worried about the damage to the company's reputation. The funds were invested in thinly traded collateralized debt obligations (CDOs). Merrill Lynch seized $850 million worth of the underlying collateral but only was able to auction $100 million of them. The incident sparked concern of contagion as Bear Stearns might be forced to liquidate its CDOs, prompting a mark-down of similar assets in other portfolios. Richard A. Marin, a senior executive at Bear Stearns Asset Management responsible for the two hedge funds, was replaced on June 29 by Jeffrey B. Lane, a former Vice Chairman of rival investment bank Lehman Brothers. During the week of July 16, 2007, Bear Stearns disclosed that the two subprime hedge funds had lost nearly all of their value amid a rapid decline in the market for subprime mortgages. On August 1, 2007, investors in the two funds took action against Bear Stearns and its top board and risk management managers and officers. The law firms of Jake Zamansky & Associates and Rich & Intelisano both filed arbitration claims with the National Association of Securities Dealers alleging that Bear Stearns misled investors about its exposure to the funds. This was the first legal action made against Bear Stearns. Co-President Warren Spector was asked to resign on August 5, 2007, as a result of the collapse of two hedge funds tied to subprime mortgages. A September 21 report in The New York Times noted that Bear Stearns posted a 61 percent drop in net profits due to their hedge fund losses. With Samuel Molinaro's November 15 revelation that Bear Stearns was writing down a further $1.2 billion in mortgage-related securities and would face its first loss in 83 years, Standard & Poor's downgraded the company's credit rating from AA to A. Matthew Tannin and Ralph R. Cioffi, both former managers of hedge funds at Bear Stearns Companies, were arrested June 19, 2008. They faced criminal charges and were found not guilty of misleading investors about the risks involved in the subprime market. Tannin and Cioffi were also named in lawsuits brought by Barclays Bank, which claimed they were one of the many investors misled by the executives. They were also named in civil lawsuits brought in 2007 by investors, including Barclays Bank, who claimed they had been misled. Barclays claimed that Bear Stearns knew that certain assets in the Bear Stearns High-Grade Structured Credit Strategies Enhanced Leverage