To refresh memories, the Wall St. Journal reported that Nadel said he acted as a trader for three other funds run by Neil V. Moody and his son, Christopher D. Moody, during the period he committed his fraud. The Moody’s have agreed to be barred from associating with any investment adviser for five years as part of a consent agreement with the SEC. They didn’t admit or deny wrongdoing as part of that agreement. “Neil adamantly denies any knowledge that this was a Ponzi scheme,” said James Felman, a lawyer for Neil Moody.

Now it is being reported that while son Chris Moody has cooperated, receiver Burton Wiand says his father, Neil, refuses to go along — even insisting that he should keep cash and property he acquired from the Ponzi scheme.

Wiand, the man appointed to try to recover money for defrauded investors, outlines vastly different approaches taken by the Moodys in his fifth interim report filed Wednesday in federal court.

The Moody’s received $42 million in fees from the six hedge funds they operated with Arthur Nadel in downtown Sarasota.

The Moodys in January settled civil fraud charges brought by the Securities and Exchange Commission. In that agreement, they consented to give up all “ill-gotten gains” from the scheme.

Wiand says Chris Moody has “cooperated fully” in turning over his assets. In January Moody even gave Wiand power of attorney to help transfer those assets.

“Neil Moody, on the other hand, has not cooperated with the receiver,” Wiand said.

“Neil Moody has taken the position that he would like to maintain some of the assets he owns although they were purchased with misappropriated funds,” he said.

Moody is trying to hold on to bank and brokerage accounts, personal property, real estate and some corporate interests, he said.

Wiand has already seized Moody’s seventh-floor bayfront condo in La Bellesara, a lavish three-bedroom, two-bath unit he bought in 2006 for $2.16 million.

The receiver also has sued Moody and wife Sharon over $28.3 million in profits and redemptions they took from the funds.

Taken earlier from the Moodys was $675,000 in jewelry they owned through their former part-ownership in the Queen’s Wreath Jewels store on St. Armands Key.

From Chris Moody, Wiand said he has recovered cars and a boat, two rental properties and an interest in a third, bank and brokerage accounts and various corporate interests. The receiver will detail those assets in his next report.

The receiver has filed more than 120 lawsuits to recover $32 million in so-called “false profits” from hedge-fund investors. That represents profits they took out that exceeded their actual investments.

It will be interesting to see if the Moody’s will be able to hold onto anything or if investors will be able to recoup their Nadel losses from him.

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U.S. District Judge Richard Lazzara in Tampa had previously ordered Nadel’s two companies, Venice Jet Center LLC and Tradewind LLC, into receivership. These were two aviation businesses that were allegedly involved in some questionable proposed deals with Newnan-Coweta County Airport in Georgia.

This is a perfect example of a hedge fund manager being involved in outside business activities. This a topic that should be covered during the operational due diligence process. If this had been uncovered by investors performing operational due diligence on Nadel some logical questions, which might have received answers which likely would have raised red flags could have included:

• Why are you involved in these aviation businesses?

• How much time do you devote to these aviation businesses?

• Where does the money come from to support these businesses?

Tampa lawyer Burton Wiand (pictured left), who was appointed by the judge as receiver for Nadel’s funds, said in a court filing that the businesses were bought with fraudulently obtained money. Nadel ran three different funds the Victory IRA Fund Ltd., Scoop Real Estate LP and Victory Fund Ltd. from about 2002 until his January 2009 arrest.

Here is a video from CNBC about Nadel’s jail time:

Nadel, is 77 years old and according to the The New York Daily News reportedly got a kick out of being called, “a mini-Madoff.”

Nadel said he is now filled with “regret and sorrow… more and more every day” for the grief he caused his family and former investors, the New York Daily News reported.

“I will carry this burden with me every day for the rest of my life,” Nadel said in Manhattan Federal Court as he pleaded guilty to securities, mail and wire fraud.

His plea agreement with prosecutors requires Nadel to forfeit $162 million in gains as well as several properties and other valuable assets. He will receive a sentence of between 151 months and 293 months in prison, the judge said. This works out to a month in jail for every $552,000 to $1.07 million he stole. With only $162 million stolen I doubt Nadel ever made that much in a month – maybe that’s why he decided to steal it.

Here’s another video about the mini-Madoff sentencing:

The Wall St. Journal is reporting that Nadel also said he acted as a trader for three other funds run by Neil V. Moody and his son, Christopher D. Moody, during the period, also committing fraud in those. Why weren’t the Moody’s trading for their own fund? Who was responsible for oversight of Nadel’s trading activity?

Apparently, the U.S. Securities and Exchange Commission had similar questions when they brought civil fraud charges against the Moodys in federal court in Florida in January. Here is a link to the SEC press release and the affidavit in the case. The Moodys have agreed to be barred from associating with any investment adviser for five years as part of a consent agreement with the SEC. They didn’t admit or deny wrongdoing as part of that agreement. “Neil adamantly denies any knowledge that this was a Ponzi scheme,” said James Felman, a lawyer for Neil Moody. Montieth M. Illingworth, a spokesman for both Moodys, and the apparently a Mike Tyson scholar, declined further comment.

No criminal charges have been filed against the Moodys….

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Six victims in the Arthur Nadel (Scoop Management, Inc.) scandal have filed  a $2.3 million lawsuit against newsletter editor and publisher (Don Rowe) . Nadel’s Scoop managed six private investment funds.

The basis of the lawsuit, the victims argue, is that they took Rowe’s newsletter seriously when it called Mr. Nadel “America’s Top-Ranked Money manager.” The suit against Rowe also alleges that his Carnegie Asset Management unit “received referral fees from Arthur Nadel, Neil Moody, Christopher Moody  and/or their hedge funds in exchange for the defendant’s fraudulent recommendations that plaintiffs invest in the foregoing hedge funds.”

Putting this specific case aside, as well as all first amendment protections of the free press, it is unclear how people can blindly rely on newsletters and similar publications to make hedge fund investments.

Based on media reports it doesn’t seem as if the newsletter (The Wall Street Digest) held itself out as being a fiduciary or had any fiduciary liabilities. It seems as if this was simply a subscription based newsletter. If people could sue newspapers, websites etc. for providing rankings than certainly similar suits should be filed against Entrepreneur Magazine who in May 2008 ranked Agape World Inc. as number 73 in the publication HOT 100 fastest growing businesses. Nicholas Cosmo CEO of Agape World surrendered himself to authorities been accused of among other things mail-fraud in a fraudulent hedge fund scheme.

But similar lawsuit have not been filed (as opposed to other class-action lawsuits which have been filed against the law firm – Holland & Knight – which prepared Nadel’s legal documents). While it is unfortunate that people were taken in by alleged frauds such as Nadel and Cosmo, complete responsibility for performing detailed due diligence should not be wholly outsourced – especially to a newsletter.

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