Setback In Bear Stearns Case May Force Gov't Shift

MARCY GORDON

WASHINGTON (AP) — The swift acquittal of two Bear Stearns executives in the government's criminal case tied to the financial meltdown likely will force prosecutors to rethink the evidence they planned to present in a raft of cases that have yet to go to trial, legal experts say.

Criminal cases may be percolating against executives at fallen mortgage lender Countrywide Financial Corp. and bailed-out insurance giant American International Group Inc., among others. The Bear Stearns acquittals show how tough it can be to prove that bank executives committed fraud by lying to investors.

The government must show that executives were actually committing fraud and not simply doing their best to manage the worst financial crisis in decades, said Michael Levy, a white-collar defense attorney at Bingham McCutchen in Washington. Jurors were not swayed by e-mails the government presented in the Bear Stearns case.

Fraud is "a very difficult theory for the government to prevail on in the context of an unprecedented financial crisis," Levy said.

Federal prosecutors and the Securities and Exchange Commission have launched wide-ranging investigations of companies across the financial services industry. But a year after the crisis struck, charges haven't yet come in most of the probes. The investigations also are targeting government-owned mortgage financers Fannie Mae and Freddie Mac and crisis casualty Lehman Brothers.