The Morality Thread

I have decided that is high time that AC start a thread highlighting all the immoral happenings in the financial industry. It is such a terrible thing to see so many professionals and fund managers get corrupted and loose discipline and focus. Part of great success is having a strong moral foundation that will not be questioned. And as a young growing fund AC would like to remind itself and other financial professionals to be a true themselves and guard against moral hazard.

-snapman

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Brokerage Settles FINRA Soft Dollar Complaint
A Chicago brokerage house paid a $400,000 fine to settle a Financial
Industry Regulatory Authority complaint that it made more than $1
million in improper soft dollar payments on behalf of five hedge fund
managers.

The improper payments included items such as $13,700 for seven trips by
a hedge fund manager to a "gentlemen's club" in a two-week period and
$65,000 for credit card bills that contained charges for meals,
clothing, auto repairs and parking tickets, FINRA alleged.

Terra Nova also didn't properly oversee its soft dollar program to make
sure that the money was being used to benefit the hedge funds or their
investors.


FINRA did not name the hedge funds involved.

Soft dollar accounts are for funds that are charged over and above what
it costs to make a trade and are supposed to be used for services that
benefit the fund, its investors or are in accordance with fund
documents.


In settling the case, Terra Nova and three former employees did not admit or deny the charges, FINRA said in a statement.

Wow could be a looong loooooong thread: I start with the master:

http://en.wikipedia.org/wiki/Charles_Ponzi

Westgate Capital Founder Pleads Guilty The founder of hedge fund firm Westgate Capital pleaded guilty Friday to defrauding investors of about $133 million.

James Nicholson, 43, of Saddle River, N.J., ran what prosecutors said
was essentially a Ponzi scheme starting in 2004. Although his funds
underperformed, he told investors returns were positive, according to
court documents.


His offering memorandum for one of his funds also falsely stated that the fund was audited by an independent accounting firm.

It was a much bigger Ponzi scheme that proved Nicholson's undoing.
After Bernard Madoff's $65 billion fraud was revealed, Westgate
investors began trying to pull their money out. Nicholson issued about
$5 million in checks but they bounced and investigators moved in.


Nicholson has been in jail since his arrest in February, unable to make his $10 million bail.


The fund manager faces up to 45 years in prison when he is sentenced.

Ex-Florida Hedge Fund Manager Sentenced to 25 Years
A former Florida hedge fund manager who fled to South Korea after his
arrest was sentenced Friday to 25 years in prison.


Won Sok Lee was also ordered to pay $78.5 million in restitution, according to court documents.


Lee pleaded guilty in September after he was extradited from Korea.

Prosecutors had charged that Lee and the cofounders of KL Financial
Group, John Kim and his brother Yung Kim, defrauded investors out of
close to $200 million from 2000 until 2005. Last year, John Kim was
sentenced to an 18-year prison term and Yung Kim to six years.

Lee's lawyers had pleaded that Lee should not be sentenced to more
years than John Kim, claiming that Kim was the mastermind of the Ponzi
scheme.

But prosecutors responded that Lee was the principal of the investment
funds. He was also using stolen investor money while he hid out from
the law in South Korea, prosecutors claimed.

From HFN

Snapman wrote:

Westgate Capital Founder Pleads Guilty The founder of hedge fund firm Westgate Capital pleaded guilty Friday to defrauding investors of about $133 million.

James Nicholson, 43, of Saddle River, N.J., ran what prosecutors said
was essentially a Ponzi scheme starting in 2004. Although his funds
underperformed, he told investors returns were positive, according to
court documents.


His offering memorandum for one of his funds also falsely stated that the fund was audited by an independent accounting firm.

It was a much bigger Ponzi scheme that proved Nicholson's undoing.
After Bernard Madoff's $65 billion fraud was revealed, Westgate
investors began trying to pull their money out. Nicholson issued about
$5 million in checks but they bounced and investigators moved in.


Nicholson has been in jail since his arrest in February, unable to make his $10 million bail.


The fund manager faces up to 45 years in prison when he is sentenced.

Madoff really screwed over a lot of ponzi schemers. There are probably some people we know in jersey who lost money in this fund. I like this thread alot Snapman.

Raj Rajaratnam, Chiesi Deny Insider Trading Charges (Update2)
By David Glovin

Dec. 21 (Bloomberg) -- Raj Rajaratnam, the billionaire
Galleon Group LLC founder, and Danielle Chiesi, an executive at
New Castle Funds LLC, may face a summer trial on federal charges
that they used inside information to profit from stock trades.
The two appeared in Manhattan federal court today to plead
not guilty in an insider trading case that allegedly generated
more than $20 million in illegal profits. They were arrested in
October and indicted on Dec. 15. Prosecutors cite multiple
schemes dating to 2003 and say the two used secret tips to trade
in stocks including Polycom Inc., Akamai Technologies Inc.,
Google Inc. and International Business Machines Corp.
In the defendants’ first court appearance since the
indictment, Assistant U.S. AttorneyJoshua Klein asked a judge
to order the case to trial in June or July. That way, he said,
the criminal case would be resolved before a related civil
lawsuit by the U.S. Securities and Exchange Commission goes to
trial on Aug. 2. Lawyers for Rajaratnam and Chiesi say they need
more time to prepare for the criminal case.
“We may wind up on an expedited schedule,” said U.S.
District Judge Richard Holwell in Manhattan, who’s presiding
over the criminal case. Holwell said he would confer with U.S.
District Judge Jed Rakoff, who is overseeing the SEC case,
before setting a trial date.
Six Arrests
Rajaratnam and Chiesi were among six people who were
arrested on Oct. 16 in the first of two waves of arrests related
to what prosecutors say are overlapping insider schemes. The
indictment from the U.S. grand jury last week moved the case a
step closer to a trial and required the defendants to enter a
formal plea.
Rajaratnam’s lawyer, John Dowd, and Chiesi’s attorney, Alan
Kaufman, previously said their clients did nothing wrong.
The indictment accuses Rajaratnam of receiving tips over
several years from a network of high-ranking executives
including Chiesi, Ali Far, a hedge-fund manager, and Roomy Khan,
a former Intel Corp. executive. Far and Khan are among six
people who have pleaded guilty and are cooperating with
prosecutors. Others in the alleged insider-trading conspiracy
aren’t named in the indictment.
The original complaint from October identifies the others
as Rajiv Goel, who worked for a unit of Intel; Anil Kumar, who
worked as a director at McKinsey & Co; Robert Moffat, a former
senior vice president at IBM; and Mark Kurland, another
executive at New Castle Funds. Charges against them are pending
as some of their lawyers engage in discussions with prosecutors
about resolving their cases.
Federal Crackdown
The charges against Rajaratnam, Chiesi and 19 others who
were accused in the two cases are part of a federal crackdown on
insider trading that began two years ago. Authorities used data-
mining and wiretaps to build their case. U.S. Attorney Preet
Bharara in Manhattan called the cases the largest-ever
prosecution of a hedge-fund insider-trading ring.
Rajaratnam and Chiesi, who live in New York, are free on
bail. Rajaratnam has asked that his $100 million bail be reduced
to $25 million. A judge will hear arguments on Jan. 8.
In court today, Rajaratnam and Chiesi replied, “Not
guilty,” after a clerk asked for their pleas and didn’t speak
further. Klein said the defense lawyers will receive a copy of
the government’s wiretap recordings this week. Defense lawyers
Dowd and Kaufman said they needed as long as four months to
review the 100 or more hours of wiretap recording generated over
eight months.
“We’re going to need more time than the government is
offering,” Dowd said. Kaufman called the government’s request
for a summer trial “wildly ambitious.”
‘Litigated Here’
One factor that may delay a trial will be whether
prosecutors indict the other four defendants arrested with
Rajaratnam and Chiesi, Klein said. The prosecutor said he didn’t
know whether they would be indicted or if some other resolution
is reached in their cases. Klein said he expected the trial to
take about one month.
Klein also said he wanted Holwell, and not Rakoff, to issue
the first rulings over whether wiretap recordings are admissible
as evidence.
“Those are the sorts of things that should be litigated
here,” Klein said.
Gloria Chiesi, the mother of Danielle Chiesi, told
reporters after court that her daughter wasn’t guilty.
“My daughter is innocent and that’s what you will be
printing,” she said. “God borrowed my body and gave me this
girl.”
After his arrest, Rajaratnam ordered that shredders be
removed from Galleon’s office and that employees preserve
documents, Dowd said in an Oct. 30 letter to a judge asking that
Rajaratnam’s bail be reduced. Such documents will play a part in
the defense, the lawyer said.
The criminal case is U.S. v. Rajaratnam, 1:09-cr-1184, U.S.
District Court, Southern District of New York (Manhattan).

Hey guys, for the holidays and to change my mind from the markets, I'm reading "The wolf of Wall Street" by Jordan Belfort about his own story... Compared to him, Madoff looks like Mickey Mouse
Definitely deserves his place in the Morality thread!

Madoff Assaulted?

Was Bernard Madoff assaulted in prison? Or was his Christmas Eve hospitalization a result of a not-so-sinister mishap?


Madoff was brought to Duke University Medical Center and treated for a
collapsed lung and rib-cage injury. Early on, rumor had it Madoff
suffered a beating at the Durham, N.C., prison where he is serving a
life sentence.

But now, word is his hospital stay was tied to his old age.


Madoff, 71, fell face first out of his bed, according to his attorney
Ira Sorkin. Sorkin told the Associated Press that Madoff got dizzy from
high blood pressure, stressing Madoff had not been assaulted.

New York native Madoff swindled $65 billion in what is considered the
greatest financial fraud of all time. He admitted to his family that
his vaunted investment operation was a Ponzi scheme. Madoff received
what is in effect a life sentence.

Obama Plans to Raise as Much as $120 Billion From Bank Fees

By Hans Nichols
Jan. 12 (Bloomberg) -- President Barack Obama plans to
impose a fee on banks expected to raise about $120 billion in
order to help recoup losses from the Troubled Asset Relief
Program, according to an administration official.
The White House hasn’t settled on the final structure of
the fee and how to target the big banks that have returned to
profitability, said the official, who request anonymity.
The plan is to have revenue from the fee dedicated to
deficit reduction and to cover the amount that the Treasury
Department estimates it will lose from TARP, which is $120
billion. Details will be contained in the fiscal 2011 budget
that Obama will submit to Congress next month, the official
said.

Snapman wrote:

Madoff Assaulted?

Was Bernard Madoff assaulted in prison? Or was his Christmas Eve hospitalization a result of a not-so-sinister mishap?


Madoff was brought to Duke University Medical Center and treated for a
collapsed lung and rib-cage injury. Early on, rumor had it Madoff
suffered a beating at the Durham, N.C., prison where he is serving a
life sentence.

But now, word is his hospital stay was tied to his old age.


Madoff, 71, fell face first out of his bed, according to his attorney
Ira Sorkin. Sorkin told the Associated Press that Madoff got dizzy from
high blood pressure, stressing Madoff had not been assaulted.

New York native Madoff swindled $65 billion in what is considered the
greatest financial fraud of all time. He admitted to his family that
his vaunted investment operation was a Ponzi scheme. Madoff received
what is in effect a life sentence.

To be blunt, I really wouldn't feel bad if he got beat up.

Sauros wrote:

Hey guys, for the holidays and to change my mind from the markets, I'm reading "The wolf of Wall Street" by Jordan Belfort about his own story... Compared to him, Madoff looks like Mickey Mouse
Definitely deserves his place in the Morality thread!

Hey Madoff's lawyer, Ira Sorkin used to be Jordan Belfort's one! He has some famous clients...

Pump and Dump scheme

Sauros, you ever seen the movie Boiler Room? Classic pump and dump scheme by the chop shop JT Marlin. Worth your hour if you come across it.

By Saijel Kishan
Jan. 20 (Bloomberg) -- Hedge funds’ best year in a decade is giving little comfort to Jason D. Papastavrou.
The founder of New York-based ARIS Capital Management LLC, which has about $250 million invested in hedge funds, is still waiting to get back $155 million from 22 managers that restricted withdrawals in 2008.
"We don’t object to the illiquidity," Papastavrou said in an interview. "We object to how some managers are abusing the situation and holding investors’ money hostage to generate fees."
Hedge-fund firms including D.E. Shaw & Co. and Harbinger Capital Partners LLC that froze client assets during the financial crisis have yet to pay back a total of about $77 billion to investors, according to estimates by Credit Suisse Tremont Index LLC, which tracks hedge funds. That’s after the biggest stock-market rebound since the 1930s and a record rally in credit markets revived demand for some assets considered illiquid a year ago.
The market recovery helped managers post returns of 20 percent last year after losing a record 19 percent in 2008, according to Chicago-based Hedge Fund Research Inc. The gains exclude some hard-to-sell assets, such as emerging-markets real estate or aircraft-engine securitizations.
"While I’m sympathetic to managers who weren’t able to sell assets back in October and November 2008 because bids were hard to come by, there are few excuses more than 12 months later," said Michael Rosen, chief investment officer of Angeles Investment Advisors LLC, a Santa Monica, California-based firm that advises clients on investing in hedge funds.

$1.4 Trillion Industry

At the end of last year, about 5.5 percent of the $1.4 trillion hedge-fund industry’s assets were restricted by managers, compared with 11.6 percent of what was a $1.5 trillion industry at the end of 2008, according to Credit Suisse Tremont Index, a joint venture of Credit Suisse Group AG and Tremont Capital Management Inc.
While some hedge funds don’t want to sell at prices that would harm remaining clients, others are using this as an excuse to retain assets to generate fees and remain in business, said John B. Trammell, chief executive officer of New York-based Cadogan Management LLC.
"Managers are running a high risk of damaging relationships with investors," said Trammell, whose firm invests $3.5 billion of client money in hedge funds.
Millennium Global Investments Ltd., the London-based hedge- fund firm founded by former Goldman Sachs Group Inc. executive Michael D. Huttman, restricted withdrawals from its $600 million high-yield bond fund after it lost 26 percent in the first 10 months of 2008. Clients were previously able to take their money out every quarter, according to an investor.

Two-Year Wait

The firm divided the bond fund, which was managed by Joseph G. Strubel, in two after half of its clients voted to liquidate it. Those investors were told that it would take as long as two years to get their money back. As of September 2009, the fund had returned $68 million in three payments, according to a letter to investors obtained by Bloomberg News.
Caroline Villiers, a spokeswoman for Millennium, declined to comment.
Another London-based company, Polygon Investment Partners LLP, had returned just 40 percent of the assets in its main fund as of the end of last year, according to a person familiar with the situation. The firm, run by Reade Griffith and Paddy Dear, had told clients in October 2008 that it was liquidating its Global Opportunities Fund, which lost 48 percent that year, according to an investor letter.

‘Taking for Granted’

"Many managers took their investors for granted," said Amit Shabi, a Paris-based partner at Bernheim Dreyfus & Co., which invests client money in hedge funds. "As a result, they’ve lost respect from the investment community, even if they have recouped losses."
Highland Capital Management LP, the $24.8 billion firm run by James D. Dondero and Mark K. Okada out of Dallas, said it’s struggling to return money because investors can’t agree on the terms of the liquidation. Highland has yet to return all money to investors who put in redemption requests before the firm said in October 2008 that it’s liquidating two hedge funds.
Highland had said its Highland Crusader and Highland Credit Strategies funds would be liquidated over three years. Investors in the funds were previously able to withdraw their money either on a quarterly or semi-annual basis. The funds, which had combined assets of more than $1.5 billion, were closed after losses on high-yield, high-risk loans and other types of debt.

Credit Market Rebound

The average price of actively traded high-yield, or leveraged, loans had dropped to around 70 cents on the dollar when Highland decided to shut the funds, from 100 cents in June 2007, according to Standard & Poor’s. The loans rose above 90 cents as of yesterday.
"No party would like to finalize the investor-led mediation and distribute funds more than Highland," the firm said in an e-mailed statement. "Highland has committed monies, waived fees, waived our voting rights and dedicated numerous staff to expedite this process. However, in support of the mediation, we are waiting for it to reach its conclusion, which we are optimistic will occur shortly."
To separate the most illiquid assets and avoid selling them at fire-sale prices, some managers put them into separate funds, so-called side pockets. Existing investors have to wait until the assets in the side pocket are sold before they can get their share of the investment back.

Waiving Fees

Philip A. Falcone, the billionaire founder of $8 billion firm Harbinger Capital Partners LLC, limited withdrawals from his biggest fund in 2008 to about 65 percent of assets and told clients that it may take as long as two years for them to get all of their money back.
The New York-based firm returned less than 10 percent of the assets that were withheld and put into a separate share class, as of the end of last year. A second payment of about 10 percent may be made in the coming months, according to a person familiar with the firm.
The value of the assets in the side pocket declined 3.6 percent in the first 11 months of 2009, according to a November investor letter. Harbinger doesn’t charge clients fees on those holdings. Carolyn Sargent, a spokeswoman for the firm, declined to comment.
Investors in Harbinger’s main fund, which focuses on distressed debt and gained 45 percent last year through November after a 29 percent loss in 2008, are usually able to take their money out every quarter with 90 days’ notice. The hedge fund, which had built stakes in companies including New York Times Co., where it is the biggest shareholder, and energy firm Calpine Corp., has been reducing those holdings, according to an investor letter and regulatory filings.

Not as Planned

"When the redemptions came, we saw that some funds had invested more in illiquid asset classes than what they may originally have planned," said Peter D. Greene, a partner in New York at the law firm Lowenstein Sandler PC, whose clients include hedge funds and investors.
Not all hedge funds kept clients waiting to get back their money. Highbridge Capital Management LLC, which suspended redemptions from its multistrategy fund after it lost 25 percent in 2008, returned 77 percent of the money that clients had sought to withdraw by July and 90 percent by Oct. 1, according to a person familiar with the firm. The New York-based fund had told clients it may take as long as 18 months to get their money back.
Canyon Partners LLC, which moved about 40 percent of its main fund into a side pocket in 2008 after posting a 29 percent loss that year, had returned 82 percent of those assets by July, according to a person familiar with the matter. The $17.2 billion firm is based in Los Angeles.

‘Screaming for Money’

"Everything has a price; it’s just that managers may not want to accept the lower prices being offered, even though many of their investors are screaming for their money back," said Geoff Varga, an insolvency and liquidation partner at London- based Kinetic Partners.
Drake Management LLC, the New York-based firm run by Anthony Faillace and Steve Luttrell, told clients in April 2008 that it’s liquidating its biggest hedge fund. As of the end of 2009, it hadn’t returned all the money. Drake said in a letter in October 2009 that its investments included a Turkish-based textile company, GISAD, which may have engaged in fraud, and two Brazilian companies that had defaulted on their debt.
D.E. Shaw, the $28 billion investment firm run by David E.
Shaw, restricted quarterly redemptions on its two biggest funds in November 2008 even after one of the funds had made money that year and the firm told clients that it had enough cash to meet Dec. 31, 2008, redemptions, according to investors.

‘Pretty Lax’

D.E. Shaw plans to return all money to investors by the end of this month, including $3.4 billion from its Occulus fund, which gained as much as 6.9 percent in 2008 and 10.5 percent last year through October, investors said.
Paul Welsh, a spokesman for New York-based D.E. Shaw, declined to comment.
Hedge-fund managers shouldn’t have to shoulder the all the responsibility for relations with clients that have soured, said Vidak Radonjic, managing partner at Beryl Consulting Group LLC.
"If investors didn’t know what they were signing up for, they weren’t doing their job properly," said Radonjic, whose Jersey City, New Jersey-based firm advises clients on investing in hedge funds. "For some, the due diligence they did was pretty lax."
Some investors have sold their stakes in hedge funds in the secondary market to raise cash, using intermediaries such as London-based Tullett Prebon Plc and Hedgebay Trading Corp. in Nassau, Bahamas. Cadogan’s Trammell said his firm is approaching other investors looking to offload their holdings that were restricted by managers.

Arbitration

Papastavrou’s ARIS is in arbitration with Javier Guerra, who runs Quantek Asset Management LLC in Miami, after filing a complaint in New York state against him in October, accusing him of inflating the value of the fund and withdrawing his personal money before suspending investor redemptions. Guerra says the allegations are "false and misleading."
"Our motion to dismiss succeeded in prevailing to move any concerns or questions this investor may have into the proper forum, arbitration," Guerra said in an e-mailed statement. "We are looking forward to resolving this accordingly."
Papastavrou, who declined to comment on the arbitration, said he plans to increasingly use separately managed accounts as a way to invest in hedge funds.
"More investors are saying ‘Enough is enough,’" he said.
"The more investors learn about abuses, the more difficult it will be for those managers to raise money."

Prosecutors from the Manhattan district attorney's office are investigating
whether a well-known hedge fund defrauded companies to which it provided
financing, according to people familiar with the case.

Plainfield Asset Management LLC, based in Greenwich, Conn., has been in
litigation in federal and state ...





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By Chad Bray

Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--The founder of California hedge fund Spherix Capital
LLC and its former president will pay more than $2 million to settle a civil
insider-trading lawsuit brought by the U.S. Securities & Exchange
Commission, according to a court filing made public Monday.

In a letter dated Jan. 20, Valerie Szczepanik, a lawyer for the SEC, said
Ali ...


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SEC and Galleon defendants tussle over wiretaps




Tue, Jan 26 2010

By Grant McCool

NEW YORK (Reuters) - The U.S. Securities and Exchange Commission is
demanding that Galleon hedge fund founder Raj Rajaratnam and others accused of
insider trading hand over recordings of wiretap evidence, but the defendants
have refused to give them up.

In a flurry of letters made public on Monday in the high-profile Manhattan
federal court case involving employees of some of America's best-known
companies, Rajaratnam and his co-accused argue that the recorded conversations
belong only in a parallel criminal investigation.

U.S. District Court Judge Jed Rakoff also heard oral arguments on the
wiretap issue on Monday, but he reserved publishing any ruling until next week.

Separately, Rakoff ruled from the bench that the SEC may file an amended
complaint to add new civil charges against Rajaratnam. The request stemmed from
a guilty plea on criminal charges by former McKinsey & Co management
consultants director Anil Kumar on January 7 in which he said Rajaratnam paid
him $1.75 million (1.08 million pounds) in exchange for tips on McKinsey
clients.

Rajaratnam, 52, is the most prominent defendant among 21 people criminally
or civilly charged last October and November in what federal prosecutors
described as the biggest hedge fund insider trading case in the United States.
The accused include employees of International Business Machines Corp
, McKinsey & Co executive management consultants and Intel
Capital, an arm of Intel Corp .

Rajaratnam's lawyers Terence Lynam and John Dowd wrote in a letter to Rakoff
that the law "denies the SEC any authority to obtain or use wiretaps as
part of its civil enforcement efforts because the SEC is not a law enforcement
agency empowered by law to conduct investigations or to make arrests, which is
why the United States Attorney's Office has not simply released the wiretaps to
the SEC."

The office of the Manhattan U.S. Attorney, in its own letter to the judge,
asked him to compel the defendants to produce wiretap recordings in their
possession to the SEC for its case. Prosecutors allowed the defendants access
to the recorded conversations so their counsel could refer to them as part of
their defense.

While the SEC and federal prosecutors often coordinate with each other,
there are limits on the information they can share. Rajaratnam's lawyers have
argued that the wiretaps were obtained unlawfully and violated his
constitutional rights.

Lynam told the judge in court that there were 14,000 intercepts of phone
conversations, some of them private conversations between Rajaratnam and his
family. The conversations in which he and others are alleged to have discussed
inside information and illegally traded in tech industry stocks date from 2004
to last year.

The cases are SEC v Galleon Management LP, U.S. District Court for the
Southern District of New York No. 09-08811 and USA v Raj Rajaratnam et al, No.
09-01184.

Also on Monday, the SEC agreed to settle its lawsuit against two defendants
in the Galleon probe.

Defendants Ali Far and Richard Choo-Beng Lee, founder and former president
of California hedge fund Spherix Capital LLC, agreed to pay a combined $2.1
million to settle the SEC's civil complaint, the commission said in a court
filing.

(Reporting by Grant McCool and Jonathan Stempel; Editing by Matthew Lewis,
Phil Berlowitz)

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requires fair presentation and disclosure of relevant interests.





----------------

China Indicts Four Rio Iron Ore Workers for Bribery (Update1)

By Bloomberg News

Feb. 11 (Bloomberg) -- China indicted four employees of Rio
Tinto Group, including the Australian head of its iron ore
business in the country, charging them with “infringing” trade
secrets and bribery after a seven-month inquiry.
Prosecutors accused the four of “taking advantage of their
position to seek profit for others, and asking for, or illegally
accepting, huge amounts of money from Chinese steel
enterprises,” a municipal court in Shanghai said yesterday in a
statement reported by the official Xinhua news agency. Australia
wants the matter resolved quickly, Financial Services Minister
Chris Bowen said today.


The indictments and a failed investment deal with Rio
strained relations between Australia and its biggest trading
partner and may add to the perception of risk of doing business
in China. Google Inc., owner of the world’s most-popular search
engine, said last month that cyber attacks from the Asian nation
may prompt the closure of its local operations.
“If people are trying to do business in China, it may well
be perceived that there’s a bigger risk in doing that today than
there was 12 months ago,” said Charles Kernot, a mining analyst
at Evolution Securities Ltd. in London. “All mining companies
will be more cautious.”

Tao Wuping, who represents one of the Rio executives, Liu
Caikui, said that as far as he was aware prosecutors were still
reviewing the case. Zhang Peihong, a lawyer for Wang Yong said
he hadn’t been informed of the indictments. Australian Stern Hu
and Ge Minqiang are the two other detainees.
“We would hope that this matter gets resolved as quickly
as possible,” Bowen told Australian Broadcasting Corp. radio
today. The government will ensure Hu gets assistance, he said.


Iron Ore Talks
The four were indicted in Shanghai and a criminal case will
be heard by the city’s No.1 Intermediate People’s Court, Xinhua
said, without giving a date for the hearing. They were formally
arrested by the Shanghai Municipality Public Security Bureau on
Aug. 11 after being detained in July.
The indictments come as Chinese steelmakers, the biggest
buyers of iron ore, begin talks with foreign suppliers to set
contract prices for the year from April 1. Last year, talks with
Vale SA, Rio, and BHP Billiton Ltd., which together supply two-
thirds of the seaborne trade in the raw material, failed to
reach agreement after China argued for a deeper cut than the 33
percent reduction accepted by mills in Japan and Korea.


Deal Rebuffed
Hu, a classically-trained violinist who chose his English
first name after virtuoso Isaac Stern, according to a person
familiar with the Rio executive, was head of Rio’s iron ore unit
in China. Rio was the lead negotiator for producers in last
year’s stalemated talks, the longest-running in their 40-year
history.

Relations between Rio and China were also strained last
June when it rebuffed a $19.5 billion investment by state-owned
Aluminum Corp. of China, its biggest shareholder, four months
after agreeing to what would have been the nation’s largest
overseas investment.

“The formal charging of some of its Chinese operatives
with alleged corrupt activity reminds me that China-Rio
relations are still very strained post Rio-fleeing from
Chinalco’s arms,” Charlie Aitken, director of Southern Cross
Equities Ltd., said in a report today.


Charges Downgraded
China originally detained the four on suspicion of stealing
state secrets, before downgrading the allegations in August, the
same month that the Australian government acknowledged that the
arrests and a visit to the country by Uighur leader Rebiya
Kadeer, had frayed ties between the two nations.
Prime Minister Kevin Rudd said a month later that relations
were in “good working order” and in October Chinese Vice
Premier Li Keqiang said his government is committed to a free-
trade agreement with Australia.

Two-way trade between China and Australia was worth A$83
billion ($73 billion) in fiscal 2009. Rio has about 30 percent
of its assets in Australia and got about 19 percent of its sales
from China in 2008.

David Luff, a spokesman for Rio in Melbourne, declined to
comment when contacted by phone today. A spokeswoman for
Australia’s Department of Foreign Affairs and Trade in Canberra,
who declined to be named in line with policy, said the
government was unable to confirm the reports of Hu’s indictment.


Transparency Report
China’s anti-corruption agency last month pledged to target
graft among top officials of state-owned enterprises after
ministerial-level executives were brought down last year for
bribery, the official China Daily reported last month.

The country fell to 79th in Transparency International’s
2009 corruption perception index from 72 the previous year. Its
population also considers corruption the biggest blot on its
international image, the China Daily said Jan. 6, citing a
survey by Horizon Research Consultancy Group.

Hu, who studied history at Peking university, became an
Australian citizen in the early 1990s after joining technology
firm AWA Ltd. to run its Beijing office, The Australian
newspaper reported July 15. Hu and his family moved to the
beachside Sydney suburb of Manly in 1993 and he lived in the
country for about eight months, the report said.

Those ones have a good business model
http://www.economist.com/business-finance/displaystory.cfm?story_id=15546448&fsrc=rss

Bloomberg News, sent from my iPod touch.
Alabama Bond Firm Head Gets 52 Months in Sewer Case (Update1)

Feb. 26 (Bloomberg) -- The former head of a Montgomery, Alabama, securities firm was sentenced to 52 months in prison for paying bribes of cash, clothes and jewelry to the former mayor of Birmingham to get $7.2 million of bond and derivatives business.

William Blount, 57, a former state Democratic party chairman, pleaded guilty last August to conspiracy and bribery. He testified against former mayor Larry Langford, who was convicted in October of taking $235,000 in cash, clothes and jewelry from Blount and go-between Albert LaPierre, while president of the Jefferson County Commission. LaPierre was sentenced today to four years in prison.
On behalf of The Dark Trader:

------


"I have many apologies to make," said Blount, the former chairman of Blount Parrish & Co., in federal court in Tuscaloosa, Alabama. "My intention was to help Jefferson County, and it turned into other things."

Blount's sentence was reduced from a maximum 15 years for his cooperation. Blount was ordered to forfeit $1 million and has paid $100,000. Blount and LaPierre were ordered to pay $5.5 million combined in restitution. That amount may be adjusted pending the outcome of a lawsuit Jefferson County has filed against JPMorgan Chase & Co.

To contact the reporter on this story: Kathleen Edwards in Birmingham, Alabama, at ; Martin Z. Braun in New York at mbraun6@bloomberg.net

Find out more about Bloomberg for iPhone: http://m.bloomberg.com/iphone


Patrick M. Ambrus
Analyze Capital LLC
Managing Partner

Sauros wrote:

Those ones have a good business model
http://www.economist.com/business-finance/displaystory.cfm?story_id=15546448&fsrc=rss

"The governor sometimes compares the role of financial regulators to the
traffic police. When a car jumps a red light and suffers an accident,
he has argued, it is not a failure of the police."

An interesting way to defend regulation, however regulation still needs to be improved. Great find Sauros.

Batman wrote:

Sauros wrote:

Those ones have a good business model
http://www.economist.com/business-finance/displaystory.cfm?story_id=15546448&fsrc=rss

"The governor sometimes compares the role of financial regulators to the
traffic police. When a car jumps a red light and suffers an accident,
he has argued, it is not a failure of the police."

An interesting way to defend regulation, however regulation still needs to be improved. Great find Sauros.

one of the many issues of emerging markets... the world has a long way to go for sure... but just means more opportunity for us; opportunity to help the good shine and develop our dynamic moral discipline.

Adding to the wall of Shame: Why do these people think they can get away with this... really now people? Morals! where are your morals!?



News Headlines
Ex-Hedge Fund Manager Pleads Guilty to Ponzi Scheme
Arthur Nadel, 77, the Florida hedge fund manager who vanished in an attempt to cover up his Ponzi scheme, pleaded guilty Wednesday in Manhattan federal court.

Nadel, who had been out on bail, was sent to jail after pleading guilty in federal court to six counts of securities fraud, one count of mail fraud and eight counts of wire fraud.

Nadel could get up to 20 years in prison for each of those counts.

He was accused of bilking investors out of $162 million to fund a lavish lifestyle.

All told, almost 250 investors handed Nadel $397 million to invest based on fake returns, prosecutors claimed.

Nadel disappeared in January 2009, as investigators closed in on him. He left his wife a note, admitting wrongdoing and hinting that he might take his own life.

A few weeks after he disappeared, Nadel surrendered to Florida police.

His disappearance was reminiscent of another convicted hedge fund manager, Samuel Israel III, who faked a suicide attempt off an upstate New York bridge on the day he was due to report to prison.

Wow, from friends and family . . . thats pretty scum.


----------

Erstwhile Hedge Fund Manager Pleads Guilty
Villanova, Pa. resident Michael Alexander, 59, told investors he was a hedge fund manager investing mostly in high tech companies and eventually got about 15 investors, mostly friends and family, to put about $12 million into his fund.

Unluckily for the investors, Alexander didn't really have a hedge fund.

Alexander pleaded guilty in federal court in Philadelphia Tuesday to two counts of wire fraud and one count of money laundering for taking $7.5 million from investors through his pretend hedge fund firm Hartford Investment Inc. and using the cash for his own expenses.

From 2004 until 2009, his fraud was Alexander's only source of income, the government charged.

At his sentencing in June, Alexander faces up to 60 years in prison. He has also agreed to pay back the $7.5 million he lost for his victims.

The government has already found more than $400,000 in two TD Ameritrade accounts owned by Alexander. The government also grabbed three subdivision lots in Villanova that total about 4.4 acres.

Those lots are listed for sale at about $4.4 million on the Web site of real estate broker Prudential Fox & Roach.

Rude Mgr Banned From Fancy Hotel

A hedge fund manager got booted from an upscale Boston area hotel for his boorish behavior. Richard Grubman tossed his car keyring at a Ritz Carlton Hotel valet when Grubman was instructed to move his BMW to a different parking spot Tuesday.

His throw nailed hotel employee Ephrem Temsgen in his face. He then accused hotel staff of attempting to steal his keychain. Police arrested Grubman, who is said to have been cursing and claiming he was being abused. He pleaded not guilty of felony assault. A judge ordered Grubman, 47, to keep clear of the hotel.

Grubman is managing director of Highfields Capital Management, which opened in 1998. He is a graduate of Princeton University.

WexTrust CEO Pleads Guilty
Steven Byers, the former president and chief executive officer of
WexTrust Capital, pleaded guilty to conspiracy and securities fraud in
U.S. district court in New York on Tuesday.


Byers and others raised $9.2 million from investors with the
understanding the capital would be used to acquire seven commercial
properties, however, were never bought. Nearly all of that money was
diverted to "other purposes," an announcement from the U.S. Attorney's
office stated. Janice Oh, a spokeswoman from the U.S. Attorney's office
did not disclose where that money went. Investors were not notified of
the diversion of the money.


The indictment alleges the scheme went back as far as 2003.


Byers and Joseph Shereshevsky, WexTrust's chief operating
officer, operated a Ponzi scheme, according to the indictment. This
gave the illusion of WexTrust being a profitable firm, when in reality,
it had been operating at a loss for years as of November 2007, the
indictment stated.

The Securities and Exchange Commission alleged that the men targeted
the Orthodox Jewish community and took about $255 million from
investors in fraudulent deals.


Byers, 47, pleaded guilty to the two felonies pursuant to a
plea agreement with government. He faces a maximum sentence of 25 years
in prison. According to the plea agreement, the sentencing range for
Byers is between 151 months and 188 months. Asked what the government
would recommend as far as punishment, Oh said that wasn't made public
yet, and sentencing was "ultimately up to the judge," who has the
authority to impose punishment above or below the recommended range.


A message left for Barry Zone, the attorney representing Byers, was not returned.


Byers has also agreed to forfeit $9.2 million and restitution.
He faces possible criminal fines of up to twice the gross gain or loss
derived from the money he took from investors. Byers will be sentenced
on Sept. 13 in New York.


Shereshevsky's trial is set to begin shortly. His pretrial
conference is scheduled for Wednesday afternoon in Manhattan Federal
Court, Oh said.


According to his WexTrust indictment, Shereshevsky has two
prior felony convictions, including a guilty plea on or about 1994 to
one count of conspiracy to commit bank fraud.

Snapman wrote:

WexTrust CEO Pleads Guilty
Steven Byers, the former president and chief executive officer of
WexTrust Capital, pleaded guilty to conspiracy and securities fraud in
U.S. district court in New York on Tuesday.


Byers and others raised $9.2 million from investors with the
understanding the capital would be used to acquire seven commercial
properties, however, were never bought. Nearly all of that money was
diverted to "other purposes," an announcement from the U.S. Attorney's
office stated. Janice Oh, a spokeswoman from the U.S. Attorney's office
did not disclose where that money went. Investors were not notified of
the diversion of the money.


The indictment alleges the scheme went back as far as 2003.


Byers and Joseph Shereshevsky, WexTrust's chief operating
officer, operated a Ponzi scheme, according to the indictment. This
gave the illusion of WexTrust being a profitable firm, when in reality,
it had been operating at a loss for years as of November 2007, the
indictment stated.

The Securities and Exchange Commission alleged that the men targeted
the Orthodox Jewish community and took about $255 million from
investors in fraudulent deals.


Byers, 47, pleaded guilty to the two felonies pursuant to a
plea agreement with government. He faces a maximum sentence of 25 years
in prison. According to the plea agreement, the sentencing range for
Byers is between 151 months and 188 months. Asked what the government
would recommend as far as punishment, Oh said that wasn't made public
yet, and sentencing was "ultimately up to the judge," who has the
authority to impose punishment above or below the recommended range.


A message left for Barry Zone, the attorney representing Byers, was not returned.


Byers has also agreed to forfeit $9.2 million and restitution.
He faces possible criminal fines of up to twice the gross gain or loss
derived from the money he took from investors. Byers will be sentenced
on Sept. 13 in New York.


Shereshevsky's trial is set to begin shortly. His pretrial
conference is scheduled for Wednesday afternoon in Manhattan Federal
Court, Oh said.


According to his WexTrust indictment, Shereshevsky has two
prior felony convictions, including a guilty plea on or about 1994 to
one count of conspiracy to commit bank fraud.

I find it very interesting that in light of Madoff, more and more schemes to screw investor and employees have leaked out. Was regulation really lax before, or did the media not care to cover such schemers until Madoff?

Ex-hedge fund manager John Lawton says he shouldn't have to pay the more than $4.3 million that the Securities and Exchange Commission is seeking as disgorgement for his scam. Lawton, 35, pleaded guilty last year in federal court defrauding investors in his Minnesota-based hedge fund Paramount Partners.

In its civil case, the SEC is seeking more than $3 million from Lawton himself, and more than $1 million from Lawton's management company, Crossroad Capital Management, according to court documents.

But Lawton claimed that his firm was legitimate. Any losses were due to market losses, Lawton said in his court filing, not theft. Not only that, Lawton said, but since he had money in the fund, he also lost money.

"Currently I live with my parents and have no substantial assets," Lawton said in his affidavit. Lawton is out on bail, awaiting sentencing in his criminal case.

Soros Must Pay $2.5M Fine

Soros Fund Management (SFM) must reimburse $2.5 million because it traded stock in Hungary-based OTP Bank unlawfully, a market regulator ruled.

Market watchdog PSZAF first meted out its fine in March 2009. SFM appealed, but a court in Hungary ruled in favor of PSZAF.

In October 2008, as the global financial crisis was exacerbating, the hedge fund traded OTB Bank just before market close-a trade which sent stock in the bank down. Hungary was the first country in the European Union to turn to the International Monetary Fund for financial relief.

George Soros, hedge fund legend and founder of Soros Fund Management, was born in Hungary. He was 13 when Nazi Germany took control of the country.

Soros has been an outspoken critic of EU policy, questioning if the union can remain intact.

Batman wrote:

Soros Must Pay $2.5M Fine

Soros Fund Management (SFM) must reimburse $2.5 million because it traded stock in Hungary-based OTP Bank unlawfully, a market regulator ruled.

Market watchdog PSZAF first meted out its fine in March 2009. SFM appealed, but a court in Hungary ruled in favor of PSZAF.

In October 2008, as the global financial crisis was exacerbating, the hedge fund traded OTB Bank just before market close-a trade which sent stock in the bank down. Hungary was the first country in the European Union to turn to the International Monetary Fund for financial relief.

George Soros, hedge fund legend and founder of Soros Fund Management, was born in Hungary. He was 13 when Nazi Germany took control of the country.






Soros has been an outspoken critic of EU policy, questioning if the union can remain intact.

I knew you would like this one! Hungary *tsk *tsk, yea GS and soros and Paulson (HF paulson not GS paulson) all getting crap form the SEC these days...

Batman wrote:

Soros Must Pay $2.5M Fine

Soros Fund Management (SFM) must reimburse $2.5 million because it traded stock in Hungary-based OTP Bank unlawfully, a market regulator ruled.

Market watchdog PSZAF first meted out its fine in March 2009. SFM appealed, but a court in Hungary ruled in favor of PSZAF.

In October 2008, as the global financial crisis was exacerbating, the hedge fund traded OTB Bank just before market close-a trade which sent stock in the bank down. Hungary was the first country in the European Union to turn to the International Monetary Fund for financial relief.

George Soros, hedge fund legend and founder of Soros Fund Management, was born in Hungary. He was 13 when Nazi Germany took control of the country.

Soros has been an outspoken critic of EU policy, questioning if the union can remain intact.

I read a while ago a quite interesting Soros' biography by Slater. The guy wrote something like "Soros is probably the greatest speculator ever and he hadn't been in jail even one single day" in the same way as if he wrote : "Look! This guy is the ski world champion and he NEVER fell"


LOL ~ hilarious analogy ~ though I surely hope that falling down doesn't equate to going to jail

And so one more of the tiger cubs fall.... bill hwang... hmm, either that these regulators are on a power trip and having a hay day...



-----



HK Regulator Seeks Ban on Tiger Asia
Hong Kong's securities regulator is going after Tiger Asia, the Asia-focused hedge fund firm that started up under Julian Robertson's aegis, for alleged insider trading.

The Securities and Futures Commission said in a statement Monday it was seeking a court order to ban New York-based Tiger Asia from trading in all Hong Kong listed securities and derivatives as allegations came out about insider trading in shares of Bank of China.

This is the first time the SFC has sought a ban against trading, the regulator said.

The Hong Kong regulator is seeking to freeze $8.6 million of Tiger Asia's assets, which it calculates was the notional amount the hedge fund firm realized from the trades.

The SFC has already tried to freeze $29.9 million related to an August 2009 proceeding for allegations about inside trading in a share placement for China Construction Bank.

Also named in the proceedings were senior executives of Tiger Asia, Bill Hwang, Raymond Park and William Tomita.

Tiger Asia was founded in 2001 by Hwang with startup funds from Tiger Management.

Tiger Asia did not immediately return a call seeking comment.

Galleon Group founder Raj Rajaratnam, says wiretap evidence the government intends to use against him in his alleged $20 million insider trading case should be suppressed because much of it was discussions of publicly available information.

Not only that, but Rajaratnam turned out to be wrong on some of the predictions he was making about stock moves, the defense argued.

Defense attorneys filed their motion to suppress the evidence in Manhattan federal court Friday.

In one of the examples given in the motion to dismiss, defense attorneys quote informant Roomy Khan as saying "What's going on with earnings this season? Are you hearing anything on Intel or -- "

To which Rajaratnam replied, "Intel, I think, will beat the current estimates by, they'll be up 9 to 10 percent and then guide down 8 percent."

Later in the same tape, Rajaratnam was recorded as telling Khan he was out of Intel, concluding, "They're a f[***]ing pain in the ass stock."

Not only that, but the attorneys noted that a number of the predictions Rajaratnam made about Intel share movement was wrong, according to the motion.

The day after this taped phone calls, Intel announced its fourth quarter earnings. The company's revenues were up only 6% to $10.7 billion in the fourth quarter of 2007 over the third quarter.

Rajaratnam is also arguing that wiretap surveillance is not authorized in insider trading cases.

Batman wrote:

Galleon Group founder Raj Rajaratnam, says wiretap evidence the government intends to use against him in his alleged $20 million insider trading case should be suppressed because much of it was discussions of publicly available information.

Not only that, but Rajaratnam turned out to be wrong on some of the predictions he was making about stock moves, the defense argued.

Defense attorneys filed their motion to suppress the evidence in Manhattan federal court Friday.

In one of the examples given in the motion to dismiss, defense attorneys quote informant Roomy Khan as saying "What's going on with earnings this season? Are you hearing anything on Intel or -- "

To which Rajaratnam replied, "Intel, I think, will beat the current estimates by, they'll be up 9 to 10 percent and then guide down 8 percent."

Later in the same tape, Rajaratnam was recorded as telling Khan he was out of Intel, concluding, "They're a f[***]ing pain in the ass stock."

Not only that, but the attorneys noted that a number of the predictions Rajaratnam made about Intel share movement was wrong, according to the motion.

The day after this taped phone calls, Intel announced its fourth quarter earnings. The company's revenues were up only 6% to $10.7 billion in the fourth quarter of 2007 over the third quarter.

Rajaratnam is also arguing that wiretap surveillance is not authorized in insider trading cases.

lol, as if perfect forecasting is possible given insider information, all of this is irrelevant if he did really use insider information, as long as he was on the right side and made any profit, its still using insider trading information, doesn't matter if he was off a few %

Snapman wrote:

Batman wrote:

Galleon Group founder Raj Rajaratnam, says wiretap evidence the government intends to use against him in his alleged $20 million insider trading case should be suppressed because much of it was discussions of publicly available information.

Not only that, but Rajaratnam turned out to be wrong on some of the predictions he was making about stock moves, the defense argued.

Defense attorneys filed their motion to suppress the evidence in Manhattan federal court Friday.

In one of the examples given in the motion to dismiss, defense attorneys quote informant Roomy Khan as saying "What's going on with earnings this season? Are you hearing anything on Intel or -- "

To which Rajaratnam replied, "Intel, I think, will beat the current estimates by, they'll be up 9 to 10 percent and then guide down 8 percent."

Later in the same tape, Rajaratnam was recorded as telling Khan he was out of Intel, concluding, "They're a f[***]ing pain in the ass stock."

Not only that, but the attorneys noted that a number of the predictions Rajaratnam made about Intel share movement was wrong, according to the motion.

The day after this taped phone calls, Intel announced its fourth quarter earnings. The company's revenues were up only 6% to $10.7 billion in the fourth quarter of 2007 over the third quarter.

Rajaratnam is also arguing that wiretap surveillance is not authorized in insider trading cases.

lol, as if perfect forecasting is possible given insider information, all of this is irrelevant if he did really use insider information, as long as he was on the right side and made any profit, its still using insider trading information, doesn't matter if he was off a few %

Well said.

Typically, we tend to highlight the bad guys and bad morality, but so often do we forget good exist in this world! Today's post will focus on the positivity CSR and Charity can bring from the HF world world. Ok, I don't know about the bad stuff of what goes on behind scenes or if they can use their charity for tax purposes, but in the end a good amount of people could benefit from 88 million dollars, in a utilitarian perspective aside from right and wrongs.


Taken from HFN Daily
------------------------



At Robin Hood Gala, A Record $88M Night
The Robin Hood Foundation gala, a star studded Wall Street fundraiser held to help fight poverty, raised a record $88 million on Monday, according to a report.

The gala, held at the Jacob K. Javits Convention Center in New York, attracted 3,600 people and featured Hollywood actress Uma Thurman, "Wall Street" leading man Michael Douglas and New York Jets head coach Rex Ryan.

The gala featured a live acoustic performance by Sting and a standup routine by Jimmy Fallon.

The Robin Hood Foundation was founded by hedge fund legend Paul Tudor Jones. David Einhorn, Steven Cohen as well as Jones sit on its board. So do Hollywood mogul Harvey Weinstein and actress Gwyneth Paltrow.

The $88 million take surpassed a then record $72.7 million haul in 2009.

Bloomberg reported on the gala.

Great find snapman. It is true that most wall street alumn do not get enough credit for raising money for charitable foundations and like work. If we had the guacamole I would have been there harrassing Rex Ryan. Lol.

Hedge Fund Manager Arrested, Claimed Ties to Belgian Royalty
A hedge fund manager who claimed he was related to Belgian royalty was arrested and charged with securities fraud.

Guy Albert de Chimay, 47, was arrested in North Carolina Friday and charged with fraud by the Manhattan District Attorney for allegedly stealing millions from investors.

As part of marketing his investment firm, Chimay Capital, Chimay told investors he was part of the storied Belgian royal family that shares its name with Chimay beer, which is brewed by Trappist monks on land granted to them in 1850 by the Chimay family, according to the SEC complaint filed Friday.

The current head of the Chimay family, the Prince de Chimay, is the 22nd in a line of princes.

According to the SEC complaint filed against Chimay Friday, the hedge fund manager allegedly stole $6 million from investors.

Chimay claimed his New York-based firm had $200 million in assets under management and that it managed hedge funds as well as making bridge loans, the SEC said.

But, rather than using the money to make loans, Chimay simply stole it to fund an "extravagant lifestyle," the SEC alleged. Funds diverted for personal use included $600,000 for the law firm representing Chimay in his divorce, massive credit card bills and Chimay Capital's rent and payroll, according to court documents.

Investors in Chimay's funds appear not to be the type of elderly retired people many Ponzi scam artists target.

Rather, they appear to be high net worth individuals or institutions, given the large sums of money involved.

For example, one investor put $2 million into Chimay's business in October 2008 and then gave him another $2 million in January 2009, the SEC claimed.

Chimay's personal and business phone numbers were reported as changed or disconnected with no forwarding number.
Click Here To Read Comments on This Story or Submit Your Own



VIA HFN DAILY

Often we do not Post the good deeds and morals. Mr. Buffer sir, I tip my hat to thee and applaud your efforts. A very noble cause indeed.



-----

My philanthropic pledge



By Warren BuffettJune 16, 2010: 8:06 AM ET


FORTUNE -- In 2006, I made a commitment to gradually give all of my Berkshire Hathaway stock to philanthropic foundations. I couldn't be happier with that decision.

Now, Bill and Melinda Gates and I are asking hundreds of rich Americans to pledge at least 50% of their wealth to charity. So I think it is fitting that I reiterate my intentions and explain the thinking that lies behind them.

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First, my pledge: More than 99% of my wealth will go to philanthropy during my lifetime or at death. Measured by dollars, this commitment is large. In a comparative sense, though, many individuals give more to others every day.

Millions of people who regularly contribute to churches, schools, and other organizations thereby relinquish the use of funds that would otherwise benefit their own families. The dollars these people drop into a collection plate or give to United Way mean forgone movies, dinners out, or other personal pleasures. In contrast, my family and I will give up nothing we need or want by fulfilling this 99% pledge.

Moreover, this pledge does not leave me contributing the most precious asset, which is time. Many people, including -- I'm proud to say -- my three children, give extensively of their own time and talents to help others. Gifts of this kind often prove far more valuable than money. A struggling child, befriended and nurtured by a caring mentor, receives a gift whose value far exceeds what can be bestowed by a check. My sister, Doris, extends significant person-to-person help daily. I've done little of this.

What I can do, however, is to take a pile of Berkshire Hathaway stock certificates -- "claim checks" that when converted to cash can command far-ranging resources -- and commit them to benefit others who, through the luck of the draw, have received the short straws in life. To date about 20% of my shares have been distributed (including shares given by my late wife, Susan Buffett). I will continue to annually distribute about 4% of the shares I retain. At the latest, the proceeds from all of my Berkshire shares will be expended for philanthropic purposes by 10 years after my estate is settled. Nothing will go to endowments; I want the money spent on current needs.

This pledge will leave my lifestyle untouched and that of my children as well. They have already received significant sums for their personal use and will receive more in the future. They live comfortable and productive lives. And I will continue to live in a manner that gives me everything that I could possibly want in life.

Some material things make my life more enjoyable; many, however, would not. I like having an expensive private plane, but owning a half-dozen homes would be a burden. Too often, a vast collection of possessions ends up possessing its owner. The asset I most value, aside from health, is interesting, diverse, and long-standing friends.

My wealth has come from a combination of living in America, some lucky genes, and compound interest. Both my children and I won what I call the ovarian lottery. (For starters, the odds against my 1930 birth taking place in the U.S. were at least 30 to 1. My being male and white also removed huge obstacles that a majority of Americans then faced.)

My luck was accentuated by my living in a market system that sometimes produces distorted results, though overall it serves our country well. I've worked in an economy that rewards someone who saves the lives of others on a battlefield with a medal, rewards a great teacher with thank-you notes from parents, but rewards those who can detect the mispricing of securities with sums reaching into the billions. In short, fate's distribution of long straws is wildly capricious.

The reaction of my family and me to our extraordinary good fortune is not guilt, but rather gratitude. Were we to use more than 1% of my claim checks on ourselves, neither our happiness nor our well-being would be enhanced. In contrast, that remaining 99% can have a huge effect on the health and welfare of others. That reality sets an obvious course for me and my family: Keep all we can conceivably need and distribute the rest to society, for its needs. My pledge starts us down that course.

For the full story behind the pledge, who is signing on, and what the drive might mean, read "The $600 billion challenge."

Via HFN DAILY via US Attorney's office


Hedge Fund Fraudsters Sentenced
Alan Fishman and Daniel Ledven, two confessed hedge fund fraudsters, were sentenced for their crimes.

Fishman received 37 months in prison and Ledven was given 57 months in prison, the U.S. Attorney's office for the Southern District of New York announced. Start dates for their sentences have not been determined yet, Janice Oh, a spokeswoman from the U.S. Attorney's office, said.

Fishman was the owner and president of A.R. Capital Group from 2002 until February 2006, and Ledven managed and operated the supposed hedge fund firm.

During this time, both men conspired with others to defraud $20 million from investors. They sent an offering memorandum to investors falsely stating the fund was going to invest in international real estate companies in addition to investing in active, leveraged trading.

Fishman and Ledven also sent materials falsely stating whether the fund would be audited and contained lies about their biographical information.

"In addition, Ledven sent false and misleading monthly account statements to investors that showed large, positive returns on their investments," the announcement stated.

Of the $20 million taken in by Fishman and Ledven, roughly $18 million of this capital was wired to a variety of bank accounts in the Ukraine, the U.S. Attorney's office said.

Ledven pleaded guilty to one count of conspiring to commit securities fraud on March 2 and Fishman pleaded guilty to the same two days later. Ledven was ordered to forfeit $160,000 and Fishman was told to forfeit $213,693 representing the proceeds each obtained from their crimes.

Ledven, 38, resides in Cresskill, N.J. and Fisman, 50, lives in Brooklyn, N.Y.

Fishman and Ledven were accused of conspiring with two other people in the scam, including Gary Gelman, Fisman's nephew.

The other person accused of being in on the scam is Edward Veisman, who pleaded guilty to the same single count of conspiring to commit securities fraud on March 1. He is scheduled to be sentenced on June 25 and is facing a maximum sentence of five years in prison, Oh said.

Gelman's whereabouts are unknown, according to Oh.

Fishman, who originally pleaded not guilty to the charges, was a limousine driver. The government said it was this job driving Wall Street bigwigs that gave him access to investors for his scam.

Go to the Announcement from the U.S. Attorney's Office

Man Madoff really messed things up for the HF industry


------


Government Going After $5M in Madoff Employee Assets
Federal authorities are going after almost $5 million worth in assets they claim were wrongfully siphoned off by two employees who worked for Bernard Madoff's Ponzi scam for years.

The U.S. Attorney's office filed civil forfeiture actions against Annette Bongiorno and Joann Crupi who worked in the back office for Bernard L. Madoff Investment Securities, each for more than 25 years.

The cases come as the women's boss, Madoff chief financial officer Frank DiPascali, was released from jail on bail. He had been in jail since he pleaded guilty in August.

DiPascali has been cooperating with the government.

Bongiorno supervised the back office staff, overseeing investor account statements while Crupi handled client funds. But Bongiorno knew the statements were fabricated and Crupi was aware that Madoff's redemption requests bore no relation to the business' cash on hand, the U.S. Attorney alleged.

Neither woman has been charged with a crime.

Despite their awareness that Madoff's business was a sham, Bongiorno and Crupi collected substantial pay checks and bonuses, authorities allege. The civil forfeiture actions were started to seize personal assets that the government claims could be traced to money taken from investors.

DiPascali, who was the women's supervisor, pleaded guilty last year and has been cooperating with the government.

In Bongiorno's case, the government is seeking to forfeit approximately $1.1 million in cash, a 2005 Bentley Continental, a 2007 Mercedes Benz and about $1.3 million paid toward a luxury condominium, according to court documents.

Crupi, the U.S. Attorney alleged, put $2.225 million toward a house in Mantoloking, N.J., an exclusive beach community of high-priced homes.

Crupi and Bongiorno could not be reached for comment.

Nine More Charged in SI Hedge Fund Fraud Case
Nine people who acted as the sales force for an allegedly fraudulent hedge fund firm were charged in a federal criminal case Monday.

The latest indictment brings to 14 the number of people charged in the criminal case against Kenneth Marsh, 43, and his Staten Island firm Gryphon Holdings.

Prosecutors alleged that investors took in $17.5 million from unsuspecting investors, mostly elderly retirees.

One of the new people charged in the case is Michael Scarpaci, 34, who is facing separate charges of managing gambling operations for the Gambino mob family.

The sales force used high pressure tactics to get customers to buy investment newsletter subscriptions priced from $99 to $1 million, federal prosecutors charged, as well as specific stock advice for from $1,000 to $50,000.

Marsh also told investors he ran a hedge fund with assets under management of more than $1.4 billion and that his top traders were alumnae of Lehman Bros. and Goldman Sachs, none of which was true the government claimed. The firm's Web site even boasted a fictitious endorsement from George Soros.

The defendants pleaded not guilty to the charges. All were released on bail.

If convicted, each defendant faces up to 20 years in jail.

Attorneys for Marsh and Scarpaci could not be immediately reached for comment.

When all else fails, blame Goldman...Cassano is not worth anyone's time.

If one is interested in Cassano and his former FP division at AIG I suggest picking up Lowenstein's The End of Wall Street and Sorkin's Too Big to Fail.

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FT.com:

Joseph Cassano, the former AIG executive whose financial products unit pushed the company to the brink of collapse, broke his silence on Wednesday to allege that Goldman Sachs had made costly demands on the insurer during the financial crisis.

Mr Cassano said AIG was surprised by the size of collateral calls made by Goldman on credit insurance – known as credit-default swaps (CDS) – the insurer wrote on subprime mortgage-related securities.

AIG Financial Products, which Mr Cassano ran from 2002 until early 2008, housed the CDS and other complex derivatives that became a chief culprit in the company’s near collapse. The precise causes of AIG’s problems, and the insurer’s relationships with counterparties such as Goldman, remain a focal point for crisis investigators.

In testimony before the Financial Crisis Inquiry Commission, Mr Cassano said his unit stopped insuring securities backed by subprime loans in February 2006 and “remained confident in our risk analysis for the existing deals”. “I think there would have been few, if any, realised losses on the CDS contracts had they not been unwound in the bail-out,” he said. “As you know, a decision was taken after my departure from AIG-FP to unwind the CDS contracts due largely, so far as I can tell, to the proliferation of collateral calls.”

No counterparty was as aggressive in seeking collateral as Goldman, said Mr Cassano, noting how the bank’s July 2007 collateral call caught AIG off guard. “We were surprised at the magnitude of the call,” he said. “It went from nothing to $1.8bn.” Mr Cassano said he eventually persuaded Goldman to reduce its demands to $450m. But in October of 2007, he said he received word from Mike Sherwood, co-head of Goldman’s European operations, alerting him that the bank would soon demand another $3bn. “That was when their response was, ‘We think the market is coming our way at this time’,” Mr Cassano said. When asked if he believed the bank was “out to get” AIG, Mr Cassano said he did not know “what was going on on Goldman’s side”.

But he said that Goldman agreed repeatedly to lower its collateral calls, and may have continued to negotiate had he remained with AIG.

Martin Sullivan, AIG’s chief executive from 2005 until 2008, told the FCIC that the “first time” he became aware of the CDS portfolio and the collateral calls was in 2007.

Phil Angelides, FCIC chairman, said: “That’s stunning.”

Gary Cohn, Goldman’s president, told the FCIC his bank’s collateral calls were guided by risk-management systems that had prompted the bank to mark down its mortgage-backed securities. Goldman’s marks, he said, were based on the going prices of similar assets. “We did not,” he said, “call for collateral because we anticipated the eventual scale of AIG’s problems.”

Mr Cohn dismissed allegations the bank bet against its clients by buying credit protection on bonds they held. Of $14.5bn in collateralised-debt obligations Goldman underwrote after the start of the crisis, Mr Cohn said, the bank bought protection on about 1 per cent. “We did not ‘bet against our clients’, and the numbers underscore this fact,” he said. Federal prosecutors and securities regulators recently ended inquiries into Mr Cassano and his unit.

Snapman wrote:

Nine More Charged in SI Hedge Fund Fraud Case
Nine people who acted as the sales force for an allegedly fraudulent hedge fund firm were charged in a federal criminal case Monday.

The latest indictment brings to 14 the number of people charged in the criminal case against Kenneth Marsh, 43, and his Staten Island firm Gryphon Holdings.

Prosecutors alleged that investors took in $17.5 million from unsuspecting investors, mostly elderly retirees.

One of the new people charged in the case is Michael Scarpaci, 34, who is facing separate charges of managing gambling operations for the Gambino mob family.

The sales force used high pressure tactics to get customers to buy investment newsletter subscriptions priced from $99 to $1 million, federal prosecutors charged, as well as specific stock advice for from $1,000 to $50,000.

Marsh also told investors he ran a hedge fund with assets under management of more than $1.4 billion and that his top traders were alumnae of Lehman Bros. and Goldman Sachs, none of which was true the government claimed. The firm's Web site even boasted a fictitious endorsement from George Soros.

The defendants pleaded not guilty to the charges. All were released on bail.

If convicted, each defendant faces up to 20 years in jail.

Attorneys for Marsh and Scarpaci could not be immediately reached for comment.

How much of this was intentional? I can't say. However, as managers we need to make sure we know how our respective clients' Cash Flows are generated.

God gives high returns… kinda…



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Church Hedge Fund Fraud Mastermind Gets Jail
A Queens, N.Y. church member who took more than $10 million from investors, mostly fellow parishioners and then lied to them when he lost their money, received a prison sentence of five years Friday.

Isaac Ovid, 29, was sentenced in Brooklyn federal court after pleading guilty to one count of conspiracy to commit securities fraud in March.

The five-year prison term was the maximum Ovid could have received, according to his attorney, Brian King.

Prosecutors charged that Ovid, who was a youth minister at the Local Christian Assembly Church in Forest Hills, Queens, lost more than $10 million, mostly on behalf of church members, in his hedge fund firm Jadis Capital.

The picture painted by Ovid's attorneys in a letter to the court, was of a young man who fancied himself a hedge fund manager, but didn't have the experience or ability to turn investor money into returns.

Within two weeks of launching the fund in May 2005, Ovid, who served as the fund's trader, lost more than $2 million, according to court documents.

Ovid, along with Jadis principals Joseph Jonathan Coleman, Aaron Riddle, Robert Riddle and Timothy Smith also used investor money to furnish Jadis Capital offices and to buy things like luxury cars, in order to give investors the impression they were successful.

The other four Jadis executives were also members of the same Queens church. Coleman is the son of the church's pastor, who has since retired. The four men have pleaded guilty and are awaiting sentencing.

Related Stories

Snapman wrote:

God gives high returns… kinda…



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Church Hedge Fund Fraud Mastermind Gets Jail
A Queens, N.Y. church member who took more than $10 million from investors, mostly fellow parishioners and then lied to them when he lost their money, received a prison sentence of five years Friday.

Isaac Ovid, 29, was sentenced in Brooklyn federal court after pleading guilty to one count of conspiracy to commit securities fraud in March.

The five-year prison term was the maximum Ovid could have received, according to his attorney, Brian King.

Prosecutors charged that Ovid, who was a youth minister at the Local Christian Assembly Church in Forest Hills, Queens, lost more than $10 million, mostly on behalf of church members, in his hedge fund firm Jadis Capital.

The picture painted by Ovid's attorneys in a letter to the court, was of a young man who fancied himself a hedge fund manager, but didn't have the experience or ability to turn investor money into returns.

Within two weeks of launching the fund in May 2005, Ovid, who served as the fund's trader, lost more than $2 million, according to court documents.

Ovid, along with Jadis principals Joseph Jonathan Coleman, Aaron Riddle, Robert Riddle and Timothy Smith also used investor money to furnish Jadis Capital offices and to buy things like luxury cars, in order to give investors the impression they were successful.

The other four Jadis executives were also members of the same Queens church. Coleman is the son of the church's pastor, who has since retired. The four men have pleaded guilty and are awaiting sentencing.

Related Stories

What a sad story. Part of me actually feels bad for the guy. However, you cannot defraud investors in this manner.

Maybe I should go to church more often Snapman.

Moffat Pleads Ex-Hedge Fund Exec Manipulated Him
A former IBM executive begged a court not to send him to jail, claiming that his affair with an ex-hedge fund analyst caused him to put aside his principles and pass along insider information.

Robert Moffat, 53, alleged in court papers that Danielle Chiesi, a former executive with $1 billion hedge fund firm New Castle, manipulated him to get information she could use to her employer's advantage.

Moffat admitted he had an affair with Chiesi although he is a married man with four children.

During the affair, Moffat said he passed on insider information about his employer, as well as technology companies AMD and Lenovo.

Moffat also said he didn't profit from the information he gave to Chiesi.

Prosecutors, however, said Moffat deserved six months in jail because he violated IBM and its shareholders trust.

"Moffat's crimes were surely committed out of arrogance and a misguided belief that he could never be caught," prosecutors said in court papers.

Chiesi has also been charged in the $20 million insider trading case, which prosecutors have said is the largest involving a hedge fund firm. She pleaded not guilty.

Galleon Group founder Raj Rajaratnam has also pleaded not guilty in the same case.

Ex-Moore Cap Trader Under CFTC Scrutiny: WSJ
A report in the Wall Street Journal Friday said an ex-Moore Capital Managemente trader who earned the hedge fund firm a $25 million CFTC fine is himself, under regulatory scrutiny.

That trader is Christopher Pia, The Journal report said, once the darling of Moore Capital founder Louis Bacon, now managing his own hedge fund firm.

In April, the CFTC announced that Moore Capital settled a case which alleged that an unidentified trader with the firm tried to manipulate platinum and palladium futures.

The CFTC claimed that from November 2007 through May 2008, the trader engaged in a practice called "banging the close," meaning he built up a substantial position toward the end of the trading day and then offset it.

Moore Capital settled the case without admitting or denying the allegations and paid a $25 million fine.

Although that ended the case for Moore Capital, the CFTC continues to investigate Pia, The Journal said.

Pia was with Bacon for 18 years, but left in late 2008 to start up his own hedge fund firm, Pia Capital Management. The firm, headquartered in Greenwich, Conn., launched in June 2009 with more than $400 million in assets under management, according to regulatory filings.

Pia's firm is not the subject of the CFTC investigation.

A spokesman for Pia said he wasn't commenting on the report. Moore Capital did not respond to a request for comment.

HFN:

The Disney insider trading scheme that included one of the conspirators meeting undercover agents he thought were hedge fund traders to sell them has claimed its second guilty plea.

Bonnie Hoxie, 34, pleaded guilty to fraud in Manhattan federal court Tuesday. Hoxie, a former assistant to Disney's head of corporate communications, Zenia Mucha, passed confidential information about the company to her boyfriend, Yonni Sebbag.

She faces up to 10 months in prison, according to court documents. Sebbag pleaded guilty last month and faces up to 33 months in prison. The two would-be scam artists sent e-mails to about 20 hedge funds, offering to sell them non-public information about Disney's plans.

Instead of taking them up on it, the hedge fund firms turned the two into the FBI. A sting operation was put into place and Sebbag and Hoxie were nabbed. Had Hoxie gone to trial, she would have faced up to 20 years in prison.

Hedge Fund Fraud Sentenced to Almost 6 Years
A Minnesota hedge fund manager who convinced more than 48 investors to invest more than $8 million by overstating the success of his fund was sentenced Wednesday to almost six year in prison.

John Lawton, 35, who, at one point, falsely told the Securities and Exchange Commission that his Minneapolis hedge fund firm Paramount Partners had $12 million in assets, was sentenced to 70 months by federal court judge Paul Magnuson.

Lawton pleaded guilty to one count of mail fraud and one count of making a false statement to the SEC in November.

At sentencing, Judge Magnuson told Lawton that even if his fund lost money in the stock market, it didn't change the fact of his crime. "No one controls the market, but the reality is you didn't tell the truth," Magnuson said. "When you lied, you stole. It's as simple as that."

In his effort to fend off a disgorgement action by the SEC, Lawton claimed that his firm was legitimate and any losses were due to the markets, rather than theft.

Settlement talks have taken place between the SEC and Lawton, but the two sides have not come to an agreement, according to court records.

The Lawton sentence came soon after sentences were meted out in Minnesota courtrooms to two other hedge fund managers.

Last week Gregory Bell was sentenced to six years in prison for his role in funneling money to Tom Petters' asset-based lending Ponzi scheme through his hedge fund Lancelot Investment Management and then covering it up.

Bell's chief financial officer, Harold Katz received a sentence of a year-and-a-day for his actions in the Lancelot-Petters scheme.

Nadel Gets 14 Years in Prison
Former Florida hedge fund manager Arthur Nadel was sentenced to 14 years in prison in Manhattan federal court Thursday.

Dubbed the "mini-Madoff" for his Ponzi scheme that persuaded 390 investors to give him more than $330 million, Nadel was subject to a lot of the same kind of excoriation from those who trusted him with their money at his sentencing.

"I assume you are a narcissistic psychopath . . . who had little success in life until you founded your fraudulent funds," Illinois businessman Michael Sullivan told him in court, according to Reuters.

Nadel, 77, has been in jail since he pleaded guilty in February to the scheme.

Like Madoff, Nadel told investors, many of them elderly, that he had consistent-double-digit returns. In reality, his trading lost money, plus he stole funds to support a lavish lifestyle that included buying himself several private planes, according to prosecutors.

Losses to investors were approximately $168 million, the government said.

Besides his prison term, Nadel was ordered to forfeit $162 million and Florida, North Carolina and Georgia real estate, five airplanes and one helicopter.

At his sentencing, Nadel expressed remorse, according to Reuters. He said that he re-read the letters victims sent to the court until the victims' "anger and outrage became my own against myself."