Gorden Geckko Grows Up – Michael Douglas Makes Insider Trading Infomercial for FBI
Actor Michael Douglas, who famously played the Wall St. icon Gordon Geckko in the Oliver Stone film Wall St., has had a change of heart. The fictional fund manager once famously touted, “Greed is good.” Here is a video of some of the more notable quotes from Mr. Geckko in the movie:
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 persona
l trading policies.
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Corgentum Consulting Releases Hedge Fund Newsletter: Operational Due Diligence Insights
Corgentum Consulting has today released the first issue of its new operational due diligence newsletter entitled, Operational Due Diligence Insights. This newsletter will bring investors unique operational due diligence news and insights . Topics covered in this issue include:
- 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.
Greenlight Capital Fined by FSA – David Einhorn’s Insider Tips
David Einhorn’s Greenlight Capital has run into trouble in the UK for insider trading.
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.
