“The Right Expert” Essential to Bear Stearns Acquittal

Choosing the right expert can be essential to the outcome of a trial, as evidenced by juror interviews following the acquittal of two former Bear Stearns hedge fund managers in a high-profile case in which Analysis Group affiliate Dean R. Glenn Hubbard of Columbia Business School delivered expert testimony. Following the not-guilty verdict, one juror told The Wall Street Journal Law Blog that “Dr. Hubbard’s research allowed us to see what the managers were seeing” (“Bear Trial Postscript: The Value of Getting the Right Expert,” November 11, 2009).

Juror Aram Hong “sounded like a junior hedge-fund analyst” as she explained to the Law Blog that the funds failed because their repurchase lenders – the banks that enabled the funds to increase the size of their positions – lost their nerve and seized the funds’ assets. She was able to reach her conclusions, she said, after hearing Dean Hubbard’s testimony.

In its coverage of the verdict, The AmLaw Litigation Daily said the defense teams of Brune & Richard LLP and Williams & Connolly LLP “benefited from expert witness R. Glenn Hubbard ... who testified that it was reasonable for someone to be optimistic about the two funds’ prospects in the spring of 2007.” (“Litigator[s] of the Week: Susan Brune of Brune & Richard and Dane Butswinkas of Williams & Connolly,” November 12, 2009).

“Professor Hubbard helped the jury understand the difference between making investment management decisions that turned out to be incorrect because of unforeseen events, and decisions made with an intent to commit fraud,” said Managing Principal Maureen Chakraborty, one of the leaders of the Analysis Group team supporting Dean Hubbard.

The case against the former managers centered on allegations of securities fraud in connection with the 2007 collapse of two Bear Stearns funds that had been invested in collateralized debt obligations, including subprime instruments. Dean Hubbard walked the jury through the often byzantine world of credit models and complex financial instruments to illustrate how it was reasonable from an economic perspective for the managers to expect their funds to be profitable, and to continue to raise capital from investors based on those expectations.

The jury acquitted defendants Ralph Cioffi and Matthew Tannin of all charges. ■