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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Allen Stanford’s Back – Slow to Justice R. Allen Stanford’s Trial Slogs On
Our good friend R. Allen Stanford is back in the news. His trial for the $7 billion dollar fraud he allegedly perpetrated.
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:
Focus on Valuation – Hedge Fund Manager Michael Balboa Charged with Fraud
In the world of operational due diligence, valuation is one of the most important subjects. The way in which a hedge fund values its positions directly effect the NAV of a fund. When questions arise concerning a hedge fund’s valuation procedures investors can be responsible for paying back 
previously earned false profits via clawback efforts.
During the operational due diligence process investors can take a number of measure to evaluate the quality and robustness of a firm’s valuation policies and procedures. Additionally, investors should inquire as to how transparent such valuation procedures are and whether any testing of such procedures is conducted. A key element of any valuation process should be independent oversight and pricing sources.
A recent example which demonstrates the importance of valuation is the case of Michael Balboa. It is being reported that Mr. Balboa was charged with fraud and conspiracy. It has been alleged that he made investments in illiquid bonds in Nigeria and Uruguay. Prosecutors allege that he worked with two brokers to inflate the values of the bonds. One of the brokers Gilles De Charsonvillne (as well as Balboa) was also sued by the Securities and Exchange Commission. The SEC received help from the Bermuda Monetary Authority with the investigation. This article talks about how such efforts are part of the SEC’s new risk analytics division. The events allegedly took place in 2008 while Balboa ran a fund for Millennium Global Investments. Balboa reportedly earned 40% of the fees from from the fund’s $844 million under management or approximately $6.5 million. Millennium Global said it had reported Balboa’s “rogue behavior” to both U.S. and British authorities.
According to this website for the Russia Forum 2010, “Michael Balboa has over 15 years of experience in EM instruments. Prior to establishing ARAM Global, he was Managing Director of Emerging Credit and the Millennium Global Emerging Credit Fund at Millennium Global.
Mr. Balboa’s career began at Salomon Brothers (1992-95), after which he co-managed the Strategos Fund, an EM hedge fund founded in 1995. He then joined Greenwich Europe and was actively involved in the management of the top performing Rainbow Advisor’s EM funds (2003-06) as well as the Rainbow Macro Fund. Mr. Balboa is a graduate of Hofstra University.”
Balboa parted ways with Millennium Global in 2009. His current employer, ARAM Global, said he is currently on leave from the firm….
