An arbitration panel for the Financial Industry Regulatory Authority (FINRA), an independent regulator for the financial services industry, ruled in favor of Atlanta-based RaceTrac [image-nocss] in the case involving Bear Stearns and two subsidiaries.
The arbitration award was rendered in December, but became public this week, according to the report.
The award comes three months after Cioffi, of Tenafly and an associate were acquitted on charges of conspiracy, securities fraud and wire fraud in connection with the collapse of the funds, said the report.
Cioffi, the head of the funds and a managing director of one of the three defending companies, Bear Stearns Asset Management (BSAM), of which the two funds were part, was a defendant early on in the FINRA case. But he and two other fund managers and a company executive were dismissed from the case five months after it was filed in December 2007, the report said.
The panel upheld RaceTrac's claims of "misrepresentation and material omission, negligence," and "failure to supervise" in Bear Stearn's handling of the company's investment, according to the newspaper. The panel made the award after 32 hearings, including six that took place after the criminal trial.
In November, a federal jury in Brooklyn acquitted Cioffi and a subordinate, Matthew Tannin, of charges that they deliberately concealed the worsening state of the funds from investors in the spring of 2007 to stop them pulling their money out. Prosecutors said the two men wanted to keep their bonus money flowing in.
The hedge funds, which had provided a healthy return for several years, were heavily invested in mortgage-backed securities. The collapse of the funds in the summer of 2007 after lenders demanded their money back was one of the first signs that Bear Stearns was in trouble.
The company was acquired by JP Morgan Chase & Co. in March 2008 after lenders pulled their money and the investment bank faced a liquidity crisis.
Cioffi and Tannin still face a suit filed by the U.S. Securities & Exchange Commission (SEC) involving similar accusations to those made in the criminal trial, the report said. The next hearing is set for March 10.
RaceTrac owns more than 525 retail gasoline convenience stores in 12 southeastern states.
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