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| 12/25 |
| 2008/12/12-17 [Finance/Investment] UID:52238 Activity:moderate |
12/12 $50B Ponzi scheme uncovered:
http://finance.yahoo.com/news/Madoff-alleged-50-billion-rb-13819411.html
\_ The Invisible Hand should take care of this.
\- "We are victims" --hedge fund people
http://www.nytimes.com/2008/12/13/business/13damage.html?em
This guys need to have an electrode planted in his brain
to fry him if he's ever caught pushing deregulation as the
solution to everything:
"Where were the auditors?" asked Bill Grayson, the
president of Falcon Point Capital, a hedge fund based in
San Francisco. "Where was his chief compliance officer?
Where was the S.E.C.?"
\_ I thought the whole point of hedge funds was maximum return
for maximum risk -- if it goes belly up, either through
fraud or for legitimate reasons, you're supposed to be
able to shrug it off because you're a rich fatcat with
tons of money to invest and lose.
\_ Dave Barry put it best: "If things go well, you take
a small profit. If things go badly, you take a
plane to Venezuela." -tom
\- i prefer "if you owe the bank $100, you have a
problem. if you owe the bank $1million, the bank
has a problem." --psb
\_ Rosalie Goes Shopping?
\_ Another waterboarding candidate:
http://www.nytimes.com/2008/12/14/nyregion/14lawyer.html |
| 12/25 |
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| finance.yahoo.com/news/Madoff-alleged-50-billion-rb-13819411.html Print By Jon Stempel and Christian Plumb The building where Bernard L Madoff Investment Securities LLC offices are located is seen in New York December 12, 2008. All equity trades involving market-making firm Bernard L Madoff Investment Securities LLC, which was founded by Bernard Madoff -- the broker arrested for an alleged $50 billion fraud -- will be processed as usual, the Depository Trust Clearing Corp told Reuters on Friday. REUTERS/Shannon Stapleton The building where Bernard L Madoff Investment Securities LLC offices are located is seen in New York December 12, 2008. All equity trades involving market-making firm Bernard L Madoff Investment Securities LLC, which was founded by Bernard Madoff -- the broker arrested for an alleged $50 billion fraud -- will be processed as usual, the Depository Trust Clearing Corp told Reuters on Friday. REUTERS/Shannon Stapleton NEW YORK (Reuters) - Investors scrambled on Friday to assess potential losses from the $50 billion fraud allegedly perpetrated by Bernard Madoff, a day after the arrest of the prominent Wall Street trader. Prosecutors and regulators accused the 70-year-old former chairman of the Nasdaq Stock Market of masterminding a Ponzi scheme of epic proportions through a hedge fund he ran. Federal agents arrested Madoff at his apartment on Thursday after prosecutors said he told senior employees that his money management operations were "all just one big lie" and "basically, a giant Ponzi scheme." Madoff is the founder of Bernard L Madoff Investment Securities LLC, a market-making firm he launched in 1960. Many investors may have had indirect exposure by investing through the firm's clients. About a dozen angry investors gathered on Friday in the lobby of the Lipstick Building in midtown Manhattan, where the market-making firm and advisory fund are both headquartered, demanding to know the fate of their money. One woman who declined to give her name said that when she called the firm's offices on Thursday she was told it was "business as usual." Fairfield Sentry and Kingate Global were among a small group of hedge funds to report positive returns for 2008; the average hedge fund was down 18 percent, according to data from Hedge Fund Research. In a Ponzi scheme, the swindler uses money from new investors, who are lured with the promise of high or consistent returns, to pay off earlier investors. Prior to Madoff's arrest, investors had wondered how he was able to generate annual returns in the low double digits in a variety of market environments. US stocks tumbled Friday after talks in Congress on a rescue for the nation's auto industry broke down, but some investors also cited unease about the Madoff collapse. "It raises the question is this a one-off deal, or in the kind of market environment we have, is the SEC going to uncover more shady investments?" said Fred Dickson, market strategist, director of retail research, DA Davidson & Co. Benedict Hentsch, a Swiss private bank, said it had 56 million Swiss francs ($47 million) of exposure to Madoff's investment advisory business. UniCredit SpA's fund management unit, Pioneer Investments, has exposure through its Primeo Select hedge fund, two people familiar with the matter said. Madoff said "there is no innocent explanation" for his activities, and that he "paid investors with money that wasn't there," according to the federal complaint. Prosecutors also alleged that Madoff wanted to distribute as much as $300 million to employees, family members and friends before turning himself in. Charged with one count of securities fraud, he faces up to 20 years in prison and a $5 million fine. The US Securities and Exchange Commission filed separate civil charges. A US federal judge is expected later Friday to hold a hearing on whether to put assets under Madoff's control into a receivership. Madoff's lawyer, Dan Horwitz, said on Thursday, "We will fight to get through this unfortunate set of events." Madoff is a member of Nasdaq OMX Group Inc's nominating committee. His firm has said it is a market-maker for about 350 Nasdaq stocks. He is also chairman of London-based Madoff Securities International Ltd, whose chief executive, Stephen Raven, said the firm was "not in any way part of" the New York-based market-maker. "Our business activities are not involved in any way with the US asset management company with which the reported allegations appear to be concerned," Raven said. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon. Quotes and other information supplied by independent providers identified on the Yahoo! Quotes are updated automatically, but will be turned off after 25 minutes of inactivity. Quote data delayed 15 minutes for Nasdaq, NYSE and Amex. Real-Time continuous streaming quotes are available through our premium service. All information provided "as is" for informational purposes only, not intended for trading purposes or advice. is not an investment adviser and does not provide, endorse or review any information or data contained herein. |
| www.nytimes.com/2008/12/13/business/13damage.html?em Click Here Hedge Funds Are Victims, Raising Further Questions Gino Domenico/Bloomberg News The collapse of Bernard L Madoff's firm surprised many on Wall Street. MICHAEL J de la MERCED Published: December 12, 2008 Frauds on Wall Street aren't unheard of. But a $50 billion Ponzi scheme, one that prosecutors say struck at boldface names on several continents, is a bombshell by any standard. Bernard L Madoff, the respected longtime trader accused of running one of the biggest frauds in Wall Street history, has been Topic A in the investor community. But close behind is a heated discussion of how the sordid drama will affect the already-battered community of hedge funds and other investment firms -- many of which invested with Mr Madoff. Mr Madoff's case could hardly have come at a worse time for hedge funds. The whipsawing markets and suddenly unfriendly lenders have already taken their toll on high financiers, and many have already suffered what amounts to runs on the bank by investors clamoring to withdraw their investments. "It can't help but have the effect of further chipping away at the confidence that the investor community has in the hedge fund industry," said Ralph L Schlosstein, the chief executive of Highview Investment Group, a money management firm and a former president of BlackRock. "But like many things that come at moments of fragility, its impact is magnified." The collapse of Mr Madoff's firm took the vast majority of investors by surprise. Mr Madoff, once the largest market maker on the Nasdaq stock market, was known for his modest demeanor and, perhaps more important, his steady and overwhelmingly positive returns. That in turn appears to have attracted scores of investors, from Palm Beach country clubs to Manhattan social circles. It is difficult to map out the swath of damage that the Madoff firm's collapse is likely to cut through the hedge fund industry, not to mention a wide range of other investors. But among its biggest investors were funds of funds, firms that invest in several hedge funds and are nominally among the most sophisticated judges of character in the industry. Because Mr Madoff reported consistently positive returns for more than a decade -- some say impossibly so -- he drew vast amounts of business from them. Now, the collateral damage is likely to add to the chaos that has already been ravaging hedge funds. Spooked by losses and forced to raise cash quickly as the financial crisis ballooned, investors have sought to pull out their money from hedge funds, causing serious pain, and even some forced closures. A growing list of large, well-known firms have sought to block redemption requests in an effort to stem a mass exodus of investors who now desperately want to get into cash. the Citadel Investment Group said it was halting redemptions at its two largest hedge funds through March 31. Confidence will only weaken further with the Madoff firm scandal, intensifying pain for the industry. The losses from the Madoff firm will also raise more questions about how well funds of funds perform due diligence, a concern already magnified by losses in the hedge fund industry. "Funds of funds that invested in Madoff will get a double whammy," said Whitney Tilson, who runs the T2 Partners hedge fund. "Not only will they have to take a loss, but they are going to have to do an awful lot of explaining for how they ever got fooled here." Indeed, while many investors are asking how regulators could have missed a towering Ponzi scheme, some are beginning to question the whole process of due diligence. Several potential investors had raised questions about Mr Madoff's claims of steady returns over the years, but regulators apparently took few steps to investigate. asked Bill Grayson, the president of Falcon Point Capital, a hedge fund based in San Francisco. Already under heightened scrutiny, the collapse of the Madoff firm is likely to propel calls for greater regulation of the hedge fund industry, beyond the current optional registration with the Securities and Exchange Commission. What's more, many investors in hedge funds are likely to ask tougher questions of the managers of these firms. Executives who are loath to disclose their investment strategies -- instead running a "black box" model, as Mr Madoff infamously did -- will probably come under increased pressure to open the lid on their operations, at least a little bit. "I suspect that many investors are going to start asking many more questions of their managers," Mr Tilson said. "They will be much less tolerant of black box managers." Still, some disagree that Mr Madoff's arrest will lead to widespread contagion throughout the industry. Mr Tilson argued that most investors would see the case as an unusual circumstance whose breadth and brazenness is unlikely to be duplicated. |
| www.nytimes.com/2008/12/14/nyregion/14lawyer.html Enlarge This Image Rob Loud/Getty Images Marc S Dreier, center, was joined by Michael Strahan and William Shatner at a charity auction in Manhattan in July 2007. Marc S Dreier So nothing seemed amiss when he showed up one afternoon in October and told a receptionist he had a meeting with her boss, people associated with Solow say. Mr Dreier was elegantly dressed, as always, the people said. They were sitting there, visible inside the glass-walled room, a few minutes later when the boss, Steven M Cherniak, happened to walk by. Mr Cherniak would later tell people at the company how surprised he had been to see Mr Dreier. He had not scheduled any meeting with him, and he had no idea what Mr Dreier was up to. But people there gave little thought to Mr Dreier's odd visit until November, when the company's founder, Sheldon H Solow, received a disturbing call. The caller wanted to let Mr Solow know that Mr Dreier had offered him the chance to buy promissory notes that had been issued by the company, people associated with the firm said. They were fake notes, and shortly thereafter, lawyers for Solow Realty -- different lawyers -- were in touch with federal authorities, reporting their suspicions that Mr Dreier might be engaged in financial fraud. Since that opening tip, federal authorities have been tracking what they describe as a brazen swindle of some of New York's savviest investors by one of New York's more accomplished lawyers. charged with multiple frauds in the United States and a related crime in Canada, and is being held without bail in Manhattan. In court last week, prosecutors said their count so far put the money missing at $380 million, most of it lost by hedge funds and other investors who had bought promissory notes that were flat-out fictions. In recent days, Dreier LLP, the Park Avenue law firm that Mr Dreier founded, has been plunged into chaos. At least $35 million in escrow that was to have been held by the firm seems to be missing, the authorities say, and nearly all of its 250 lawyers are now looking for work. Bernard L Madoff , was accused last week of orchestrating, but they have unnerved lawyers and their clients in the broader legal community. As the Dreier firm's lawyers rummage through the law firm's books, which had been until recently Mr Dreier's exclusive preserve, they are finding that bills have not been paid in months. "No one is in charge," Vincent F Pitta, a lawyer at the firm, complained last week in an affidavit in support of a government request to freeze assets. Harvard-educated lawyer who had been a partner at some of New York's better known firms before opening up a high-profile practice of his own in 1996 that now has offices in five cities. Mr Shargel said Mr Dreier is cooperating with the receiver now running the firm. The expense of running such an operation does not provide a ready explanation for thefts of such magnitude. Even the cost of sustaining Mr Dreier's appetite for luxury does not provide an easy answer for what instilled the desperation that seems to have prompted schemes involved here, schemes that prosecutors said involved Mr Dreier pretending to be other people. Mr Dreier's lifestyle includes a waterfront home in the Hamptons, a Manhattan triplex and a place on Ocean Avenue in Santa Monica, Calif. Heesen motor yacht with a Jacuzzi and a crew of 10 docked in Manhattan or St. Associates said the boat, the Seascape, was the site of late-night parties at which Mr Dreier, who is divorced, was often joined by an attractive young crowd. The law offices themselves at 499 Park Avenue were like modern art galleries. In court papers filed this week, the comptroller for the law firm reported that $30 million to $40 million of the firm's assets had been spent on art. In recent days, someone not affiliated with the firm removed several pieces of artwork from the walls and carted them away, a person at the firm said. Today, lawyers at the firm cannot remove even client papers without the permission of authorities who are struggling to track the apparent financial chicanery. Mr Dreier, 58, controlled the finances of his law firm to an unusual degree, according to lawyers there, because of the unusual way it was set up. |