Corgentum’s Consulting’s operational due diligence webinar series was recently featured in the Hedge Fund Law Report .

The first webinar in the series, Operational Due Diligence Survival Kit for 2012: Essential skills for uncovering and evaluating operational risk in hedge funds, private equity and traditional funds, outlined key trends for investors to consider when performing operational due diligence.  The Hedge Fund Law Report article, “Corgentum Webinar Highlights Trends, Challenges and Best Practices for Hedge Fund Investors in Conducting Operational Due Diligence” can be read on the Hedge Fund Law Report
website (subscription required) in Vol. 5, No. 16 (Apr. 19, 2012).

Corgentum has also recently posted a replay of the webinar on the Videos section of Corgentum.com. .

Readers can sign up for news related to upcoming Corgentum webinars focused on operational due diligence via the firm’s Contact page.

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Newly Released Handbook by Jason Scharfman is an Indispensable Guide for Assessing Essential Non-Investment Operational Risks and Mandatory Reading for Limited Partners

Managing Partner of operational due diligence consulting firm Corgentum Consulting and former senior team member at Morgan Stanley’s Graystone Research, Jason Scharfman, has authored a groundbreaking new book,

“Private Equity Operational Due Diligence: Tools to Evaluate Liquidity, Valuation and Documentation”, John Wiley & Sons, Inc., 371 pp , which is available today.

“Private Equity Operational Due Diligence” , addresses the unique aspects and challenges associated with performing operational due diligence reviews on both private equity and real estate funds. This essential guide provides readers with the tools to develop a flexible comprehensive operational due diligence program based on the author’s real world experience.

Corgentum is the preeminent global provider of independent operational due diligence reviews for investors. Scharfman is also the author of “Hedge Fund Operational Due Diligence: Understanding the Risks”, John Wiley & Sons, Inc., 300 pp, which is considered to be at the forefront of operational due diligence texts.

“Investors now have a comprehensive guide to develop and implement a functional operational due diligence program for private equity and real estate funds,” said Scharfman. “The techniques outlined in this book will allow limited partners to avoid risky funds and make better investment decisions.”

The 12 chapters of the book cover areas including techniques for analyzing private equity fund legal documents and financial statements, as well as methods for evaluating operational risks concerning valuation methodologies, pricing documentation and illiquidity concerns. The book is filled with case studies in operational fraud and other examples to help equip investors with the tools to avoid unnecessary operational risks and fraud. The book also outlines techniques for limited partners to incorporate operational due diligence into their private equity asset allocation and portfolio construction processes.

“Scharfman provides helpful insight into this emerging area of private equity risk,” said Francis X. Frecentese, Managing Director, Global Head of Alternative Investments, Citi Private Bank. “His guide offers limited partners the potential to efficiently identify and evaluate private equity operational issues and avoid unnecessary risk. Similarly, it offers general partners guidance as to best practices in light of institutional investors’ increasing demand to institutional-quality infrastructure and enhanced transparency.”

Additional topics covered include:

• Private equity fund advisory boards
• Valuation techniques, methodologies and standards
• Operational due diligence concerns specific to real estate funds
• Core issues to consider when beginning an operational due diligence review
• Advanced operational due diligence techniques when conducting an expanded analysis

A companion Website to the book includes sample checklists, templates, spreadsheets, and links to laws and regulations referenced in the book.

Private Equity Operational Due Diligence: Tools to Evaluate Liquidity, Valuation and Documentation is available for purchase via Amazon.com.

About Corgentum Consulting:

Corgentum Consulting is a specialist consulting firm that provides investors with the industry’s most comprehensive and in-depth operational due diligence reviews. Corgentum partners with private equity and hedge fund investors, including fund of funds, pensions, endowments, investment banks, investment consultants, ultra-high net worth individuals and family offices to improve upon the efficiency and effectiveness of the operational due diligence process. The firm’s proprietary due diligence methodologies and innovative original research allows their clients to continually manage and mitigate their operational risk exposures. Corgentum’s sole focus on operational due diligence, veteran experience, innovative original research and fundamental bottom up approach to due diligence allows the firm to ensure that its clients avoid unnecessary operational risks. Corgentum is headquartered at 26 Journal Square, Suite 1005, in Jersey City, New Jersey, 07306. Phone 201-360-2430. More information is available at
http://www.corgentum.com.

About Jason Scharfman:

Jason Scharfman is the Managing Partner of Corgentum Consulting. He is recognized as one of the world’s leading experts in the field of private equity and hedge fund operational due diligence. Before founding Corgentum, Scharfman held positions focused on due diligence and risk management at Morgan Stanley, Lazard Asset Management, SPARX Investments and Research, and Thomson Financial. He has consulted with the U.S. House Judiciary Committee on the subject of hedge fund regulation. Additionally, he has provided training to financial regulators on the subject of hedge fund due diligence.

Link to this release on PRWeb.

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Analyzing organizational culture is a key part of the operational due diligence process. Mr. Scharfman’s article discusses how evaluating a hedge fund’s corporate culture can detect meta risks, such as problems in organizational culture, that may lead to future operational issues. The op-ed piece also discusses how the operational due diligence process can provide cues to red flag due diligence issues (such as those in the AIJ scandal in Japan).

The article, Due diligence lessons from the Goldman Sachs resignation letter   is available at the Pensions & Investments website or via direct link  here.

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In anticipation of the upcoming book  a new promotional video has been released:

To pre-order the book please visit the publisher’s website.

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The actor has recently teamed up with the FBI to create a video which encourages would be tipsters to come forward with any insider trading news, and outlines, that greed is not good. Here is the video:

Tipsters who decide to turn into rats and go to the government might do better then to follow Douglas’ advice. Whistleblower lawyer David K. Colapinto outlines that, “If they just go to the FBI, they are probably going to get zero,” Colapinto said. “The FBI’s not obligated to do anything for them.”

Colapinto said that if informants want a reward for information that exposes financial fraud, they should consult a lawyer — and file a whistleblower claim with the SEC.

Under the SEC’s , tipsters are entitled to 10 to 30 percent of the money the SEC collects if the whistleblower’s information leads to an enforcement action in which sanctions of more than $1 million are ordered.  The bounties were ordered by Congress in the aftermath of the financial crisis and were intended to be powerful weapond in the war on Wall Street fraud. That being said Harry Markopolos, who reported the Madoff fraud to the SEC for years, got nothing.

Attempting to diagnose whether or not a hedge fund has the potential to be exposed to insider trading scandals can be a critical part of analysis of a fund’s compliance and trading functions during the operational due diligence process. Investors should attempt to evaluate such risks during a review of operational risk factors including personal trading policies.

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• How will SEC registration influence investor due diligence on hedge funds?
• Tools for investors to evaluate financial statement risk
• Considerations when analyzing administrator independence in the valuation process
• Diagnosing information security risks

This newsletter will be available on Corgentum Consulting’s website via direct link here.

Operational Due Diligence Insights also includes a section about Corgentum’s upcoming events like their new webinar: Operational Due Diligence Survival Kit for 2012. This webinar will be on March 15 from 2-3 pm EST and will give attendees vital information to asses and uncover operational risk in hedge funds, private equity and traditional funds.  Click here to signup for the upcoming webinar.

Readers can also visit Corgentum’s contact page to sign up to receive future issues as well as other Corgentum news and upcoming events.

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Michael Spak, one of the three partners in the fund, reported Zuck to the FBI. He said that the situation was currently under investigation. Osiris was started in 2009 and Spak told FINalternatives, “The fund is a ‘hedged’ fund in the truest sense of the word. Our team’s objective is to immunize the volatility of the portfolio which in turn allows us to produce better than average returns consistently.”

Interestingly enough, according to Bloomberg data, the fund ranked third out of 3,527 top performing global hedge funds in April 2010. Since the start of the investigation, no money has been recovered and Zuck is nowhere to be found.

It was announced that Zuck was arrested in 1995 and spent over a year in jail for “misconduct by a corporate official.” Hedge fund operational due diligence would have revealed these public records as well as identified any other questionable aspects of the fund to investors. Investors should be wary of investing in a fund without performing any bit of ops dd because fraud is much more common than we think…

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Reuters is reporting that Britain’s Financial Services Authority (FSA) said on Wednesday it had fined Einhorn 3.64 million pounds ($5.67 million) and his Greenlight Capital 3.65 million pounds for market abuse.

Greenlight rose to  prominence in credit crunch for shorting Lehman Brothers bank.

The story goes that Einhorn (a prolific poker player) learned from a telephone conversation, held with a broker in 2009, that British pub company Punch Taverns was on the verge of a significant equity fundraising, prompting Einhorn to sell down his holdings before an expected fall in the shares, the FSA said in a statement.

This decision allowed Einhorn (who wrote a book called Fooling Some of the People All of the Time, A Long Short Story) to avoid losses of around 5.8 million pounds, the FSA said. “The FSA accepted that Einhorn’s trading was not deliberate because he did not believe that it was inside information. However, this was not a reasonable belief,” the FSA said. “This was a serious case of market abuse by Einhorn and fell below the standards the FSA expects, particularly due to Einhorn’s prominent position as President of Greenlight and given his experience in the market.”

According to the Wall St. Journal, Mr. Einhorn stated, “We believe that this action is unjust and inconsistent with the law and with prior FSA enforcement precedent. However, rather than continue an arduous fight, we have decided to put this matter behind us and concentrate on managing our business.”

Mr. Einhorn continued, “We have always strived to set an example of good conduct and ethics, and we take compliance very seriously. We didn’t believe in 2009, and we don’t believe now, that there was anything wrong with our conduct and our actions. The fine is for trading in advance of a decision that had not been made, and the FSA concedes we did not believe we had any inside information. We did not enter into any confidentiality agreement, we explicitly requested that we not be given confidential information, and we do not believe we were given any such information. Further, all the witness testimony supports our view.”

Reportedly, ts he FSA said Einhorn gave instructions to sell all of Greenlight’s holdings in Punch a “matter of minutes” after the telephone call, on June 9 2009. At the time these instructions were given Greenlight held 13.3 percent of Punch’s issued equity, and over the next four days Greenlight sold 11,656,000 Punch shares, thereby reducing its holding in Punch to 8.89 percent.

Punch announced a fundraising of 375 million pounds on June 15 2009. Following the announcement the price of Punch shares fell by 29.9 percent, the FSA said. While the regulator said the trading infraction was inadvertent and not deliberate, the fine may put some tarnish on 43-year-old Einhorn, a stalwart of the hedge fund community who is known for public crusades against abuses by public companies.  Einhorn has targeted Green Mountain Coffee Roasters, claiming the company’s accounting practices and long-term earnings power are questionable.

Here is a video calling his views about Green Mountain Coffee into question:

While the average U.S. hedge fund lost about 5 percent in 2011, last year Einhorn’s flagship fund rose 2.9 percent. However, the hedge fund manager lost out on a high-profile bet last year when his effort to buy a significant minority stake in the New York Mets broke down over the summer. He is a life-long fan of the baseball team.

Einhorn isn’t the first fund manager to be fined in the UK for insider trading. In 2006 the FSA fined former GLG fund manager Philippe Jabre a then-record 750,000 pounds after he was found guilty of insider trading on a convertible bond sale for Japan’s Sumitomo Mitsui Financial Group. ($1 = 0.6416 British pounds)

Here are some videos of Einhorn talking about his investing style and views:

Understanding a hedge fund’s compliance procedures and the way in which it deals with and may be exposed to material non-public information is an important part of the operational due diligence process.

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To refresh memories regarding Mr. Stanford’s alleged crimes and his passion for cricket see the previous post here and here – and some good lessons on operational due diligence.

The first day of jury selection has ended in the oft-delayed trial of jailed Texas financier R Allen Stanford, who is accused of bilking investors out of $7billion in a vast Ponzi scheme. A federal judge spent Monday questioning 80 potential jurors. Stanford emerged in chains.

In other Stanford news, Bloomberg is reporting that the SEC is asking a judge to determine a payout plan for Stanford victims.

Here are old videos of Stanford in his own words talking about Antigua:

And video of Stanford being treated after being beaten by fellow inmates in prison:

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At the panel sessions, it is anticipated that Mr. Scharfman will focus the discussion on upcoming trends in operational risk in alternative investments including hedge funds and private equity funds. Other topics which are anticipated to be discussed include the role of operational due diligence consultants such as Corgentum in designing a comprehensive operational due diligence solution, and operational due diligence challenges institutional investors can expect in 2012.

The panel Mr. Scharfman will moderate will be entitled, “Investing in Alternatives” and will take place on Wednesday February 15, 2012 at the Astor Crowne Plaza in New Orleans, LA.

To register for the event here, please visit the conference website.

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