bank failed and admitting they could go under; feels like the SEC aided these executives in their crimes of investor fraud and complete breach of their fiduciary duties.
I urge all my readers to take the time to read our story at the non-profit investigative journalism publication www.sirf-online.org. This publication was founded by Roddy Boyd and depends on the generous donations of readers to cover and report stories that a lot of main street financial publications won’t touch but should. You can find the DONATE NOW button on the top right of the home page. I spent my time and money going through the legal system to unseal this case and make these important documents available to The Street, other reporters, and the investing public to read for free. It took Roddy Boyd and I a lot of digging and skill to write an engaging story that corrects the record and exposes this truth that occurred during one period of the financial crisis. Please join the other readers who have donated to help us cover the cost of this important work.
I would also like to thank the New York-based law firm of Rottenberg Lipman Rich and attorney Tom Chase who represented me in our legal work to get the case of Bruce Sherman v. Bear Stearns unsealed. And to William D. Cohen who gave credit to my work in the New York Times today. He’s got his own amazing account from rare interviews with Bear executives that shows the level of deception these men went through to push blame to anyone but themselves.