Limo Driver Turned Hedge Fund Manager A Fraud : From Ukraine With Love
Alan Fishman spent years of escorting business executives around in his limos. Mr. Fishman was a Ukrainian limo driver turned hedge fund manager. He admitted he’s guilty of fraud.
In 2003 Mr. Fishman and two partners decided to launch a “hedge fund” of their own, A.R. Capital Global Fund.
Fishman is a 50year-old Ukraine native who resides in Brooklyn’s Brighton Beach. Last week Fishman pleaded guilty to conspiracy to commit securities fraud and is scheduled to be sentenced on June 18, according to a spokeswoman for the U.S. Attorney’s office in Manhattan. He also agreed to pay a $160,000 penalty.
Crain’s is reporting that according to his attorney, Don Savatta, Mr. Fishman came to the U.S. nearly 20 years ago and attended Temple University, where he majored in Russian literature and business administration. Around the turn of the millennium, his job was driving investment bankers and corporate lawyers to meetings or back to their homes. He decided to take a crack at his customers’ game.
A gentleman named Gary Gelman, who is Mr. Fishman’s nephew, was trying to launch a hedge fund. Although Mr. 
Fishman had no prior experience managing money, in 2003 he became president of the A.R. Capital Global Fund, which operated from a small office on 39 Broadway in lower Manhattan. Using cold calls, the fund lured in 70 clients who invested about $20 million. I am still amazed to this day that people respond to these cold calls. I doubt any of these investors did any due diligence or if they did they likely didn’t make it far enough to inquire why a limo driver was running a hedge fund. Simply amazing.
The fund managers told investors they would buy shares in overseas real estate companies and trade currencies, oil, gas and other commodities while using “active, leveraged trading” and “fundamental and technical analysis” to make money. None of this was true, according to prosecutors. Instead, client money was invested in three Ukrainian stocks or parked in a Ukrainian money market fund. Millions more were wired to bank accounts in Lithuania, including one held by a company located in St. Kitts and Nevis.
When one client visited New York to check on his investment, fund officials refused to meet at their office because they said it was being renovated—and met instead held at a nearby deli. Operational due diligence red flag anyone?
Mr. Fishman had primary responsibility for investment decisions, according to the government. His lawyer, Mr. Savatta, says Mr. Fishman continued working at the limousine company and served mainly as an administrator at the hedge fund.
Two of Mr. Fishman’s hedge fund colleagues, Daniel Ledven and Edward Veisman, also pleaded guilty last week. Veisman (according to this NASD bulletin) was barred from associating with any NASD member and fined $20,000 for failing to respond to NASD requests. I doubt this came out in any investor due diligence. The fourth defendant, Mr. Gelman, is a fugitive and believed to be in Ukraine. Good luck getting them back, or investors getting their money back.
Thomas Petters Prepares To Face The Music: A Double Madoff?
Thomas Petters, the embattled formerly successful entrepreneur and hedge fund manager of Petters Group Worldwide 
LLC is facing a long prison sentence. 335 years (more than twice the term give to Bernard Madoff). Petters was convicted of on different 20 criminal counts including wire fraud, mail fraud and money laundering and obstructing justice. Here is a video from the Minnesota local news (where Petters was based and was convicted) discussing his conviction:
The Petters Group owned Polaroid, an interest in Sun Country Airlines and at its peak employed over 3,200
employees. The whole thing was a $3.5 billion Ponzi scheme. Here’s a great old video for Polaroid commercial with James Garner (I’m sure he would be very proud of Mr. Petters…):
“The defendant’s fraud is beyond comprehension,” prosecutors said in a court filing. “A life sentence is wholly deserved and justified given the defendant’s corrupting influence on individuals and institutions, and his strident refusal to accept any responsibility.”
Here is a video where Petters discussed the importance of maintaining core values in corporate America:
Perhaps these were the kind of core values Petters was talking about:
Petters’ lawyers said their client should be sent to the Federal Medical Center in Rochester, Minnesota, because of hi
s health and because the national notoriety of his case would make him a “marked man” in prison. He has a pituitary adenoma (or tumor) and faces the risk of blindness and paralysis. Sentencing is scheduled for April 8. Stay tuned to see if the judge sends a message or takes sympathy….
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….
