Hedge Fund Red Flags, Madoff and the Law – Too Good To Be True Video Series
Here is a series of interviews conducted at the end of 2009 with Erin Arvedlund. Ms. Arvellund first wrote about Bernie Madoff for Barrons in 2001 and published her book, Too Good to be True- The Rise and Fall of Bernie Madoff in August of 2009. The interviews are conducted by Lawrence R. Velvel, the Dean of Massachusetts School of Law at Andover and himself a Madoff victim.
Part 1 –
Part 2-
Goldman keep secrets while Madoff’s no snitch and Markopolos writes a book – No one Would Listen
Apparently not even prison is kind to Bernie Madoff. It is being reported that Madoff had his nose broken by another inmate last December. After the attack, Mr. Madoff, who pleaded guilty a year ago and was sent to a federal prison in Butner, N.C., was moved on Dec. 18 to the prison’s low-security medical center for treatment. At the time, the Bureau of Prisons said that rumors of an assault were false and that Mr. Madoff suffered from dizziness and hypertension. Here is a previous post about Madoff’s reported prison injury.
The Wall St. Journal reports that Mr. Madoff was treated for a broken nose, fractured ribs and cuts to his head and face, according to a felon currently at Butner serving time on drug charges who was familiar with his condition at the time. The former inmate said the dispute centered on money the assailant thought he was owed by Mr. Madoff.
“In December he [Madoff] told staff he was not assaulted, and an investigation was completed following his statements, which corroborated his statements,” said Traci Billingsley, a Bureau of Prisons spokeswoman. “Not one inmate has told staff he was assaulted.” It’s not uncommon for prisoners to deny being beaten because they don’t want to risk a reputation as a snitch, according to prison experts and prisoner advocates. It’s good to know Madoff’s not a snitch…
In other news Law.com is reporting that an investor, Jermore Goodman, is suing Goldman Sachs over Mad
off investments. Goodman alleges that Goldman had an internal ban in place on investing with Madoff since 1999 but didn’t think it was important to share with its investors like Goodman. Assuming these allegations are true, this is just another example of the imperfect nature of operational risk data in the hedge fund market.
Finally, the reportedly shy Harry Markopolos has written a book about his Madoff experiences appropriately entitled, “No One Would Listen.” Here is a video about the book:
Other reported key highlights from the book include:
- The Madoff case is just the tip of the iceberg of his multiple probes of financial shenanigans
- The health care industry “makes Wall Street look honest”
- If he felt threatened, he was prepared to kill Madoff himself
- Markopolos claims he tried to give his Madoff file to then-New York Attorney General Eliot Spitzer; Spitzer says he didn’t get it
- Markopolos slams the media, expressing his incredulity at their lack of initiative and says reporters ignored the story he told them about
- He was devastated by the suicide of friend and french money manager Thierry de la Villehuchet, who remained heavily invested in Madoff despite Markopolos’ warnings
Arthur Nadel Finally Fesses Up To being “Mini-Madoff” : Mike Tyson and the Moody’s
Arthur Nadel a Florida hedge fund manager who, to refresh memories, pulled a Sam Israel and disappeared a little over a year ago just as he was due to pay investors $50 million. 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 $162 million fraud.
U.S. District Judge Richard Lazzara in Tampa had previously ordered Nadel’s two companies, Venice Jet Center LLC and Tradewind LLC, into receivership. These were two aviation businesses that were allegedly involved in some questionable proposed deals with Newnan-Coweta County Airport in Georgia.
This is a perfect example of a hedge fund manager being involved in outside business activities. This a topic that should be covered during the operational due diligence process. If this had been uncovered by investors performing operational due diligence on Nadel some logical questions, which might have received answers which likely would have raised red flags could have included:
- Why are you involved in these aviation businesses?
- How much time do you devote to these aviation businesses?
- Where does the money come from to support these businesses?
Tampa lawyer Burton Wiand (pictured left), who was appointed by the judge as receiver for Nadel’s funds, said in a court filing tha
t the businesses were bought with fraudulently obtained money. Nadel ran three different funds the Victory IRA Fund Ltd., Scoop Real Estate LP and Victory Fund Ltd. from about 2002 until his January 2009 arrest.
Here is a video from CNBC about Nadel’s jail time:
Nadel, is 77 years old and according to the The New York Daily News reportedly got a kick out of being called, “a mini-Madoff.”
Nadel said he is now filled with “regret and sorrow… more and more every day” for the grief he caused his family and former investors, the New York Daily News reported.
“I will carry this burden with me every day for the rest of my life,” Nadel said in Manhattan Federal Court as he pleaded guilty to securities, mail and wire fraud.
His plea agreement with prosecutors requires Nadel to forfeit $162 million in gains as well as several properties and other valuable assets. He will receive a sentence of between 151 months and 293 months in prison, the judge said. This works out to a month in jail for every $552,000 to $1.07 million he stole. With only $162 million stolen I doubt Nadel ever made that much in a month – maybe that’s why he decided to steal it.
Here’s another video about the mini-Madoff sentencing:
The Wall St. Journal is reporting that Nadel also said he acted as a trader for three other funds run by Neil V. Moody and his son, Christopher D. Moody, during the period, also committing fraud in those. Why weren’t the Moody’s trading for their own fund? Who was responsible for oversight of Nadel’s trading activity?
Apparently, the U.S. Securities and Exchange Commission had similar questions when they brought civil fraud charges against the Moodys in federal court in
Florida in January. Here is a link to the SEC press release and the affidavit in the case. The Moodys have agreed to be barred from associating with any investment adviser for five years as part of a consent agreement with the SEC. They didn’t admit or deny wrongdoing as part of that agreement. “Neil adamantly denies any knowledge that this was a Ponzi scheme,” said James Felman, a lawyer for Neil Moody. Montieth M. Illingworth, a spokesman for both Moodys, and the apparently a Mike Tyson scholar, declined further comment.
No criminal charges have been filed against the Moodys….
