Pay and venue were the focus of a jury's early deliberations on Monday in the trial of two former Bear Stearns hedge fund managers accused of fraud over dealings in mortgage-backed securities early in the financial crisis.

"Please explain venue further," said one of the first notes to the judge from the 12-member jury in federal court in Brooklyn, New York, who also asked to rehear testimony on the compensation of defendants Ralph Cioffi and Matthew Tannin between 2001 and 2007.

Although the trial is the first against high-profile Wall Streeters who worked in the borough of Manhattan, the charges were brought in the federal district that includes the borough of Brooklyn. The judge explained to the jury that venue means the government need only prove the offenses took place within the district by a preponderance of the evidence, a lesser standard than proof beyond a reasonable doubt.

It was not clear why the jury sent the note. In his closing arguments last Thursday, Cioffi's lawyer raised the issue. Prosecutors said some investors who lost money were based in the district.

Whether the government is successful in its case against Cioffi, 53, and Tannin, 48, could influence the aggressiveness of other investigations arising from the market meltdown.

U.S. prosecutors called a score of witnesses and cited hundreds of documentary exhibits for their case, in which they accused the former Bear Stearns hedge fund managers of lying to investors over the health of their funds in 2007 at an early point in the financial crisis.

Two hedge funds managed by Cioffi and Tannin failed in mid-2007, costing institutional and individual investors up to USD 1.6 billion. Bear Stearns Cos, once worth USD 45 billion, collapsed in March 2008 and was sold to JPMorgan Chase & Co in a government-brokered fire sale.

In the opening two hours of deliberations, the jury asked to see a total of about 20 exhibits. They are due to resume deliberations on Tuesday.

The jury asked US District Court Judge Frederic Block if they could reread the testimony of former Bear Stearns payroll manager Kathy Hartman over the two men's compensation.

In their opening and closing arguments, US prosecutors cited Cioffi and Tannin's "multimillion dollar bonuses" as a motive for the alleged crimes.

Together, the men were paid bonuses of nearly USD 20 million in 2005 and 2006, in addition to salaries of USD 250,000, the court heard. Cioffi was Tannin's boss and earned much more.

The two men have pleaded not guilty to the charges of securities fraud, wire fraud and conspiracy. Cioffi has also pleaded not guilty to a charge of insider trading. The two men are free on bail, but if convicted they could be sentenced to as much as 20 years in prison.

The jurors have heard four weeks of arguments and testimony about the world of hedge funds, leveraging, repo lending and subprime mortgage-backed securities.

They were selected on Oct. 13 after answering written and oral questions about whether they could be fair and impartial in an era of lost jobs, executive bonuses, government bailouts of banks and the Wall Street financial crisis.

Prosecutors said the two funds, the High Grade Fund and the Enhanced Leverage Fund, had USD 1.6 billion leveraged to USD 20 billion of assets, primarily collateralized debt obligations (CDOs). CDOs are securities backed by a pool of debt such as mortgages.

The verdicts of the jury could have implications for government investigations of possible wrongdoing at other companies in the lead up to the global financial crisis, including bailed-out insurer American International Group Inc and bankrupt Lehman Bros Holdings Inc.

In closing summations last week, defense lawyers argued that the government had not proven its case beyond a reasonable doubt or proven a conspiracy. They said prosecutors selected email evidence out of context and that overall, Cioffi and Tannin were optimistic about the funds but could not predict the future troubles of the subprime market.

A prosecutor told the jury that Cioffi and Tannin told "black and white lies" to investors early in 2007 while privately expressing their fears in emails of a market calamity.

The case is USA v Cioffi & Tannin, US District Court for the Eastern District of New York, No. 08-415.