The recent acquittal of two Bear Sterns Hedge fund manager caught my attention. Ralph Cioffi and Matthew Tannin, who managed two failed mortgage-bond hedge funds at now-defunct, were found not guilty Tuesday of securities fraud. They were accused of lying to investors and giving optimistic views on their funds, while privately declaring that the funds were dead and worthless.
The prosecutor’s main evidence was internal emails where the defendants uttered statements such as: "Simply no way for us to make money -- ever," and “the entire subprime market is toast.” Then, just days later told their investors, “there's no basis for thinking this is one big disaster,” and “we’re very comfortable with exactly where we are.” The prosecutors viewed these emails as a smoking gun, however the jury felt very differently.
I found this story interesting in how email evidence was viewed the court and by the jury. I started my career in sales, and thus had a love/hate relationship with email for many years. I had it beat into my head to never put anything down in writing when you can pick up the phone instead. I would reply to internal and external emails by phone and avoid email answers longer than 2 sentences. On the other hand, I would regularly pester my customers to send any of their oral promises or statements via email to me. The point is that my company and my customers viewed any emails as an official business letters or business records. Email evidence has won convictions against Martha Stewart and Dennis Kozlowski in the past. However, as this case highlights, emails aren’t always treated as official records.
As the LA Times story states, “John Hueston, who led the federal prosecution of executives at defunct energy trading giant Enron Corp., said the widespread use of e-mail, text messages, Twitter and other social media has caused the public to perceive electronic messages as casual remarks open to interpretation.” In other words, certain emails may be seen as the office banter that might have previously taken place at water cooler in an earlier age. Emails may represent an emotional remark versus an ongoing frame of mind. Thus, context plays a much more important role with email interpretation than with a formal business letter.
Federal rules 803 (Hearsay Exceptions) seem to back up this point of view and set the rules for email evidence. They state:
(1) Present sense impression. A statement describing or explaining
an event or condition made while the declarant was perceiving the event or
condition, or immediately thereafter.
(2) Excited
utterance. A statement
relating to a startling event or condition made while the declarant was under
the stress of excitement caused by the event or condition.
I think it will be interesting how court opinion on email evidence continues to develop. As digital interaction continues to replace oral conversations, situations such as this case are sure to multiply.
http://online.wsj.com/article/SB10001424052748704402404574529433123464654.html
http://www.nytimes.com/2009/11/11/business/11bear.html?_r=1&ref=business
http://www.latimes.com/business/la-fi-bear-stearns11-2009nov11,0,7438983.story
http://www.law.com/jsp/legaltechnology/pubArticleLT.jsp?id=1186736525985
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