Daily Archives: December 17, 2008
Obama names Mary Schapiro to replace Cox. Back when I represented investors against Wall Street firms lawyers on my side of the fence thought that Schapiro, then head of NASDQ, was a bit too cozy with the firms. But then again, we had our own axe to grind and she was representing the members who paid her salary, so she’ll probably be fine. Certainly she’ll be better than her immediate predecessor, Cox. And as the events of the past week show, being a former head of the NASD is a guarantee of moral integrity and fair dealing, so that’s a relief!
Business Week doesn’t think much of their prospects. Those that survive, it predicts, will no longer have credit for the kind of leverage that made them all rich and their clients won’t pay 20% of the profit as fees. Maybe right, maybe wrong but if right, Greenwich’s title as “Hedge Fund Capital of the World” won’t make no never mind.
But I don’t see how he walks from the Madoff fiasco with a single asset intact. When Madoff was first arrested and FGG’s participation revealed, I checked to see what FGG promised about due diligence. It didn’t look good for the firm, and I said so. Certainly, were I still plying my trade hunting wicked stock brokers and discovered that the primary evil-doer had no assets, I’d have looked to his employer or in this case, anyone who directed my client to him, to recover lost monies. I wrote about all that earlier last week but here’s no one’s favorite Wall Street crook, Henry Blogett, who’s done the same job. It’s easier to link to him than to dig up my previous posts so try this.
Here’s how Fairfield describes its initial manager research process–the process by which Fairfield screens a handful of super-promising managers from the hundreds it meets each year:
FGG is introduced to several hundred potential managers in the course of each year. A relevant subset of these leads are pursued and background information on promising potential relationships is collected and shared among FGG’s professionals for initial assessment.
The nature of FGG’s manager transparency model employs a significantly higher level of due diligence work than that typically performed by most fund of funds and consulting firms. This model requires a thorough understanding of a manager’s business, staff, operational practices, and infrastructure.
[That's good to hear. So it will be interesting to see how FGG explains why Madoff's strip-mall based accountant and tiny operating infrastructure satisfied its requirements. Also, if FGG really developed a "thorough understanding of the business, staff, and operational practices," it may have been the only firm on earth to do so. Even people who worked for Madoff claim to have no idea what he was up to.]
At this stage, FGG begins qualitative and quantitative reviews of a manager’s past performance obtained from independent sources, as well as a series of manager interviews and reference calls.
[How many of the people who wrote to the SEC saying Madoff was a fraud did FGG talk to? What "independent sources" did they use to examine the returns. Madoff's accountant?]
Through this process, a preliminary assessment evolves of a manager’s business and investment practices. Particular attention is paid to the extent to which each manager’s controls are reasonably suited to maintain operational, market, and credit risks at an appropriate level and as represented by the manager.
During this period, FGG personnel also have an opportunity to evaluate a manager’s attitudes and receptiveness (as opposed to his proclaimed intention) towards providing FGG with full transparency of its security level trading activity and access to its investment thought process.
[This is the real key. Some folks who looked at Madoff's trading strategy in detail say they could not understand or replicate his returns. We look forward to reading the documents that made FGG comfortable that Bernie's trading strategy wasn't just some black box that spit out attractive-looking numbers on a page]
This close level of communication and access is the cornerstone of FGG’s ongoing relationship with the manager, without which a business relationship with FGG would not exist.
And on and on. Remember, FGG supposedly put Madoff through this extensive examination before ever entrusting him with a penny, let alone $7.5 billion, 100% of its Sentry Fund. And charged a huge fee for this screening. How will Tucker or Noel explain to a jury or an arbitration panel’s satisfaction that they delivered what they promised? Or convince them that it wasn’t their negligence and outright lies concerning the safeguards in place that caused their clients’ losses? I don’t think they can, or will.
Anyone interested in a villa in Mustique? It’ll be going cheap.
49 N. Stanwich came on for rent today – nothing special about that except that it’s part of that $31,000,000 job at 309 Taconic that was supposed to be auctioned off last summer, minimum bid of $19 million, or thereabouts. Last I heard, the bidders all ignored the stricture against personal checks, tendered same and they all bounced. I don’t pretend to know the strategy behind offering a rubber check on a land deal, but perhaps someone can explain that to me.
So did the Taconic mansion ever sell? I don’t know – next time I see Julia Ward, the listing agent, I’ll ask. I assume it did not, if this cottage is up for rent, but ….
Long Island PTA Vice President (wonder how she got that title) caught in fogged-windowed SUV doing the naughty with 13-year-old boy. I’m sure the poor child will be scarred for life but whenever I read of these incidents I do wonder, where were these teachers and PTA moms when I was growing up?
It’s always been here of course but we’re seeing more lis pendens filed. Or I think we are. 11 Green lane, in Pemberwick, showed up again today as a short sale – there’s more owed on the house than the house is worth. It was originally listed at $895,000 in April 2007 (the owner paid $699 for it in July, 2004) and endured nine price cuts over the ensuing months until it finally hit $515,000 in October. Now it’s back up to $544,300, a number precise enough to make me think that that’s what’s owed. Someone has obviously lost out on this property, and that’s too bad. The listing says “fast sale required” but offers only a 1% seller’s commission, which probably isn’t going to drive the real estate community into a frenzy of activity.
You get occasional angry missives like this one:
Okay, now I am annoyed. I have lost a lot of respect for you because you chose not to post (or even acknowledge) my comment that mentioned XXXX. I can understand you wanting to be sensitive to a friend/colleague’s distressed property but anyone with a free realtytrac subscription can see it for themselves very easily.
You consistently hammer away at ridiculous asking prcies, make fun of Realogy and hope for their demise, etc. but when it comes too close to home it seems you wimp out. It could very well be that XXX is not in foreclsoure at XXXX (I have no idea except for wha tit shows online) but for you not to address it is somewhat hypocrytical.
So here’s the deal: It’s my blog, and I decide what goes up on it. You call that censorship and I suppose it is but that’s how it goes – I also weed out comments that personally attack other people – not those who find themselves thrust in the public eye, like Walter Noel, but otherwise they don’t get posted. You don’t like it you can, as I’ve suggested many times before, start your own blog and run it by your own rules. Have fun.
Bernie gets ankle bracelet, stay out of jail card, for now. Here’s what’s interesting: originally he was supposed to get “four financially responsible individuals” to sign a pledge for his bail. According to the document I link to, he only came up with two, and one was his wife (I assume that his pal Walter Noel is no longer considered “financially responsible”). Gee, maybe his sons weren’t in on it – I hear they haven’t spoken to him since he confessed.
2 Old Stone Bridge, which we’ve written about before, sold Monday for $1.775 million, 68% of its original $2.595 asking price. It was last sold in 2000 for $1.150 million but the new owners did a ton of work modernizing it so I’d guess that they, or the relocation company that handled the sale, broke even, at best. Nice house, too.
A nice tie always goes over big at sentencing day.
Put Madoff, the master of scams, in charge of the mother of all Ponzi schemes, Social Security. Warning to Madoff victims – the author isn’t sympathetic about your misplaced trust.