The panel will be entitled, “Hedge Fund Opportunities” will take place on Friday March 2, 2012 at the Crowne Plaza Times Square in New York, NY.

It is anticipated that Mr. Scharfman will discuss evolving trends in hedge fund operational due diligence for 2012, the benefit to investors towards working with operational due diligence consultants such as Corgentum, and the benefits of incorporating risk considerations into the hedge fund portfolio construction process.

To register for the event here, please click here.

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A hedge fund manager for FrontPoint Partners was sentenced to five years in prison on Friday, November 18th. Joseph Skowron pled guilty in the summer of 2011 to insider trading which resulted in Morgan Stanley avoiding $30 million in trading losses. According to the New York Times, Skowron enticed French doctor,  Yves Benhamou, to give him “confidential results about clinical drug trials.” In addition to selling HGSI Human Genome Sciences stock before the news of its downfall was made public, Skowron and Benhamou agreed to deceive the Securities and Exchange Commission (SEC) by withholding information from them regarding their endeavors. Dr. Benhamou also pled guilty to charges he was brought up on, and will be sentenced next month.

Here is a video about the arrest:

Because Skowron obtained access to material non-public information and took advantage of it to benefit himself, he caused many people to lose their jobs and money. Although it is possible to receive non-public information legally, it is what you choose to do with that information that can become a potential problem. In the case of Skowron, not only did he go searching for insider information, but he also acted upon the information he received. It was the action he chose to take, that led him down the path he is now traveling. Ironically, Chip, as he is referred to in the industry, made Galleon Group one of his victims. Galleon Group was the hedge fund managed by Raj Rajaratnam, who was sentenced to 11 years in prison for insider trading not long ago. The charges that surrounded Skowron destroyed FrontPoint, which was one of the most prestigious firms on Wall Street. Skowron is forced to pay $8 million in forfeiture and fines to the government.

This is a perfect example of the need for operational due diligence firms. A simple list of investigative procedures, if properly executed, could have prevented Skowron, and several others, from committing this white-collar crime. By conducting a comprehensive review of a hedge funds’ exposure to, operational strengths and weaknesses regarding the hedge fund manager, and a hedge fund’s exposure to material nonpublic information, it will decrease the chance of insider trading as well as other operational risks. It is with due diligence that we can identify any below-the-surface issues within a fund, and find out about people like Skowron, so that investors can make more informed decisions before investing.

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A jury recently handed down a sentence which found that the Galleon Group’s founder Raj Rajaratnam was convicted of insider trading. Bloomberg is reporting that jury never argued during 12 days of secret deliberations that he was innocent.  Instead the focus was on what sentence to give Rajaratnam. Here is a post about the Galleon verdict entitled, Galleon’s Fait Accompli : Investor’s Move the Dial Towards a Conservative Approach to Hedge Fund Research, on the Corgentum Consulting blog and some videos from the trail and verdict:

http://youtu.be/YKbqdE_BA5w

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Details are still emerging regarding JPMorgan Chase’s alleged knowledge of the Madoff fraud. Here is a video about the investigation:

It is  being reported that the latest avenue being pursued by Madoff trustee Irving Picard is that one of the many operational due diligence red flags which should have alerted JP Morgan Chase & Co. to the Madoff Ponzi scheme was the number and volume of suspicious transactions by one of Madoff’s so-called “surrogate father” a man named Norman F. Levy. Mr. Levy, who is now deceased, was a real estate broker who made transfers from1998 to 2001 to the tune of more than $83 billion in and out of his account with Madoff. Levy’s  supermodel girlfriend, supermodel Carmen Dell’Orefice, would lose her life savings with Madoff. Here is a video showing Ms. Dell’Orefice modeling:

Levy’s estate is being pursued by the IRS as a result of revelations from the Madoff fraud.

The other so-called “surrogate father” to Madoff was, according to Vanity Fair, philanthropist Carl J. Shapiro. Shaprio (who’s wife is also named Ruth) lives in both Boston and Palm Beach and was the founder of Kay Windsor, Inc. a maker of women’s apparel.

Despite heavy Madoff losses for Shapiro personally, and his charities, Shapiro agreed to return $625 million to Irving Picard which included $38 million which was paid by Shapiro’s son in-law (Robert M. Jaffe).

In other Madoff news, it is being reported that Ruth Madoff was turned away from a memorial service for her son Mark by Mark’s widow. Apparently there are still hard feelings from when Ruth chose to visit Bernie in jail after he was reportedly beaten in prison.

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The Madoff saga has yielded another unfortunate death -Madoff’s eldest son Mark Madoff. According to media reports Mark Madoff, 46, committed suicide by hanging himself  with a black dog leash while his 2-year-old son slept nearby. His death occurred two years to the day after his father (Bernard Madoff) was arrested by the FBI.

Mark Madoff had sent at least two e-mails to his wife and one to his lawyer in the early morning, a police official said, before killing himself. In the e-mails to his wife, he asked her to take care of their son and said that he loved her, the official said. If you will remember Stephanie Madoff, Mark’s wife, petitioned a Manhattan court in February to change her and her children’s last names to Morgan to avoid harassment and threats (see previous post). Here is a video about Mark’s death:

Madoff and his first wife, Suzanne, divorced in 2000.He has two other children from a previous marriage, ages 18 and 16. Mark Madoff graduated from the University of Michigan. He was a licensed broker with his father’s firm since 1987.

Mark’s death is the fourth major death surrounding the Madoff scandal and the second purported suicide. The first was investor’s Rene-Thierry Magon de la Villehuchet’s suicide and the second being the death of Jeffry Picower (see previous post regarding Picower) and the third was Stanley Chais a Beverly Hills, California investment advisor who operated feeder funds which allocated capital to Madoff funds (see previous post regarding Chais).

In recent weeks, federal investigators had charged a number of Bernard Madoff associates in indictments. The latest under indictment was key operative Annette Bongiorno, who was charged last month with fabricating documents and securities fraud in connection with the Ponzi scheme.

Madoff’s other son Andy, despite attempts to continue to keep a low profile, was featured in several media articles relating to a company he started with his girlfriend Catherine Hooper (who reportedly has a tattoo of the Madoff name) called Black Umbrella which provides disaster recovery planning for families. Andy and the now deceased Mark reportedly also were avid fisherman which was coincidentally a hobby equally shared by Madoff’s former Chief Financial Officer Frank DiPascali (see previous post). Here’s is a video with Mark Madoff showing off Abel Reels (a company he was the leader of an investment group which bought them):

Agents investigating the scheme recently had focused more attention on Mark Madoff, one investigator said. “He was next up to the tee,” said the investigator, who didn’t want to be named because of the pending probe, referring to the shift of attention to Mark Madoff. Mark Madoff wasn’t viewed as a major insider with vast knowledge of his father’s fraud but he is believed to have had some awareness of the fraudulent nature of the operation, the investigator said.

“This is a tragic development, and my sympathy goes out to Mark Madoff’s family,” Irving Picard the Madoff trustee said in a statement yesterday.

Jeff Wilpon, chief operating officer of the New York Mets, who went to Roslyn High School with Madoff in the 1980s, said, “It is shocking, it is sad, it is tragic.” Mr. Wilpon, who said in December 2008 that Mark Madoff had been a friend of his for 30 years, has been sued along with other members of his family by Picard in one of hundreds of lawsuits the trustee has filed to get back profits from Madoff investors.

Ira Sorkin, Bernard Madoff’s lawyer, said he was unable to get in touch with his client, who is serving a 150-year sentence at federal prison in North Carolina. Sorkin did say, “I’m very sure he has been informed. This is a great tragedy on many, many levels.”

A lawyer for Madoff’s mother said, “Ruth is heartbroken.” Mark Madoff had not spoken to his parents since his father’s arrest, on the advice of his lawyer.

There have been no reported statements made by Peter Madoff (Bernard’s brother and Mark’s uncle) or Peter’s daughter (Bernard Madoff’s niece and Mark and Andy’s cousin Shana Madoff). Both Peter and Shana were also named in a suit recently filed by Irving Picard.

Perhaps this fictional account of Mark and Andy teaming up with their own lawyers and distancing themselves from Bernard Madoff around the holidays puts Mark’s death this in perspective:

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Photos recently surfaced of Stanford beaten in prison over a dispute related to using the telephone.

Since the allegations against Stanford broke a number of interesting facts have come out regarding his business and operations including many operational risk red flags.

Here is part one of the BBC Panorama special on Stanford:

Part two:

Part three:

And here’s a video about Stanford being sued for gambling losses. This video also talks about allegations by James M. Davis, Mr. Stanford’s former CFO who has since agreed to a plea deal with the government, that Stanford participated in a  bizarre blood brothers ritual with Leroy King, Antigua’s chief banking supervisor – where Stanford’s offshore bank was located:

And here is a video of Stanford victims and former employee:

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It is expected that Mr. Scharfman will discuss the developing role of operational due diligence, considerations for integrating operational risk into the asset allocation process, and techniques for family offices to integrate operational due diligence into their investment process.

The event will take place on December 2, 2010 at the W Hotel Lakeshore, Chicago, IL. To register for the event here, please click here.

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The New York Times reports that wearing a dark suit, black tie and starched white shirt, he stood impassively while the verdict was read, betraying no emotion.

Here is a video from CNBC about the verdict:

Since leaving Societe Generale Kerviel, took a job with Lemaire Consultants & Associates an information systems and computer security consulting firm.

Here is Reuters take on the story:

At the end of Kerviel’s high-profile three-week trial in June, his defense team pleaded guilty to computer abuse but rejected the other charges.The public prosecutor has recommended Kerviel serve at least four years behind bars, with a fifth year suspended. Tuesday’s verdict is critical for SocGen, which has worked hard to clean up its image since the scandal.

Caroline Guillaumin, a spokeswoman for Société Générale, said the damage award was a “symbolic” sum that the bank did not expect would be paid. “But it is important, and we are satisfied, because it recognizes that the entirety of the bank’s losses are attributed to Jérôme Kerviel’s actions,” she said.

Mr. Kerviel’s lawyer, Olivier Metzner, said he would appeal immediately. “This judgment is totally unreasonable,” he said outside the court. “It suggests that the bank is not responsible for anything, that no system of control could have prevented this.”

Dominique Pauthe, the presiding judge, agreed that the former trader could remain free until the outcome of the appeal, which legal experts said was unlikely to be heard before late next year.

The prosecutors, Jean-Michel Aldebert and Philippe Bourion, had requested that Mr. Kerviel spend at least four years behind bars. The maximum penalty possible on the charges faced by the former trader — breach of trust, forgery and unauthorized use of the bank’s computers — was five years.

The unwinding of an estimated €50 billion in unauthorized open positions on Mr. Kerviel’s trading book in late January 2008 cost Société Générale €4.9 billion, the equivalent of about $7 billion at the time.

Mr. Kerviel acknowledged at his trial that he had falsified documents and entered fake trades to hide his activities, but he maintained that his bosses had deliberately turned a blind eye to what he was doing and had tacitly encouraged him as long as it was profitable.

Specifically, around 2002 Kerviel created a fictional rugby loving hedge fund friend name “Matt” in response to inquiries from broker, Moussa Bakir, who had asked him about his trading strategy. Kerviel told Bakir all about “Matt”, but whom Kerviel had imagined into a wanna-be billionaire hedge fund manager who loved rugby.

Reading from excerpts of the 73-page ruling, Judge Pauthe said Société Générale’s failure to detect Mr. Kerviel’s dealings for more than two years did not absolve the trader of primary responsibility for the bank’s huge losses.

“The lack of vigilance by the bank in monitoring the only existing limits, acting as alert signs, hardly exempted Jerome Kerviel from his duty to inform his hierarchy of the reality of his excesses or to come back within the limits imposed,” Judge Pauthe said. “By his deliberate actions, he put in peril the existence of the bank that employed 140,000 people, of which he was a part, and whose future he mortgaged.”

The case continues to attract intense interest in France, though outside financial circles it has been largely overshadowed by the sequence of events that has shaken the world economy since the collapse of Lehman Brothers in September 2008.

Some have portrayed Mr. Kerviel’s activities as emblematic of the very culture of excessive risk at the root of the global financial crisis.

During the trial, he described himself as “someone who tried to do his job the best he could, in the interests of the bank.” He added: “My objective was to help it make money.” In a newspaper article last year, he was quoted as saying that he had taken “crazy risks” for “astronomical gains that brought me, sometimes, great joy.” Daniel Bouton, the former chief executive and chairman of the bank, has described Mr. Kerviel as “a crook, a fraudster and a terrorist” who acted alone and nearly destroyed the bank.

Mr. Kerviel had been placing bets outside his trading limit for more than two years. The bank has said it booked €1.4 billion in profit in the fourth quarter of 2007 from his unauthorized dealings. In the aftermath of the scandal, Mr. Kerviel spent five weeks in pretrial detention and became something of a French folk hero. He even wrote a book in French (L’engrenage : mémoires d’un trader) about his exploits in which he states, “I was only a prostitute in a great banking orgy.” In the French media much was made of the fact that someone from such a modest background — his mother was a hairdresser, his late father a metal-shop teacher — could dupe so many of his bosses, many of them well-bred graduates of France’s best schools.

Mr. Kerviel’s conviction follows the dismissal last week of a U.S. shareholder lawsuit accusing the French bank of concealing losses linked to the trading scandal, as well as the extent of its exposure to subprime mortgages. Citing a U.S. Supreme Court decision in June, a U.S. court in New York ruled that the investors — including several pension funds — could not sue in the United States for losses linked to their investments in foreign companies.

It will be interesting to see if the judge reconsiders Kerveil’s sentence on appeal…

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Stanley Chais was a Beverly Hills, California investment advisor who operated feeder funds which allocated capital to Madoff funds. He passed away on September 26, 2010 from a rare blood disease at the age of 84.

The Chais death is the third major death surrounding the Madoff scandal. The first was investor’s Rene-Thierry Magon de la Villehuchet’s suicide and the second being the death of Jeffry Picower (see previous post regarding Picower).

Chais was accused in a pending Securities and Exchange Commission lawsuit of feeding about $1 billion — virtually all the funds he collected from investors — into Madoff’s multibillion Ponzi scheme. Specifically Chais managed three funds which invested with Madoff: 1) the Lambeth Company, 2) the Brighton Company and the 3) Popham Company. Although he withdrew $500 million before the collapse of the Madoff funds, Chais maintained that he was also a victim and was not complicit. Here is the SEC complaint against Chais.

Chais also facing a lawsuit from the Madoff trustee, Irving Picard which was filed on May 1, 2009 Irving Picard, bankruptcy trustee for Madoff Securities, filed a lawsuit against Stanley Chais.  The complaint alleges he “knew or should have known” he was deep in a Ponzi scheme when his family investments with Madoff averaged 40% and
sometimes soared as high as 300%. It also claims Chais was a primary beneficiary of the scheme for at least 30 years, allowing his family to withdraw more than $1 billion from their accounts since 1995 – money that belonged to Madoff victims. The Picard complaint is here.

Chais was also facing a lawsuit from filed on September 23, 2009, California Attorney General Jerry Brown seeking $25 million in penalties and restitution for victims.

Chais was a large philanthropist and his philanthrophy, the Chais Family Foundation, closed in December 2008 as a result of losses associated with Madoff.

Here is a video from CNBC about the Chais death:

In other Madoff news, Bernard Madoff’s wife Ruth Madoff has been spotted in New York City at Midtown’s Le Pain Quotidien. Here’s the video:

Ruth Madoff had a new red harido (previously her hair was blond). Ms. Madoff was so dedicated to her previous blond hairstyle that she visited her salon, Pierre Michel, every six weeks for the last 10 years. After the Madoff scandal broker she was told that she could no longer enjoy her routine of sitting with a glass of Poland Spring water while Giselle, a colorist often cited in Vogue and Allure, wielded the foils. “Oh my g-d,” Madoff uttered, as ABC News advanced towards her. This video also features Madoff victims advocate Ronnie Sue Ambrosino. By the way the a website for the Madoff victim’s network is: http://bernardmadoffvictims.org.   When Ruth Madoff was asked if she had any words regarding her husband’s victims, she said nothing. Perhaps it makes sense she’s keeping mum, since no one knows what federal prosecutors may or may not be up to….

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Here is a link to our previous post on Mr. Nadel. He later surrendered to authorities in January 2009. Nadel has finally admitted to perpetrating the $168 million fraud. His attorneys say the former Sarasota hedge-fund operator is in poor health and might not survive a longer stretch in a federal prison.

These sentences are on top of other lawsuits including one filed by 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.

His attorney’s also argue that the criminal conduct of Nadel, 77, was not an effort to live a lavish lifestyle, unlike his partners, Neil and Christopher Moody.Neil and Christopher have denied any wrongdoing as outlined in my previous post.

“Mr. Nadel’s conduct, although reprehensible, was not motivated by greed but by his pathological desire for admiration and his inability to face and admit to others that he was a failure,” his attorneys said.

If Nadel were to be sentenced to five years — and get credit for his 20 months of detention in the Metropolitan Correctional Center (where Bernard Madoff spent some time) — he could be back in Sarasota in less than 31/2 years.

But there are significant hurdles to that future. Prosecutors are seeking a much stiffer sentence. They believe Nadel is eligible for nearly 22 years, and may submit their own sentencing recommendations this week.

Investors who earlier filed victim-impact statements have urged U.S. District Judge John G. Koeltl to lock up Nadel for the rest of his life. He is scheduled to be sentenced Oct. 8 in New York for orchestrating a Ponzi scheme that cost investors $168 million in out-of-pocket losses. He pleaded guilty in February to 15 federal fraud counts. It will be interesting to see if the court complies with Nadel’s pleas or delivers a stiff sentence….

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