United States v. Ralph Cioffi and Matthew Tannin Criminal Docket No (FB)

Transcription

1 U.S. Department of Justice United States Attorney Eastern District of New York 271 Cadman Plaza East F.#2007R01328 Brooklyn, New York VIA ECF The Honorable Frederic Block United States District Judge United States District Court Eastern District of New York 225 Cadman Plaza East Brooklyn, New York September 25, 2009 Re: United States v. Ralph Cioffi and Matthew Tannin Criminal Docket No (FB) Dear Judge Block: On August 18, 2009, the government moved in limine to admit certain evidence pursuant to Federal Rule of Evidence 404(b). Cioffi opposed this motion on September 1, 2009, and the government now replies. Based on the complete evidence now obtained and set forth below, the government asserts that the proffered evidence is direct proof of the charged crimes. This proof will demonstrate that Cioffi and Tannin used Cioffi s investment in the High Grade Structured Credit Strategies Enhanced Leverage Master Fund Ltd. (the Enhanced Fund or the Fund ) to lie to Busey Bank to secure a $4,250,000 line of credit, which Cioffi needed to complete a construction project in Longboat Key, Florida. The defendants fraudulently pledged Cioffi s interests in the Enhanced Fund and bound Bear Stearns Asset Management ( BSAM ) to the terms of a Consent and Agreement ( pledge agreement ) knowing that BSAM refused to consent to Cioffi pledging his Enhanced Fund investment. Of course, this is the very same investment that Cioffi is charged with illegally redeeming in Count Four of the indictment, and which Cioffi and Tannin are charged with lying about in Counts One and Three of the indictment. As discussed below, the concealment of this fraud is direct evidence of Cioffi s motive to commit insider trading and both defendants motives to commit the remaining crimes charged in the indictment. This evidence is alternatively admissible pursuant to Rule 404(b) of the

2 Federal Rules of Evidence as it is directly relevant to issues of the defendants motive, intent, knowledge and absence of mistake. I. The Facts 1 In no uncertain terms, BSAM refused to consent to Cioffi s request to pledge his investment in the Enhanced Fund as collateral for a $4,250,000 line of credit from Busey Bank. With Tannin s assistance, Cioffi executed the pledge anyway, thereby compelling them to hide the truth from BSAM management and their investors. Cioffi invested in a multi-million dollar building project ( La Firenza ) in Florida that was on the verge of foreclosure in November 2006 ( from Cioffi to bank officials acknowledging, [y]our latest threat was that you would foreclose on 11/13th. BS-SEC ). Cioffi negotiated the use of his Fund investment as collateral to secure a loan (the pledge )(11/3/06 from Cioffi to bank official indicating, I m prepared to secure you with my shares in my Bear Stearns Hedge Fund... As of 10/31/06 the market value is $5.7M. BS-SEC ). Cioffi knew that BSAM management had to consent to the pledge (11/6/06 BS-SEC ; 11/8/06 stating, I m waiting on Bear Stearns to sign and return to me the assignment agreement on one of my BSC accounts that has $5.7M market value in. BS- SEC ). On or within days before November 6, 2006, Tannin contacted an attorney in BSAM s legal department (the 1 By no means does the government intend to offer all of these facts at trial. The government provides the Court with a fullsome recitation of the facts here, however, to refute Cioffi s claim that the government has somehow misrepresented the facts surrounding the pledge agreement. (See, e.g., Supplemental Memorandum Regarding The Government s Motion To Admit Evidence Pursuant To Federal Rule Of Evidence 404(b), dated September 22, 2009). In Section III-E herein, the government outlines the proof it intends to offer during trial on these issues. 2

3 Attorney ) to obtain the necessary documents for the pledge. The Attorney neither approved the pledge nor had the authority to do so. Rather, as set forth below, he provided ministerial editing services on certain documents. On November 6, 2006, the Attorney notified BSAM s Global Head of Hedge Funds (the Global Head ), the Chairman of BSAM s Hedge Fund business, BSAM s General Counsel, and the Director of BSAM s Third Party Seeded Hedge Funds about the pledge. He informed the senior managers that he had discussed the pledge with outside counsel, who did not think the pledge was a disclosable event because Ralph was maintaining a beneficial ownership in the interests, but asked if the managers had any questions. (BS-USAO )(Exhibit #1). Cioffi was not a party to this discussion. Minutes later, the Chairman of the Hedge Funds replied to all who were on the questioning whether Cioffi s outside interest in this real estate concern posed a potential conflict of interest for Cioffi. (BS-USAO )(Exhibit #2). About 30 minutes later, Tannin ed the General Counsel and explained that La Firenza was a real estate partnership, in which Cioffi was 40% investor. (BS- USAO )(Exhibit #3). A few minutes later, Tannin asked the General Counsel Are we ok? (BS-USAO ). The General Counsel responded, not yet. Without addressing whether BSAM would consent to the pledge, he told Tannin that Cioffi would have to complete the Outside Business Interest ( OBI ) process at BSAM. The General Counsel directed Tannin to inform Cioffi that [a]nything else he hasn t disclosed also should be on the table. The General Counsel advised Tannin that [s]ometimes, in times of difficulty, we prohibit managers from removing their investment in favor of clients going first. This [pledge] arrangement has the potential to interfere with that if there was a problem and the bank seized the assets at an inopportune time. (BS-USAO )(Exhibit #4). Minutes after sending the last to Tannin, the General Counsel forwarded the exchange to the Global Head, stating, FYI. The Global Head was 3

4 Cioffi and Tannin s direct supervisor. (BS-USAO )(Exhibit #5). On November 7, 2006, the General Counsel exchanged s with Cioffi and the compliance department regarding Cioffi s involvement in the OBI process. The General Counsel told a compliance officer, who was about to go speak with Cioffi, that after Cioffi s OBI is approved, the next question is whether we agree with him pledging the assets he owns in the fund. We have the right to restrict a withdrawal by any manager at anytime if we feel that investor withdrawals have priority. His arrangement could interfere with that. (BS-USAO )(emphasis supplied)(exhibit #6). In the meantime, the Global Head consulted with a variety of senior managers of BSAM about the propriety of Cioffi s pledge, including the Chief Executive Officer ( CEO ) of BSAM, who delegated the decision on the pledge to the Global Head. As set forth below, the Global Head denied the pledge. For his part, Tannin advocated in favor of Cioffi s pledge to the Global Head. (11/13/06 from Tannin stating [t]his is more than you want to know... but... Ralph s pledge of the hedge fund shares is to cover the $3mm lein [sic]. (BS-SEC )(Exhibit #7). Viewing the decision whether to permit Cioffi to enter into the pledge agreement as a business, rather than a legal decision, the Global Head decided not to grant BSAM s consent to Cioffi s pledge of his investment in the Enhanced Fund. (See 3500 GQ-4 and GQ-5; BS- SEC ). On November 14, 2006, the Global Head sent Cioffi an telling him that he came by Cioffi s office to see him, but that Cioffi was in a meeting. He asked Cioffi to call him re the pledge. (BS-USAO )(Exhibit #8). That same day, the OBI Group informed Cioffi that it had approved his continued interest in La Firenza as an OBI. (BS-USAO ). The OBI group never considered or approved the pledge. On either November 14 or 15, 2006, the Global Head visited Cioffi s office again. He informed Cioffi, in 4

5 no uncertain or ambiguous terms, that BSAM did not consent to Cioffi s pledge. The Global Head gave Cioffi his reasons for the denial of consent, including his concern that such a pledge would have to be disclosed to Fund investors. Cioffi became enraged, resorting to expletives, and blamed the decision on BSAM s General Counsel. (3500 GQ-4 and GQ-5; BS- SEC or BS-USAO )(Exhibit #9). On November 29, 2006, Tannin ed the Attorney and asked him if him if he was cool with a draft pledge agreement Tannin attached to the . (BS-USAO ). Neither Tannin nor Cioffi advised the Attorney that BSAM had expressly denied the pledge on or about November 14, Later that day, the Attorney responded to Tannin, providing some minor typographical edits to the draft pledge agreement. (BS-USAO ). The Attorney did not and could not have approved the pledge. On a later date after November 29, 2006, (see BS-USAO )(Exhibit #10), Tannin brought the pledge agreement to BSAM s Hedge Fund Middle Office Manager ( Middle Office Manager ). 2 The Middle Office Manager signed the agreement at Tannin s request. Neither Tannin nor Cioffi advised the Middle Office Manager that BSAM had expressly prohibited the pledge on or about November 14, On or about December 20, 2006, a Busey Bank Senior Vice-President, executed the pledge agreement on behalf of Busey Bank thereby finalizing the pledge of Cioffi s Enhanced Fund investment as collateral for the $4,250,000 line of credit to Cioffi. (BUSEY ). 2 In his position, the Middle Office Manager supported the portfolio managers, provided estimates to clients on returns by sector and portfolio, and oversight for administrators. (See 3500-GC-3 at 1). 5

6 The pledge agreement has four signatories: (1) Matthew Tannin on behalf of the Enhanced Fund 3 and as a representative of BSAM; (2) the Middle Office Manager on behalf of BSAM, (3) Ralph Cioffi as the Customer (Borrower) and (4) Busey Bank s Senior Vice-President, on behalf of Busey Bank. Id. The pledge agreement states that: 1. BSAM consented to Cioffi s pledge; 2. BSAM consented to the assignment of Cioffi s security interest in the Enhanced Fund to Busey Bank; 3. BSAM acknowledged that it had been directed by Cioffi to register Busey Bank s partnership interest in the Enhanced Fund as [Busey Bank] as pledgee of [Ralph Cioffi]; 4. BSAM agreed not to change that registration without Busey Bank s written consent; 5. BSAM represented that Cioffi s Enhanced Fund investment was not otherwise encumbered; 6. BSAM agreed not to consider or act upon any request by Cioffi to withdraw all or some of his interest in the Enhanced Fund; 7. BSAM agreed to consider only withdrawal requests made by Busey Bank; 8. BSAM agreed neither to consider nor act upon any request by Cioffi to sell, assign or otherwise dispose of his interest in the Enhanced Fund; and 3 Inexplicably, the form is in the name of the Bear Stearns High-Grade Structured Credit Strategies, L.P. ( High Grade Fund ), despite the fact that, as of December 20, 2006, Cioffi had no investments in the High Grade Fund. Other documents, such as the State of Florida Uniform Commercial Code Financing Statement Form, clarify that the pledge was secured by Cioffi s investment in the Enhanced Fund. (BUSEY ). 6

7 9. BSAM agreed that the agreement would remain in effect until it received written notice from Busey Bank. By the agreement, Tannin, as the Fund s agent, represented that, as of the date of the agreement, the interests of Busey Bank were registered on the books of the Enhanced Fund as [Busey Bank] as pledgee of [Ralph Cioffi]. Tannin also agreed to pay the proceeds of any distributions or withdrawals incurred by Cioffi directly to Busey Bank s account. Contrary to Tannin s representations, the security interests of Busey Bank were never registered on the books of the Enhanced Fund on December 20, 2006, or on any date thereafter. (See Fund Shareholder Register, as of May 31, 2007)(BS-USAO )(Exhibit # 9). Along with the pledge, Cioffi executed a four-page revolving promissory note for the $4,250,000 line of credit, which contained an acceleration clause that provided that if Cioffi defaulted in the performance of or compliance with the Security Agreements or any of the other loan documents securing the note, he would be liable for the entire principal of the loan plus interest on 10 days notice. (BUSEY ) As of April 1, 2007, Cioffi redeemed $2 million (or one-third) of his investment in the Enhanced Fund, which was still, albeit unregistered, subject to the restrictions of the pledge with Busey Bank. Similar to the manner in which he approached the pledge, Cioffi did not personally notify BSAM senior management of his intent to redeem. On July 23, 2007, after inquires by Busey Bank, Cioffi advised the bank that its security interest in the Enhanced Fund was worthless. (BS-SEC ). II. Witness Accounts To verify the above facts, the government interviewed the CEO, the Global Head, the Middle Office Manager, the Attorney and Busey Bank personnel. These interviews have provided the following information. The Global Head stated that he was the highest ranking manager in the hedge fund division of BSAM; he was 7

8 Cioffi s and Tannin s direct supervisor; and he reported directly to BSAM s CEO. The decision to deny the pledge was his to make, and he communicated his decision to Cioffi directly and unequivocally. As his subordinate, the Middle Office Manager, had no authority to overrule the Global Head s decision. As the denial was a business decision, rather than a legal decision, the Attorney had no input in, much less the authority to overrule, the Global Head s denial of consent. Other than the CEO, no other person at BSAM had the authority to overrule the denial, and the CEO did not do so. In fact, the Global Head assumed that Cioffi abided by the denial until only a few days ago. The Attorney stated that he learned about Cioffi s pledge from Tannin. The Attorney alerted BSAM senior management to the pledge because he thought it was unusual and something they should know about. (See BS-USAO ( Matt was being a bit cagey about the purpose of the loan )). The Attorney merely provided the pledge documents to Tannin. He had no contact with Cioffi about the pledge. He did not approve the pledge, nor did he have the authority to do so. Had he been informed by Cioffi, Tannin or anyone else that the Global Head forbade Cioffi s pledge, he would not have assisted Cioffi and Tannin in any way. The Middle Office Manager stated that Tannin brought him the pledge agreement, and he signed it. While he had previously signed investor pledge documents, this was the first and only time he had seen a portfolio manager pledging his or her investment in their own fund. He recalled that he was hesitant to sign the document because Busey Bank had not yet signed the agreement. He recalled offering some push-back to Tannin over signing the pledge. He was confident, nonetheless, that he would have asked Tannin whether Cioffi had obtained the proper approvals for the pledge. Had he been told by Tannin or anyone else, that the Global Head, his superior at BSAM, had denied Cioffi s request to pledge the investment, he is absolutely sure he would have never signed the pledge. For his part, the CEO stated that the Global Head had the authority to deny BSAM s consent to Cioffi s pledge. He stated that neither the Attorney nor the Middle Office Manager had the authority to override the Global Head s decision. He, as the CEO, was the only person at BSAM who was authorized to reverse the Global Head s decision not to permit Cioffi to pledge his investment in the Enhanced Fund, and he did not do so. 8

9 III. Argument A. Cioffi Did Not Have BSAM s Permission To Pledge His Investment In the Enhanced Fund As a threshold matter, the government can now put to rest the question of whether Cioffi had BSAM s consent to pledge his investment in the Enhanced Fund as collateral for a loan: Cioffi did not. Cioffi s recent attempts to skew the facts by stringing together s from the Global Head s subordinates are meritless. See Supplemental Memorandum Regarding The Government s Motion To Admit Evidence Pursuant To Federal Rule Of Evidence 404(b), dated September 22, The evidence is also clear that Tannin was in lock-step with Cioffi in his scheme to circumvent BSAM s decision to deny the pledge and, in doing so, bind BSAM to the terms of a pledge agreement of which it did not approve. Tannin was involved in the pre-denial negotiations with the Global Head: he directly advocated that Cioffi be permitted to enter into the pledge. Tannin did all of the legwork to make it appear to Busey Bank that BSAM approved the pledge: (1) he managed all of the contacts with the Attorney to obtain the forms needed to effectuate the pledge; (2) he brought the pledge to the Middle Office Manager for his signature, without informing him that the Global Head forbade the pledge; and (3) by signing the pledge, he represented to Busey Bank that the bank s interests in Cioffi s investment were recorded on the books of the Enhanced Fund. They never were. 4 Moreover, Tannin never raised an objection to Cioffi s redemption of $2 million from the Enhanced Fund when he learned of it in April 2007, even though he knew the proceeds of the redemption were subject to the terms of the pledge agreement that he signed. Tannin also did not deposit the proceeds of the redemption in Busey Bank s 4 Documents show that Tannin was familiar with the pledge registration process, having been involved in another investor s redemption of his pledged assets in the High Grade Fund to effectuate a subscription of the same assets into the the Enhanced Fund only months before. (BS-USAO )(Exhibit #10). Not surprisingly, the existence of that investor s pledge agreement is clearly reflected in the books and records of the Enhanced Fund. (See Exhibit #9, BS-USAO ). 9

10 account as required by the pledge agreement. Tannin, an attorney, did neither of these things because he, like Cioffi, knew that BSAM did not consent to the pledge. In sum, the facts will show that Cioffi and Tannin conspired to circumvent BSAM s denial of consent for Cioffi s pledge. Together, the defendants duped the Middle Office Manager into signing the pledge and later lied to Busey Bank in representing, inter alia, that BSAM consented to the pledge when they knew that was false. As a result of their efforts, Busey Bank was defrauded into granting Cioffi a $4,250,000 line of credit based, in part, on collateral in which the bank did not have a registered interest and was later rendered worthless. 5 B. The Pledge Is Direct Evidence Of The Defendants Motive To Commit Securities Fraud Evidence of Cioffi and Tannin s scheme to circumvent BSAM s denial of Cioffi s pledge coupled with evidence of the fraud they perpetrated on Busey Bank provides probative, direct proof of the defendants motives to commit each and every crime charged in the indictment. This pledge occurred immediately prior to the charged conspiracy and colored every decision and motive of the defendants throughout the spring of 2007 and the securities fraud conspiracy. The defendants had to keep the existence of the pledge a secret from BSAM and the existence of Cioffi s blatant violation of the pledge (i.e., the $2 million redemption of Busey Bank s collateral in the Enhanced Fund) a secret from Busey Bank. Together with their obvious motives to increase their wealth and maintain their lifestyles, their motive to conceal pledge-related frauds drove them to commit additional acts of securities fraud against the investors in the Funds. To be sure, when Cioffi, aware of negative material, non-public information about the prospects of the Funds, redeemed $2 million from the Enhanced Fund in April 2007, he also did so out of concern for the future value of the collateral he had fraudulently pledged to Busey Bank. 5 It should be noted that the Busey Bank loan was subsequently re-paid in full months after the bank s collateral in the Enhance Fund was reduced to zero. 10

11 Having been threatened once with foreclosure by Busey Bank, Cioffi was aware of Busey Bank s willingness to initiate foreclosure proceedings in the event of a default. A foreclosure would have required Cioffi to pay the entire balance of the loan on 10 days notice, which would have been a demand Cioffi was ill-equipped to meet due to the numerous other financial burdens he carried during the same time period (see Govt s September 21, 2009 Letter, p ). Avoiding foreclosure proved to be a strong motive for Cioffi to tell lie after lie to his investors to keep the Enhanced and High Grade Funds in business. That motive was further augmented by Cioffi s reasonable expectation that BSAM would take adverse action against him if it discovered that he pledged his investment against BSAM s explicit orders. As an attorney, Tannin was fully cognizant that if his lies to Busey Bank came to light, he would face potential criminal liability. Indeed, Tannin s misrepresentations to Busey Bank amounted to black-and-white violations of the law (e.g., falsely binding BSAM to the pledge when he knew he did not have the authority to do so and falsely representing that he had registered the securities in the name of Busey Bank when he had not). Like Cioffi, Tannin had a strong motive, therefore, to lie to investors in the hope of propping up the Enhanced Fund and not drawing Busey Bank s or BSAM s attention to the status of Cioffi s investment in the Fund. Greed coupled with fear of exposure motivated Cioffi and Tannin to lie to the Funds investors in their futile attempt to keep the hedge funds alive and, hopefully, keep their fraudulent pledge deal a secret. Without question, had the defendants told investors about Cioffi s $2 million redemption or the collective state of redemptions in the Funds in April and May 2007, these disclosures would have jeopardized the Funds stability, thereby increasing the likelihood of further redemptions and the discovery of the fraudulent pledge. These were eventualities the defendants were loathe to let happen. C. The Pledge Is Inextricably Intertwined Direct Evidence Of The Crimes Charged The government submits that the pledge evidence is not a remote uncharged act committed by the defendants, but part of a continuing offense that contributed to their motives of greed and personal enhancement to commit the crimes on trial. The pledged securities are the same 11

12 securities that the defendants are charged with lying about in the indictment. For that reason, the Court should consider evidence of the pledge as inextricably intertwined direct evidence of the crimes charged, making a Rule 404(b) analysis unnecessary. Among other things, evidence of the pledge is inextricably intertwined proof that directly: Proves that the defendants had motives, beyond greed and personal enrichment, for committing securities fraud and insider trading; Belies Cioffi s assertion that he moved $2 million into the Structured Risk Partners Fund ( SRP ) to put his skin in the game in the SRP Fund, something he had intended to do since December 2006; Demonstrates that the defendants never intended, under any circumstances, to reveal Cioffi s $2 million redemption to BSAM or investors in the Funds; and Establishes that the defendants conspired to conceal the fact of Cioffi s redemption after April The Second Circuit has made clear that evidence of uncharged criminal activity is not considered other crimes evidence under Fed. R. Evid. 404(b) if it arose out of the same transaction or series of transactions as the charged offense, if it is inextricably intertwined with the evidence regarding the charged offense, or if it is necessary to complete the story of the crime on trial. See United States v. Carboni, 204 F.3d 39, 44 (2d Cir. 2000) (quoting United States v. Gonzalez, 110 F.3d 936, 942 (2d Cir. 1997)(emphasis supplied); see also United States v. Baez, 349 F.3d 90, 94 (2d Cir. 2003); United States v. Avendano, 2004 WL , at *2 (S.D.N.Y. Nov. 30, 2004) (finding defendant s agreement to act as a cocaine courier for a cooperating witness to be inextricably intertwined with the evidence regarding the charged heroin conspiracy and necessary to complete the story of that alleged offense, highly probative intrinsic evidence of Defendant s involvement in the conspiracy charged, and not 12

13 other crime evidence within the meaning of Rule 404(b)); accord United States v. Leavitt, 878 F.2d 1329, (11th Cir. 1989) ("Evidence of criminal activity other than the offense charged is not extrinsic evidence under Rule 404(b) if it is inextricably intertwined with the evidence of the charged offense or is necessary to complete the story of the charged offense ). The government will offer evidence of the pledge not to show the defendants propensity to commit fraud, but rather as relevant background evidence to complete the story of the crimes charges and the relationship, including the relationship of trust, that developed between the defendants. See United States v. Langford, 990 F.2d 65, 70 (2d Cir. 1993)( It is within the court s discretion to admit evidence of acts committed prior to the time charged in the indictment to prove the existence of the alleged conspiracy as well as to show its background and history ). This evidence fills out for the jury the manner in which the defendants conducted their affairs at BSAM. Evidence of the uncharged acts completes the story of the crimes charged and helps explain to the jury how the illegal relationship between the participants in the crime developed. See United States v. William, 205 F.3d 23, (2d Cir. 2000). D. The Pledge Is Admissible Under Rule 404(b) In the alternative, the government submits that evidence of the pledge is not only admissible for the reasons set forth above, but is also admissible pursuant to Fed. R. Evid. 404(b) to show motive, intent, knowledge and absence of mistake. See e.g., United States v. Smith, 727 F.2d 214, (2d Cir. 1984) (affirming admission of similar acts of securities fraud to show defendant s knowledge of, and intent to engage in, free-riding securities scheme ); United States v. Lauersen, No. S2 98 Cr (WHP), 2000 WL at *3 (S.D.N.Y. November 8, 2000) (evidence of false diagnoses attributed by defendant to patients not undergoing fertility treatments admitted to show intent and lack of mistake when making identical false representations attributable to patients undergoing fertility treatments). The Second Circuit has adopted the inclusionary or positive approach to the Rule. United States v. Levy, 731 F.2d 997, 1002 (2d Cir. 1984); see also United States v. DeVillio, 983 F.2d 1185, 1194 (2d Cir. 1993). Consistent with this approach, "evidence of other crimes, wrongs, or 13

14 acts is admissible for any purpose other than to show a defendant's criminal propensity." United States v. Brennan, 798 F.2d 581, 589 (2d Cir. 1986) (emphasis added); see also United States v. Pipola, 83 F.3d 556, 565 (2d Cir. 1996) (Second Circuit s inclusionary interpretation of the rule allows evidence of other wrongs to be admitted so long as it is relevant and is not offered to prove criminal propensity ). As the government set forth in its first letter on this topic, see Govt s August 18, 2009 Letter, evidence of Cioffi s involvement in the pledge is relevant to his knowledge of BSAM s dim view of portfolio managers altering their investments in their funds, and his intent to avoid BSAM s scrutiny. The government otherwise relies on its prior arguments as they relate to the pledge s relevance to Cioffi s knowledge and disregard of the compliance procedures at BSAM. E. The Quantity Of Proof Of The Pledge The government has no intention to create a trial within a trial or to offer any proof that will distract the jury s attention away from the crimes charged in the indictment. To prove the existence of the pledge and its relationship to the crimes charged, the government expects to add a limited amount of proof to the trial record. The Global Head is already a noticed trial witness for the government. The government plans to ask him a limited amount of questions about how the pledge came to light and about the day he explicitly denied BSAM s consent for Cioffi s pledge. The government also intends to call the Middle Officer Manager to testify to that the pledge is authentic, that his position at BSAM was subordinate to the Global Head, that he signed the pledge without having been advised that BSAM objected to the pledge, and that, to his knowledge, the pledge was never filed on the books of the Enhanced Fund. 14

15 IV. Conclusion For the foregoing reasons, the government respectfully requests that evidence of the pledge agreement be admitted as direct proof of the crimes charged in the indictment or, in the alternative, be admitted as Rule 404(b) evidence. Respectfully submitted, BENTON J. CAMPBELL UNITED STATES ATTORNEY By: James G. McGovern Ilene Jaroslaw Patrick Sean Sinclair Brian Sano Assistant U.S. Attorneys 15