Here is the trailer:

Mr. Gecko is most famous for the line, “Greed, for lack of a better word, is good.“ Here the clip where Mr. Gecko says the famous line at a stockholder’s meeting:

This new movie revisits Mr. Gecko 23 years later, after he is released for stock manipulation and other securities crimes.

In this film, Mr. Gecko tries to warn the world of the 2008 financial crisis (before it happens). Along the way he crosses paths with a hedge fund’s prop trader, Jacob, (played by Shia LeBouf). In a plot twist Jacob suspects, who else but the hedge fund manager for the death of his mentor….

In the pre-Madoff environment, and particularly in the 1980′s when the first Wall St. film takes place, business and operational shenanigans, may have foolishly been subject to lesser degrees of due diligence – which is perhaps why they either went undetected or grew out of control (i.e. – Ivan Boesky)

All this made me think in the post-Madoff environment if the Gordon Gecko’s of the world would still stand up to modern due diligence techniques? ….

Perhaps maybe this theatrical shareholder’s speech sums it up best:

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Corgentum – Working with Investors to Evaluate and Monitor Operational Drag® in Hedge Funds

The paper is available for download in the research section of  www.Corgentum.com or here.

Hedge Fund Operational Due Diligence: Operational Drag

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This paper provides an overview of the importance of independence and objectivity in the Corgentum hedge fund operational due diligence process. This paper also outlines the benefits of Corgentum’s sole focus on operational due diligence as well as the benefits of Corgentum’s multidisciplinary approach.

The paper is available in the Research section of www.Corgentum.com or via direct link here.

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From some recent media coverage… “Former Société Générale chief Daniel Bouton, who resigned amid intense criticism just over a year ago, branded Kerviel “a terrorist” at the time. But Kerviel quickly became a romantic underdog – a clever anti-hero seen to be caught in the massive cogs of finance, who was only trying to do his job. T-shirts around Paris read, “I am Jerome’s girlfriend,” and he wrote a tell-all book, published last month.”

His book is called L’engrenage, Mémoires d’un trader . Kerviel even had a graphic novel comic book made about his escapades (Le Journal De Jérôme Kerviel).

Here is a video about Kerviel back in court:

Here is an interview from French television (in French) with Kerviel:

But I think these British puppets might describe the whole rogue trader situation the best:

Or perhaps this sums it up more succinctly:

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Corgentum Consulting has released a new research paper which provides an overview of the role due diligence questionnaires (“DDQ’s”) and request for proposals (“RFP’s”) play in the hedge fund operational due diligence process. This paper also outlines some key questions and other considerations investors should bear in mind before asking a manager to complete a customized due diligence questionnaire.

The paper entitled, Hedge Fund Operatinal Due Diligence Questionnaire – To Use or Not To Use? can be found in the Research section of the www.corgentum.com website, or via direct link here .

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1) the demand for operational due diligence seems to be global in nature (i.e. – USA, Asia and Europe);

2) direct hedge fund operational due diligence experience is (foolishly) not always required, but rather an industry qualification is sufficient in some cases;

3) based on some job descriptions it is clear that certain operational due diligence functions will be understaffed to performed a thorough operational due diligence review;

4) In certain other cases, the operational due diligence position may be part of a larger role which will require the operational due diligence analyst to both perform due diligence and oversee other internal operational processes

In short, based on the continued apparent misperception among certain hedge fund allocation groups as to the time and effort required to perform operational due diligence, I would highly encourage all those seeking an operational due diligence role to perform some sort of due diligence on your potential employer to ensure they actually understand the appropriate effort required to thoroughly perform operational due diligence on a hedge fund.  If not,  an under resourced and overworked operational due diligence analyst may find themselves serving as a scapegoat in the event a hedge fund failure occurs (a fund which they may not have had the opportunity to thoroughly vet). Here’s a video about scapegoating:

Some recent links to some operational due diligence jobs are posted below. As I stated in the previous post, I do not know if these positions have been filled and I do not vouch for or endorse any of these positions. Now with all of this hokum out of the way I thought this list might be of interest to some of this website’s readers:

Operational Due Diligence Researcher (Seattle, Washington, USA)

Hedge Fund Due Diligence Analyst (New York, New York, USA)

Operational Due Diligence Associate (New York, New York, USA)

Director, Operational Due Diligence (New York, New York, USA)

Operational Due Diligence Analyst (London, United Kingdom)

Head of Operational Due Diligence (United Arab Emirates)

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It’s worth noting that in a separate case, Kovachev in 2006 was ordered to pay $350,000 in a civil suit brought by the U.S. Securities and Exchange Commission accusing him and 11 others of defrauding more than 600 investors of more than $28 million in a Ponzi scheme. The SEC said that Kovachev and others sold unregistered securities structured as hotel timeshare rental interests.

Mr. Dreier was a graduate of  Yale as well as Harvard Law School. He previously ran Dreier LLP which had offices in five cities, employed over 250 lawyers and annual revenues of over $90 million. the firm’s client’s included Bill Cosby, Andy Pettitte and Justin Timberlake. The firm is now defunct.

Notable quotes from the video, which investors might want to keep in the back of their mind during the operational due diligence process include:

“The more money you look for the fewer questions people ask sometimes.”

“It was clear to me the more you showed people you didn’t need money, the easier it was to attract money”

“A $20 million dollar mistake had grown into a $100 million mistake”

“Do I have chutzpah? Yes!”

He further goes onto describe part of the reason he finally was caught was that a potential investor, who was attempting to defraud, had acted diligently and made some phone calls (i.e. – performed due diligence) which had raised his suspicions.  If that isn’t an endorsement for operational due diligence I don’t know what is.

The video describes how Dreier lived a lavish lifestyle to create the illusion that he already was a billionaire before his empire crumbled. Some of his assets included an $11 million ocean front compound in the Hamptons, his $10.5 million apartment, an art collection that included a Picasso, three Matisse’s and 12 Warhol’s. Also just like Madoff, Dreier had a yacht. His was a 120 foot yacht called “Seascape” staffed by a full-time crew of 10, which Dreier paid $18 million for.

The video also describes how Dreier tried to further add an air of credibility to his persona by hosting charity events with former New York Giants (American football) player turned actor Michael Strahan, which were attended by such celebrities as Diana Ross, Jon Bon Jovi, Alicia Keys and William Shatner.

Dreier is serving 20 years at a Federal Correctional Institution in Sandstone, Minnesota. He is scheduled for release on October 26, 2026.

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To refresh memories, initial arrests were made last year in regards to an on-going fraud investigation into the K-1. Most notably the firms founder (and former telephone book salesman), Helmut Kiener, was arrested. He still remains behind bars. Perhaps Helmut is lucky, at least he is safe in prison from disgruntled German investors.

K1 Group is at the center of an international criminal probe after saddling banks including Barclays Plc, JPMorgan Chase & Co. and BNP Paribas SA with losses. European and U.S. authorities are examining whether Kiener deceived the banks when he borrowed money.

Now there have been two new arrests. Dieter Frerichs, the managing director of K1′s two British Virgin Island-based funds, and David Zuendorf, who worked with the funds’ administrator Treukapital Treuhandverwaltung AG, were arrested on April 13.

Prosecutors in the southern German city of Wuerzburg said in a statement that these arrests were reportedly the result of renewed searches of foreign premises linked to the original K1 fraud investigation.

“There is a suspicion that investors may have been hit by around 90 million euros in fraud damages,” the statement said, adding that the investigation indicated the investment companies were a “snowball system with no objective of earning a profit”.

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Proponents of this increased taxation argue, in part, that it is a good way to raise additional revenue for the government and that it is a technique to further align the interests of investors and managers.

Here is a link to a Reuters article which explains that under current law, profits earned by investment fund managers at hedge fund and private equity firms are taxed as capital gains, a 15 percent tax rate, instead of as ordinary income, which would subject them to the highest 36 percent marginal income tax bracket.

To learn more about carried interest you can visit this bizarre website put up by Representative Eric Cantor from the Seventh District of Virginia. While it seems Representative Cantor’s heart might be in the right place by showing us the adventures of Seth, Jason and Caitlin to protect “America’s retirement resources at risk” via this educational resource the introductory warbly robot voice, odd graphics, and grainy pictures remind me of those sci-fi movies of the 50′s  like Forbidden Planet. Eerie to say the least. America’s tax dollars at work….

Those against this tax argue (as does law professor Darryl Jones in the clip below) that the hedge fund manager is performing services and not investing capital so the capital gains tax rate should not apply to the management fees earned by the hedge fund.

One of the key questions, from a purely tax perspective, is whether carried interest is truly ordinary income. Here is a nice discussion about this point on Forbes.com.

Those who point to the fact that this tax has not gained much traction is due to the large political donations made by hedge fund managers.

Here is a CNBC clip in which Daniel Mitchell of the Cato Institute and Darryl Jones discuss the issue. My favorite quote from Mr. Mitchell is, “we have to take the keys to the liquor cabinet away from the alcoholics.” It is unclear to me who Mr. Mitchell is calling an alcoholic – investors, the U.S. government or hedge fund managers?…

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Perhaps these investors were influenced by a wave of new U.S. vigilante movies such as Kick-Ass? (clip below):

Perhaps this will usher in a new age of activism, where instead of seeking board seats like other activist investors, people who suffer losses simply  obtain recompense via more forceful means. This new modern code of Hammurabi, could be would have certain rules of course.

Yes, rather than the abject street justice of doled out by vigilante’s such as Charles Bronson in Death Wish, there would be some sort of structure. It could be Gladitorial combat for the entertainment of investors and the financial media, popularized recently by such films as the aptly named Gladiator or the popular television program Spartacus: Blood and Sand. Or perhaps it would be something more civilized such as when Spock and McCoy fought Gladiators:

Or perhaps it could be a more clandestine individual or groups of vigilante’s fighting for investors rights such as Batman. Unfortunately, though just as not everyone can be a star hedge fund manager, neither can all defrauded investors be Batman. Instead these individuals could form a new type of SEC which protected investors at risk of being defrauded everywhere such as the Justice League or the X-Men.

Fortunately, or not, none of this will happen – nor should it. Hedge fund managers, just as investors both have rights and both should play an active role in the investment process. As Mr. Amburn (and his assailants) story outlines, even a little due diligence before an investment is made can prevent a great deal of litigation, better risk management, and a more thorough understanding of the full pallete of risks being undertaken. So too must a hedge fund manager provide transparency and on-going level of information to facilitate this process. If not, it can unfortunately lead to this type of result…

The Story of James Amburn:

Amburn was ambushed outside his home in Speyer, West Germany, where he was bound with masking tape and bundled into the trunk of a car after being hit over the head with a walker (called Zimmer Frame in the UK) of one of his kidnappers.

Prosecutors charged the two married couples, aged between 60 and 79, as well as the co-conspirator, with carrying out the kidnapping in order to recoup losses amounting to £2.3 million in investments that soured due to the international financial downturn.

Amburn was abducted and driven to a house on the shores of Lake Chiemsee (pictured below):

He was driven 300 miles to a house on the shores of beautiful Lake Chiemsee in Bavaria – but not before escaping at a service station.

His elderly abductors recaptured him and beat him with the walker (aka: Zimmer Frame in King’s English), causing Amburn two broken ribs.

The court in Traunstein, Germany heard prosecutors describe the kidnapping and torture as ‘almost surreal – except it happened.’

For four days Amburn was kept in the cellar of the house in June last year, beaten and tortured by the pensioners who saw their comfortable retirement dreams evaporating before their eyes.

Another couple, retired doctors Gerhard and Iris Fell, aged 63 and 66, who arrived to assist the kidnappers, admitted their roles in the plot. Mr Fell was not in court due to illness. Koenig and his wife Sieglinde, 79, made a partial admission but he, bizarrely, told the court that Amburn was there ‘willingly.’

A Chance Meeting In Florida

He said he and the others had met Amburn in Florida in the 1990′s and they possessed holiday homes in the state. ‘He said he was a business adviser and promised us yields of 18 percent on our savings,’ he told the court. ‘At first that happened – but then he took the p**s.’

They met up co-incidentally with Dehmer who told them Amburn owed him $690,000. Together, say prosecutors, the plan coalesced to ‘teach him a lesson.’ ‘The fear of death was indescribable,’ Amburn said, adding that he was beaten and tortured during four days of captivity in a cellar room where he was held naked. He was rescued when he was ordered to send a fax to release funds from a Swiss bank and managed to scribble a message on it for the recipient to call police.

He said: ‘I told them that if I sold certain securities in Switzerland they could get their money and for this I had to send a fax to a bank.’ Allowed out of the cellar for a cigarette break in the garden while the kidnappers awaited their loot, Amburn attempted to escape over a wall. In the pouring rain he ran down the street pursued by his captors in the Audi A8 they had used to transport him to the house. Several people saw him, but Roland Koening shouted: ‘He’s a burglar!’

Amburn was then dragged back to the cellar.  Shortly afterwards, the Swiss bank telephoned police in Germany and a team of armed commandos stormed the house. His captors now face a minimum of five years in jail each when the trial concludes in March. Their lawyer Harald Baumgaertl insisted before the court that his clients were not ‘big criminals.’

But the prosecution disagreed, saying they showed a ‘high degree of criminal energy.’ Wiley Dehmer (pictured below):

Roland Koenig (pictured below):

According to the prosecutors, kidnappers, Roland Koenig, 74, and Willy Dehmer, 60, attacked Amburn outside his home and bundled him into an oversize cardboard box which they wheeled to the boot of a silver Audi saloon car.

After all this Mr. Amburn is under investigation from German authorities for fraud.

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