Blogging the Bear Stearns Trial: An Assistant's Notebook Becomes A Key Piece of Evidence

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The body of evidence is largely electronic in form, with one exception.

In May 2007, Jason Bunin scribbled 'Ralph 5.5mm in Enhanced' into a notebook during an early morning meeting with Ralph Cioffi and Matthew Tannin. Bunin was an assistant to one of Bear Stearns' top brokers, who represented $1 billion in investor money. Little did Bunin know he'd be flipping through that notebook more than two years later in federal court and submitting it as evidence in the U.S. government's securities fraud case against the two former hedge fund managers, who are accused of lying to investors about the health of their funds.

Bunin testified that during the May meeting, Cioffi said he had $5.5 million of his own money in the funds. Prosecutors said  Cioffi's personal investment was actually about $3 million, after already having transferred one third of his money to another hedge fund that was experiencing better returns. In its closing argument, the government said Cioffi lied to Bunin and his boss, so they'd share that information with their clients and give them 'false comfort that all was well with the funds.' The funds collapsed two months later, resulting in $1.6 billion in investor losses.

In his closing argument, Cioffi's lawyer, Dane Butswinkas, offered an alternative explanation of the 'Ralph 5.5mm in Enhanced' note. He pointed out that Bunin, during his cross examination, didn't remember the exact question that prompted the $5.5 million note. Was the question, how much money does Cioffi have invested in the fund? Or was it, how much money do the portfolio managers have invested in the fund? Could $5.5 million be the combined investment by Cioffi, Tannin and the other fund manager Ray McGarrigal? So maybe Cioffi didn't lie?