Ireland’s bold blow for democracy
By Gideon Rachman
I was at a lunch at the Danish embassy in Brussels in 2001, when a diplomat strode in and whispered something nasty into the ambassador’s ear. The ambassador pulled a face and told his guests the bad news: the Irish had voted to reject the European Union’s Nice treaty. The lunch broke up in disarray.
I remembered that afternoon when the news came through last Friday that Ireland had now voted to reject the Lisbon treaty. Once again, we are being told that “Europe is in crisis”. British newspapers are trumpeting the idea that the Lisbon treaty is “finished”.
So it is worth remembering what happened last time. The Irish were simply made to vote again and came up with the “right” verdict the second time round.
The EU is like some hideously persistent suitor who will not take No for an answer. The treaty that the Irish have just rejected is a reworked version of the EU constitution that was itself rejected by the French and Dutch in referendums in 2005. If the EU would not accept rejection from the voters of France and the Netherlands, why would anyone imagine that the Irish will be allowed to block the forward march of European unity?
A Franco-German statement issued within hours of the Irish referendum purred that: “We give the democratic decision of Ireland’s citizens all the respect that it is due.”
How much respect is that? Well, not very much, evidently. The statement made clear there was no question of abandoning the Lisbon treaty, which was needed “to make Europe more democratic and more efficient”.
It is the pairing of the words “democracy” and “efficiency” that is so suspect. In the EU these two ideas do not advance in lockstep. If and when the Lisbon treaty came into force, it would make the EU more efficient. But it would also make it less democratic.
Even the efficiency point is arguable. The treaty would set up a bizarre structure of competing presidents – of the European Council and the European Commission – that is a recipe for confusion.
On the other hand, Lisbon would establish a more comprehensible voting system on EU laws. It would also become significantly easier to pass new legislation, by increasing the number of laws that are decided by majority vote and making it harder to form blocking minorities.
The treaty would also strengthen Europe’s international presence, creating a single European foreign minister and a European diplomatic service.
There is a case for enabling the EU to act in a more efficient fashion. There are plenty of pressing subjects – from climate change to energy to Russia – that might benefit from a more united European response. The trouble is that all these efficiency gains would come at the expense of democracy.
Naturally, the supporters of the Lisbon treaty would not agree. They argue that the treaty would make the Union more democratic.
While it may seem a little odd to reject a democratic vote in Ireland in the name of democracy, the pro-Lisbon camp make that argument without blushing (much). Wolfgang Schäuble, the German interior minister, says “a few million Irish cannot decide on behalf of 495m Europeans”.
This might be a fair point if the Irish were unrepresentative. But the French and Dutch referendums of 2005 show that this is untrue. The only thing that is peculiar about the Irish is that they are constitutionally compelled to hold a referendum on the Lisbon treaty, while the other 26 EU countries can push the document through by parliamentary vote.
Ah well, say the pro-Lisbonites, once the treaty is in force the EU will be much more democratic. They point to the enhanced powers for national legislatures and the European parliament.
But the sop to national parliaments in the treaty is feeble. They would not be able to amend European legislation, nor would they gain new powers to block it. It is the Brussels institutions that truly gain power.
However, “democracy” exercised at a pan-European level lacks the legitimacy and support of Europe’s national democracies. National politicians have a profile and a popularity that unknown Euro-MPs lack. They literally speak a language that voters understand.
That is why rising stars in the European parliament so often turn their backs on Brussels in favour of national politics – and why there are so many clapped-out has-beens filing expenses claims from their parliamentary offices in Brussels.
The fact that voters still identify much more closely with nations than with “Europe” also explains why making it easier for the Union to pass laws by majority vote does not make the EU more democratic. Countries that find themselves overruled in Brussels’ council chambers do not usually regard this outcome as a triumph for democracy. The second most popular reason for voting “No” in Ireland (after simply not understanding the treaty) was “to keep Ireland’s power and identity”.
The European Union has a difficult balance to strike between efficiency and accountability – between democracy and technocracy. The lesson of the Irish referendum, and of the French and Dutch votes before it, is that the balance has tilted too much towards technocracy.
Europe’s political leaders should resist the temptation to “respect” the Irish referendum by seeking to overturn it.
US N-weapons parts missing, Pentagon says
By Demetri Sevastopulo in Washington
The US military cannot locate hundreds of sensitive nuclear missile components, according to several government officials familiar with a Pentagon report on nuclear safeguards.
Robert Gates, US defence secretary, recently fired both the US Air Force chief of staff and air force secretary after an investigation blamed the air force for the inadvertent shipment of nuclear missile nose cones to Taiwan.
According to previously undisclosed details obtained by the FT, the investigation also concluded that the air force could not account for many sensitive components previously included in its nuclear inventory.
One official said the number of missing components was more than 1,000.
The disclosure is the latest embarrassing episode for the air force, which last year had to explain how a bomber mistakenly carried six nuclear missiles across the US. The incidents have raised concerns about US nuclear safeguards as Washington presses other countries to bolster counter-proliferation measures.
In announcing the departure of the top air force officials earlier this month, Mr Gates said Admiral Kirkland Donald, the officer who led the investigation, concluded that both incidents had a “common origin” which was “the gradual erosion of nuclear standards and a lack of effective oversight by air force leadership”.
Mr Gates added that the Pentagon was evaluating the results of a “comprehensive inventory of all nuclear and nuclear-related materials [conducted] to re-establish positive control of these sensitive, classified components”.
Adm Donald briefed Congress on the results of his investigation on Wednesday. Bryan Whitman, Pentagon spokesman, declined to comment on the classified report.
A senior defence official said the report had “identified issues about record keeping” for sensitive nuclear missile components. But he stressed that there was no suggestion that components had ended up in the hands of countries that should not have received them.
But Daryl Kimball, executive director of the Arms Control Association in Washington, said the revelation was “very significant and extremely troubling” because it meant the US could not establish the positive control referred to by Mr Gates.
“It raises a serious question about where else these unaccounted for warhead related parts may have gone,” said Mr Kimball. “I would not be surprised if the recent Taiwan incident is not the only one.”
A senior military officer said the military leadership, including Adm Mike Mullen, the chairman of the joint chiefs of staff, was “deeply troubled” by the findings of the Donald report. He added that they would be paying close attention to recommendations for improving nuclear safeguards that Mr Gates has asked James Schlesinger, a former defence secretary, to make.
Gordon Johndroe, National Security Council spokesman, declined to comment on the disclosure about the unaccounted for components. But he said the “the White House has confidence that secretary Gates through his actions with the air force is addressing all of these issues”.
By James G. Neuger
June 19 (Bloomberg) -- A day after truckers, taxi drivers and farmers blockaded Brussels to demand that the European Union fight the soaring cost of living, the EU will get to work on a plan of action.
The trouble is that the plan responds to an entirely different crisis, one triggered by Ireland's veto of the bloc's new governing treaty.
Disputes over the Lisbon Treaty's fate threaten to turn a summit starting tonight into a political-theory class, distracting the 27 leaders from the economy and stoking charges that the bloc is out of touch with its citizens.
Political leaders ``aren't asking the right questions or setting the right priorities,'' Christian Starck, 46, a Belgian dairy farmer, said at yesterday's demonstration as he brandished a poster of a cartoon cow saying ``this is getting on my nerves.''
In the EU's high councils, Italian Prime Minister Silvio Berlusconi says Ireland ``will have to come up with its own solution,'' while German Chancellor Angela Merkel rejects the notion that the rest of Europe can move ahead without the Irish. Czech President Vaclav Klaus wants to declare the treaty dead.
``It is necessary for Ireland to have time now to analyze last week's vote and explore options,'' Irish Prime Minister Brian Cowen said today. ``It is far too early yet for anyone to put forward proposals.''
For the protesters, the survival of the new 277-page set of amendments to the EU's governing articles took a back seat to pocketbook issues like an inflation rate of 3.7 percent in the euro region in May, the highest since June 1992.
`Stagflation' Specter
Food costs rose 6.4 percent in May and energy was up 13.7 percent, threatening to push up wages in their wake and raising the specter of the ``stagflation'' -- a dormant economy with runaway prices -- of the 1970s.
The 15 EU countries using the euro are in a fix because they have handed control of interest rates, the main weapon against inflation, to the European Central Bank and set themselves tight limits on borrowing.
Inflation would be higher -- and the ECB weighing more than one increase in its main 4 percent rate -- were it not for the record-breaking run of the euro, which cuts Europe's bill for dollar-denominated commodities like oil.
Europe is caught in the same vise between spiraling prices and weakening growth that is afflicting the U.S. The International Monetary Fund predicts the fastest inflation in the advanced economies since 1995 and the slowest growth in seven years.
Draft Statement
The EU's answer, according to a draft statement to be issued when the summit ends tomorrow, includes steps such as the sale of surplus foods, an increase in milk quotas, and the go- ahead to national governments to take ``short term and targeted'' measures.
Beyond rubber-stamping decisions by lower-level ministers, the leaders will call the commodity-price surge a ``complex phenomenon with many root causes and consequences,'' reissue appeals for energy efficiency and strive for ``dialogue'' with oil-producing countries.
Concerned about the disconnect with public opinion, EU leaders will hear reports on the economic situation tonight before looking at how to salvage the treaty that they unanimously negotiated and signed last year.
While the veto will be ``foremost on everybody's minds,'' the leaders must escape ``the trap of institutional navel- gazing,'' European Commission President Jose Barroso said. Renegotiating the document would be ``extremely difficult.''
Parliamentary Approval
The treaty can only take effect once all EU countries endorse it, giving the 862,000 Irish who voted ``no'' a veto over political life in a bloc of 495 million people. So far, 19 countries have ratified it through parliament and the remaining seven plan to follow suit.
There is so much momentum behind the treaty that scuttling it is ``pretty inconceivable,'' said Peter Ludlow, a historian and chairman of EuroComment, a Brussels publisher. Nor is renegotiating it an option because ``everybody's sick and tired of constitutional discussions.''
EU leaders argue that the new treaty would make the bloc run more smoothly and give it more weight in global affairs, helping it to tackle quality-of-life issues like unemployment, health care, energy efficiency and climate change.
Whether the EU needs the treaty's innovations, especially a new full-time president, to handle the challenges of globalization is debatable. It didn't need them to create a common market -- globalization on a European scale -- in the 1980s and 1990s.
``We need these powers, these legal powers that the Lisbon Treaty would've given, if we are to do the things that people want the European Union to do,'' Graham Watson of the U.K., head of the Liberals in the European Parliament, said in a Bloomberg Television interview.
June 19 (Bloomberg) -- Free-trade policies long advanced by World Bank President Robert Zoellick and U.S. President George W. Bush are losing favor as countries in Africa, Asia and Latin America find they can't buy enough food to feed their people.
Global food prices have spiked 60 percent since the beginning of 2007, sparking riots in more than 30 countries that depend on imported food, including Cameroon and Egypt. The surge in prices threatens to push the number of malnourished people in the world from 860 million to almost 1 billion, according to the World Food Programme in Rome.
Leaders of developing nations including the Philippines, Gambia and El Salvador now say the only way to nourish their people is to grow more food themselves rather than rely on cheap imports. The backlash may sink global trade talks, reduce the almost $1 trillion in annual food trade and lead to the return of high agricultural tariffs and subsidies around the world.
``Trade as the route to food security, that idea is on the ropes,'' said Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics in Washington. ``If the guy who is selling it doesn't want to sell it overseas, then the guy at the other end is terribly exposed.''
In dozens of interviews and speeches at the United Nations Food and Agriculture Organization's Rome conference on the food crisis this month, officials from developing countries, farmers and leaders of non-governmental organizations said food self- sufficiency is the new goal for many poor nations.
Grain exporters such as Argentina and Vietnam have restricted shipments, driving global prices higher and leaving nations that depend on imports searching for adequate supplies.
Worldwide Search
``The idea of trade liberalization was that you could count on global markets, but they're not proving reliable,'' said David Orden, a fellow at the International Food Policy Research Institute in Washington.
The Philippines has embarked on a worldwide search for additional food supplies to build stockpiles and ensure it can feed its people amid record prices. The surging costs of rice, other grains and fuels have stoked inflation and triggered concern of civil unrest, according to the International Monetary Fund. Philippines President Gloria Macapagal-Arroyo said her country will try to become self-sufficient in food by 2010.
``For a long time, it made sense to buy food from the international market,'' said Arthur Yap, the Philippines Agriculture Minister, in an interview June 4 in Rome. ``The situation has changed.''
The rift between developing countries and wealthy nations on food trade was apparent at the Rome conference. The U.S., the European Union and the World Bank all pushed for a new global trade agreement to cut subsidies and import duties in countries such as India and South Africa.
Latest Talks
The latest round of World Trade Organization negotiations was launched in 2001 in Doha, Qatar. The goal was to cut subsidies in rich nations and tariffs in poor nations, allowing the most efficient producers -- be they in Iowa or Cordoba, Argentina -- to sell to the world. Supporters say the economic rationale still holds.
``The reason why getting a Doha Round done is important is it'll end up reducing the cost of food, importing food,'' Bush said at the White House on May 1.
The U.S. and Europe continue to subsidize production of grains and other commodities, enabling their farmers to undercut the prices of competitors in developing countries.
Zoellick, Bush's former top trade adviser, said this month in Rome that one key to long-term food security is ``closing the Doha WTO deal, phasing out huge distortions from subsidies and tariffs.''
Export Limits
Most alarming to policy makers in food-importing nations are the export constraints imposed in Indonesia, Argentina, India and others. Thailand, the world's largest rice exporter, said in February that it would restrict shipments abroad to ensure stable prices at home. The country later reversed the decision.
``There is no security if your food basket is coming from another country,'' said Bakary Trawally, permanent secretary of Gambia's Department of State for Agriculture, in an interview in Rome. ``If they close it off, like Thailand did, you would be in trouble.''
Trawally and officials from other developing countries say they will use more subsidies to boost domestic production.
``A few years ago it was thought it was better to buy food in other countries, but that whole policy failed,'' said Raul Robles, Agriculture Minister of Guatemala, in an interview. Now Guatemala has reversed course and is supporting farmers ``with land, seeds and technical help,'' he said.
Defending Free Trade
The trend has disheartened free-traders such as Orden and U.S. Agriculture Secretary Ed Schafer.
``We need to open up markets so you can have the free flow of food where you need it,'' Schafer said in an interview last week.
The current crisis has shown the limits of free trade to provide food, some analysts say.
``Agriculture markets are notoriously volatile, and all countries really do have to make sure that they have at a minimum systems that don't let their people go hungry,'' said Sandra Polaski, a former Clinton administration trade official and fellow at the Carnegie Endowment in Washington.
June 19 (Bloomberg) -- Iran is studying incentives from the world's powers for the country to drop its uranium-enrichment program and will respond ``at an appropriate time,'' Foreign Minister Manouchehr Mottaki said.
Iran is prepared to negotiate on the proposals, though it won't be intimidated by threats from the U.S., Mottaki told reporters today in Uganda's capital, Kampala, where he's attending a meeting of the Organization of the Islamic Conference. The U.S. ``has no right to interfere; the time for ordering other nations is over,'' he said.
The U.S., European governments, Russia and China are offering the incentives in exchange for a halt to Iran's production of nuclear fuel, which the U.S. and its allies suspect is disguising a program to develop an atomic bomb or gain the knowledge to make one.
President Mahmoud Ahmadinejad, who has repeatedly said he won't surrender to pressure over the nuclear dispute from the Bush administration and its allies, said the West had failed to coerce his country. And Iran's Ambassador to the International Atomic Energy Agency, Ali Asghar Soltanieh, said yesterday Iran won't be pushed into suspending its enrichment program.
Mottaki's promise to examine the incentives package doesn't signal any softening in Iran's stance, said Radzhab Safarov, director of the Moscow-based Center for the Study of Contemporary Iran, who has ties to the government in Tehran. ``Any new proposals which stipulate that Iran must freeze its uranium enrichment will fail because Iran under no circumstances will agree to suspend enrichment,'' he said by phone.
International Law
Iran believes it's acting in accordance with international law and hasn't any faith that making such a concession would lead to the lifting of all sanctions against it, he said. The Persian Gulf state in 2003 suspended uranium enrichment for three years to facilitate talks over its nuclear activities without any result, Safarov said.
The Western powers may have to sit down and negotiate with Iran, without insisting Iran first suspend its program, added Thierry Coville, a researcher at Paris-based Institute of International and Strategic Relations.
``Sanctions aren't going to bend Iran and the contents of any offer aren't really the issue,'' Coville said in a telephone interview. ``The problem is the lack of confidence on both sides. If they want to get anywhere, they may just have to sit down, without any preconditions, to see what the Iranians want.''
The Iranians insist their enrichment program is aimed at producing electricity, not weapons, so they see no legal ground to force them to stop, Coville said.
`Bullying Powers'
``In the nuclear issue, the bullying powers have used up all their capabilities but could not break the will of the Iranian nation,'' Ahmadinejad was quoted as saying by state television today, according to Agence France-Presse.
It wasn't clear whether Ahnmadinejad's comments were in response to the proposal presented by European Union foreign policy chief Javier Solana in Tehran on June 14.
The incentives plan includes an offer to recognize Iran's right to develop nuclear energy for peaceful purposes and to support the construction of a light-water reactor. The world powers also proposed steps toward the normalization of trade and economic relations, greater Iranian access to international markets, and support for its admission to the World Trade Organization.
Iran's Parliament
Iran ``will review the offer'' and ``in time announce its point of view,'' Ahmadinejad told Bloomberg News two days ago in his first reaction to the proposal.
Iran's parliament has approved plans for the production of 20,000 megawatts of nuclear energy and the nation is within its right to enrich uranium under guidelines from the International Atomic Energy Agency, Mottaki said.
Mottaki said the U.S. lacks the moral authority to dictate to other nations on nuclear weapons since it was the first country in the world to use them and is now testing next- generation arms. He didn't elaborate.
A U.S. National Intelligence Estimate released in December, which summarized the thinking of all of the U.S.'s intelligence services, said Iran stopped its nuclear weapons program in 2003.
In an interview with French newspaper Le Monde, Israeli Defense Minister Ehud Barak said Security Council members need to keep up the pressure on Iran.
``The Iranians are determined to defy the entire world,'' Barak said. ``The report of the American intelligence community was wrong, period. And we will show it in time.''
June 19 (Bloomberg) -- Bear Stearns Cos. former hedge fund managers Ralph Cioffi and Matthew Tannin were taken into custody at their homes this morning over their roles in the collapse of two funds that ignited the subprime mortgage crisis last year.
The arrests are the first from a federal probe of possible fraud by banks and mortgage firms whose investments in subprime loans and securities plunged in value, causing losses that now total $396.6 billion. The U.S. Securities and Exchange Commission may sue the two men as early as today, claiming they committed fraud by falsely telling investors the funds they managed were sound, people with knowledge of the case said.
Cioffi, 52, was arrested at his Tenafly, New Jersey, home and Tannin, 46, at his Manhattan apartment, said James Margolin, a spokesman for the Federal Bureau of Investigation's New York office. The two men were processed at FBI headquarters in Manhattan, then taken out in handcuffs by six FBI agents to be transported across the East River to Brooklyn federal court for an appearance later today in connection with an indictment.
``The arrests are appropriate given the magnitude and the egregiousness of their alleged misconduct,'' said attorney Steven Caruso, who is representing investors in arbitration claims against the funds. Cioffi and Tannin engaged in a ``gross violation of the public trust.''
`Credit Crisis'
Cioffi's lawyer attacked the arrests as an effort by the government to make an example of innocent men.
``Because his funds were the first to lose might make him an easy target but doesn't mean he did anything wrong,'' said Edward Little, Cioffi's lawyer, in a statement. ``Cioffi had no motive to do anything wrong. He did not and could not have profited by doing anything the government now claims he did.''
Susan Brune, a lawyer for Tannin, also said her client is innocent and that he ``is being made a scapegoat for a widespread market crisis.''
SEC spokesman John Nester declined to comment.
Cioffi was a senior portfolio manager of the two funds that collapsed and Tannin served as his chief operating officer. The hedge funds invested almost all of their assets in subprime- mortgage-related securities. Their investment bets failed last June when prices for collateralized-debt obligations, called CDOs, linked to loans plummeted amid rising late payments by borrowers with poor credit histories or heavy debt.
E-Mail Allegations
U.S. prosecutors are focusing on an e-mail allegedly sent by the two suggesting that their funds were headed for trouble, four days before they told investors they were comfortable with their holdings, the Wall Street Journal reported today, citing people familiar with the situation.
Tannin allegedly e-mailed Cioffi saying he was afraid that the market for bond securities they had invested in was ``toast,'' and suggested shutting the funds, the Journal said. The two have told colleagues that they quickly were convinced that Tannin's concerns were misplaced, according to the Journal.
Indictments against Cioffi and Tannin might lead to a cascade of criminal cases and civil suits, said former prosecutor Robert Bunzel, a white-collar criminal defense lawyer in San Francisco.
``The floodgates could open,'' Bunzel said.
Separate U.S. Sweep
In a separate move today, two government officials said more than 400 people have been charged in a U.S. Justice Department mortgage-fraud sweep.
Called Operation Malicious Mortgage, the arrests are to be announced this afternoon by FBI Director Robert Mueller and Deputy Attorney General Mark Filip at the Justice Department in Washington. A number of arrests were made earlier this week and the FBI is still tallying the final numbers, said the officials who requested anonymity.
Cioffi, now with Tenafly-based RCAM Capital LP, left Bear Stearns in December amid inquiries by prosecutors and the SEC into whether he withdrew $2 million from two funds before their collapse in July, three people with knowledge of the matter said at the time. He was relieved of his duties as a fund manager in June, when his funds' subprime mortgage investments began to unravel.
Rice Memorial
Cioffi was born on Jan. 5, 1956, and grew up in South Burlington, Vermont, a city of 16,500 that borders Lake Champlain. He went to Rice Memorial High School and St. Michael's College, three miles down the road from each other in the neighboring towns of South Burlington and Colchester.
He was a running back, fullback and offensive guard on the Rice football team and worked at bodybuilding at St. Michael's. He was an A student in math and economics in high school, a Rice official said. At St. Michael's, he studied business administration and graduated with honors in 1978.
Tannin had been with Bear Stearns since 1994, according to a company prospectus. He spent seven years on the CDO structuring desk focusing on emerging markets, high grade and market value transactions. From June of 2001 through February 2003, he followed the CDO market as a research analyst in Bear's asset- backed research group.
Tannin, a lawyer, has a Juris Doctor from the University of San Francisco and served as a clerk for a California appeals court. He was also a Preston Warren scholar in philosophy at Bucknell University.
Two Funds
Today, both men walked out of FBI headquarters in lower Manhattan looking straight ahead with their hands cuffed behind their backs. More than two dozen reporters, photographers and television cameramen watched as Cioffi, wearing a blue blazer, tan slacks and no tie, and Tannin, wearing a blue suit and tie, were led into separate vehicles. Neither man made any comment.
Since the failure of the two Bear Stearns hedge funds, investors claimed in lawsuits that banks and financial companies such as the New York-based securities firm knew their underlying investments weren't worth what they were telling shareholders.
Today's arrests ``signal a new chapter in the subprime debacle,'' defense lawyer Bunzel said.
Investors in the two Bear funds, which filed for bankruptcy in July, lost $1.6 billion. Barclay's Bank PLC said in a lawsuit that the funds once held a total of about $20 billion in assets.
Cioffi allegedly pulled the $2 million of his own money, one third of the amount he'd invested in one of the funds, before March 2007, so he could commit it to another fund he set up, said a person familiar with the investigation. The withdrawal occurred before the funds ran into trouble, the person said.
Packaging Assets
CDOs are created by packaging assets including bonds and loans and using their income to pay investors. The securities are divided into different portions of varying risk and can offer higher returns than the debt on which they are based.
The two Bear Stearns funds are part of Bear Stearns Asset Management Inc. They were the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage Master Fund Ltd. and the Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd.
As the securities dropped in value, the funds' creditors demanded more collateral. Bear Stearns extended $1.6 billion in credit to one of the funds before seizing its assets in July. Both funds filed for bankruptcy protection two weeks after the firm told investors they would get little if any money back.
The credit crunch led to lawsuits against other lenders including Countrywide Financial Corp., American Home Mortgage Investment Corp., Citigroup Inc. and JPMorgan Chase & Co.
JPMorgan Purchase
Bear Stearns agreed to sell itself to New York-based JPMorgan in March after a run by clients and lenders threatened it with bankruptcy.
The hedge funds tried to liquidate in the Cayman Islands before a U.S. judge held that New York was a more appropriate jurisdiction, ruling they can't shield their U.S. assets from lawsuits.
Barclays, the U.K.'s third-biggest bank, claimed in its lawsuit, filed last year in federal court in New York, that it was misled about the health of Bear's so-called enhanced fund.
Bear Stearns, Cioffi and Tannin are named as defendants in London-based Barclays suit. The British bank accused Cioffi of withdrawing his $2 million at the same time Bear persuaded Barclays to double its investment, according to the complaint.
The suit cites a February e-mail to Barclays in which Tannin allegedly said the fund is ``having our best month ever'' and that our ``hedges are working beautifully.''
By then, the fund was having ``severe'' liquidity problems, said Barclays, which said it lost ``hundreds of millions of dollars,'' as a result. Internally, Cioffi and Tannin discussed the ``wipe out'' of the fund, according to the complaint.
Elizabeth Ventura, a spokeswoman for New York-based Bear Stearns, didn't return a call seeking comment.
The case is U.S. v. Cioffi, U.S. District Court for the Eastern District of New York (Brooklyn).
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