The Life and Death of Dieter Frerichs – The K1 Group Saga Continues….
Dieter Frerichs is unfortunately dead.Mr. Frerichs was the director of two hedge funds, K1 Invest and K1 Global, controlled by Helmut Kiener, the founder of the K1 Group. With his death we may never learn the real story of what happened at the K1 Group. Mr. Freirichs had been under public scrutiny of late due to allegations of fraud at the K1 Group. In fact, he had already been arrested in the probe. As I outlined in a previous post, Freirichs had been a
rrested along with David Zuendorf, who worked with the funds’ administrator Treukapital Treuhandverwaltung AG. These arrests were the follow up to a series of arrests I discussed in a different previous post, by U.S. police in Miami (Stefan Seuss) and Nebraska (Thomas Meyer) in the probe.
Echoing shades of the deceased Jeffry Picower and Rene-Thierry Magon de la Villehuchet in the Madoff scandal, Mr. Frerichs proved to be an interesting character in the K1 scandal whose full story will never be revealed. He
Mr. Frerichs, 72, died of a gunshot wound on Saturday after police officers went to his home in Palma, Majorca to serve a warrant for extradition to Germany, the Spanish police said Monday.
According to a police spokeswoman, three officers went to Mr. Frerichs’s home on the island at 11:30 a.m. on Saturday and found him sunbathing nearby on rocks overlooking the sea. When the officers identified themselves, they said, Mr. Frerichs took a gun from a bag that was lying beside him and leapt into the water.
Mr. Frerichs fired two shots, the spokeswoman said. The first, presumably to test the gun, the authorities said, was fired in the air; with the second, he shot himself in the head. Mr. Frerichs was picked up by a rescue boat and taken to the Son Dureta hospital in Palma. He died not long after arrival.
According to the New York Times, the case has sent shock waves through Spain, where Mr. Frerichs’s stepdaughter, Fiona Ferrer Leoni, initially told the media that the police had shot Mr. Frerichs. She also questioned the police account of him sunbathing with a gun.
Ms. Ferrer, a prominent television personality and model, is married to Jaime Polanco, a Spanish tycoon whose family controls Promotora de Informaciónes, or Prisa, the media group, whose assets include the newspaper El País.
She also told the Spanish news media that Mr. Frerichs had been sought only for his relationship to K1 Group executives and that he was innocent of any fraud.
The police spokeswoman, who cannot be identified because of department policy, denied that officers had fired at Mr. Frerichs. She said his weapon had been retrieved and would be used, along with an autopsy, to determine the exact circumstances of his death.
“It is not normal to be sunbathing with a bag that has a gun,” the spokeswoman said. “But that’s what he did.”
Dietrich Güder, the state prosecutor in Würzburg, declined to comment beyond confirming that the Spanish police had informed him of the events.
Lutz Libbertz, a lawyer in Munich for Mr. Kiener, argued in a November court filing that Mr. Kiener could “at the most be accused of making bad investment decisions, but not of actions constituting breach of trust.” Mr. Libbertz declined to comment on Monday, saying through an associate that “he had nothing to add to what’s already been said.”
Mr. Kiener promoted the power of his “K1 Fund Allocation System,” and is accused of taking advantage of lax lending oversight by banks during the credit boom. He claimed his investments had returned more than 700 percent from 1996 and the end of 2008.
Mr. Kiener, K1′s founder, is equally interesting. He was a former telephone book salesman and psychologist (who graduated from Johann Wolfgang Goethe-University in Frankfurt, Germany in 1987) who founded a seemingly successful and large asset management organization.
The case has been an embarrassment for Germany, as BaFin, the market regulator, had several times sought to stop Mr. Kiener’s activities because of significant legal questions but had its enforcement overturned on appeal.
Mr. Kiener has been in custody in Würzburg, Germany, since October on suspicion of operating a pyramid scheme, defrauding thousands of privat
e investors and banks including JPMorgan Chase, Barclays and BNP Paribas of more than 300 million euros, or $375 million. The F.B.I. is also investigating the group; so are authorities in the British Virgin Islands, Liechtenstein and Switzerland.
The two highly leveraged funds had a combined 421 million euros ($529 million) of liabilities when the accounting firm Grant Thornton was retained in November to liquidate them. The authorities say the prospects for recovering most of the money are poor.
Money Never Sleeps… Does Hedge Fund Operational Due Diligence?
We all knew this day would come. Gordon Gecko, the fictional wolf of Wall Street portrayed by Michael Douglas in the 1987 film Wall Street is returning in a new soon to be released movie sequel called Wall Street: Money Never Sleeps.
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:
A Royal Hedge Fund Fruad? – Guy Albert de Chimay
It is being alleged that a New York based hedge fund manager named, Guy Albert de Chimay is a liar.
In particular it is being reported that Chimay, the CEO of Chimay Capital Management, utilized lies about his claims to the Belgian royal family to scammed clients out of more than $6 million, federal prosecutors said.
Specifically, Chimay promised “bridge loans” to pool investors’ money, court papers filed yesterday claim. The problem was that in doing this he, allegedly, falsified bank statements as he swept the money into his personal bank account or spent it, said an SEC complaint (link here) filed in Manhattan Federal Court.
“Rather than using investor money to make bridge loans, Chimay simply stole it,” a civil fraud complaint alleges. “Chimay falsified bank statements to hide the fraud, while diverting at least $6 million into his personal bank account or otherwise misspending it on unrelated firm expenses.”
Investigators said he used the cash for a multimillion-dollar mansion in the Hamptons and an overseas bank account among other items. He also used some of the ill-gotten gains to pay more than $500,000 to a law firm representing him in a divorce.
The SEC said the money-manager told investors his company Chimay Capital had about $200 million in assets and a history of turning big profits for clients. He promised annual returns of 12%.
Chimay, who was featured on three episodes of a 2006 TV documentary titled “Wall Street Warriors“ also claimed to belong to Belgian royalty and to be connected to the famed beer brewed by Trappist monks. “Wall Street takes the brightest people and smashes them into the pavement on a regular basis,” Chimay said on the show. Here is a video showing a tour of the real Chimay brewery:
Perhaps some of the handwriting was on the wall. Chimay had previously shut down certain funds, including an onshore long/short fund named Spartan Mullen Chimay II, due to lack of assets and poor performance in 2006. Apparently related fund entities, were also involved in previous historical litigation as well.
Interestingly, Chimay wasn’t the only TV celebrity at his firm. In 2008, Jason Colodne joined Chimay Capital 
Management. Colodne lost his job at his former employer, Patriarch Partners, for appearing on appeared alongside girlfriend Bethenny Frankel, the unmarried “housewife” on the reality TV show, who was also on the apprentice. Seems like quite a high profile operation on which little operational due diligence may have been performed…..
