Bernie, we hardly knew ye, but we had our suspicions

A commentator alerted me to Blogett’s latest (I was busy working on the post below) attempt to unpack Walter Noel’s and FGG’s “strategy” behind investing with Bernie Madoff. Blogett concludes, as I do, that Walter thought Bernie was front running and just assumed that it was someone other than Walter and his five fabulous girls who were getting hosed.

The documents do suggest, however, that FGG:

  • Closed its eyes, shoved its fingers in its ears, and hummed as Madoff made the firm $500 million of fees in the past five years (and more before that).
  • Took all the credit for the trading strategy and based its fees on the premise that FGG, not Madoff, was the brains behind the operation. The firm almost always spoke as though it managed its primary Madoff fund, Fairfield Sentry, itself.  If Madoff ever came up in FGG’s marketing materials, he was described as a “broker.”
  • Knew that the key driver of the fund’s stated returns was NOT the “split-strike conversion strategy” but market timing.  The firm never explained, however, how this superb market timing was supposedly executed.

As investigators dig through the FGG wreckage, therefore, one of the key questions will be how partners like Walter Noel, Jeff Tucker, and Andres Piedrahita explained Sentry’s astonishing market-timing ability to themselves and their clients. 

Andrespiedrahita.jpgIf the best answer is “proprietary models,” FGG may well be found to have been negligent in its failure to conduct adequate due diligence. Consistent market timing is extraordinarily difficult, and Madoff’s claim that he could do it when others couldn’t should have set the same alarm-bells clanging at FGG as it did elsewhere.

We suspect that the more likely answer is “We thought he was front-running.”  Lots of other folks on Wall Street thought Madoff was front-running, including some major Madoff investors, and, for most folks, this seemed to explain his preternatural timing ability.  The trouble for FGG with this explanation is twofold: First, front-running is illegal. Second, the firm doesn’t mention front-running it its fund documents. If FGG did rationalize Madoff’s performance on the suspicion that he was front-running, the firm will likely be exposed to charges of fraud.

FGG itself is almost certainly toast regardless of what investigators find. The legal distinctions will come into play with respect to victims’ ability to go after the personal assets of Noel, Tucker, Piedrahita, et al.

I was confronted a week ago by a red faced, goggle-eyed gentleman who stuck a finger in my face and demanded that I stop saying mean things about his dear, close friends, Walter and Monica. I can’t say I felt remorseful – I thanked him for reading my blog and edged away – but the more we learn about Noel, the less sympathy I feel for him. If that’s possible. My general summation of this sorry spectacle is that it couldn’t have happened to a more-deserving guy.

18 Comments

Filed under Uncategorized

18 responses to “Bernie, we hardly knew ye, but we had our suspicions

  1. Anonymous

    Good for you Chris, don’t back down. Who in the world would have the audacity to defend the slimey Noel crowd? Fraud is fraud, and they will pay the price. I hope the SEC claws back every last dime these despicable people got from investors.

    I go back to what I posted previously and it has to do with arrogance. The Noel’s helped perpetrate one of the largest frauds in history and they did it by basically prostituting their daughters. They flaunted their wealth as if it was their birth right. The Vanity Fair and T&C articles were shameful. Any self-respecting person would be emabarassed to be in the press like that but they used it as one of their more effective marketing tools.

    The Noels confirm peoples’ misguided impressions of Greenwich and as a life-long resident I cringe everytime I see the Greenwich name associated with them. I hope they go to jail.

  2. christopherfountain

    Don’t be afraid to express your feelings, man – that’s why we allow anonymous comments!

  3. Inagua

    Walter Noel was a moderately successful guy who became fabuously wealthy by being the top salesman for the world’s greatest Ponzi scheme.

    In just two years, 2006 and 2007, his firm took in over $340 million from Madoff. The two decade total almost surely exceeds a billion dollars.

    He then used his ill-gotten gains to make a public nusiance of himself and his repellent family. If he had any sense of honor or shame, he would repent his greed and folly, and refund what is left to his victims. But because he is without honor or shame he parties away. Why does the Round Hill Club still open its doors to him?

    • christopherfountain

      A friend tells me that he lunched with Walt a year or two ago and Walt told him, “everything I am today I owe to Bernie”. Oddly, that staement’s as true today as it was then.

  4. CEA

    You can’t have your PR firm have your family in a big glossy spread in Vanity Fair – AND one in Town & Country – saying how wonderful, perfect, and fabulous your life, and then say “you can’t say anything bad if it’s negative”.

    You hold yourself out to be public figures, that is how you are treated when life turns another way. And it wouldn’t have turned that way had you done an honest day’s work for an honest year’s pay ($135 mil a year! That is $2.6 mil a week, or a half-mil a DAY!)

    One last thing about FGG – they did not act as a “fund of funds” with that Sentry fund which was $7.5 bil, 100% Madoff. They said in their documents that they were the Investment Advisor. They can’t say they were snookered – they were the advisors, which means they had to account for each and every trade, not rely on someone else.

    Basically, the Noels were like the toll collectors at the Midtown Tunnel – you want to go down the road, we aren’t going to check it, we don’t care; yes it is dark and you can’t see anything, but trust us – you’ll be fine. Just give us your money.

    The Noels should have been paid whatever the pay scale is for an experienced toll booth collector in the greater tri-state area.

  5. Towny

    As long as he produced, nobody cared how Bern made it. Nobody.

    Was he colluding with others and splitting? Maybe.

    He mentored plenty of students over the years. Was he sitting upstairs, fronting or penny jumping on his traders downstairs and anticipating the actions of what he taught others? Probably.

    Was he anticipating the pump and dump? Probably.

    When the shit it the fan, did he fall on his sword to protect others? You betcha. Copping to a Ponzi is too easy.

  6. Hiram

    Inagua asks why the Round Hill Club still opens its doors to Noel. Maybe because the Club’s standards aren’t that high and revolve more around ethnicity and wealth than around personal integrity and dignity.

  7. kidding really?

    As much as I am one of the biggest skeptics living in Greenwich… I’d rather come to this site looking for houses I can buy. Sort of bored by the whole Noel/Madoff thing. I’m just saying…

  8. Anonymous

    As Chris has told me on more than one occasion, it is his blog and he will do as he pleases (note our tiff over a colleagues’ pending foreclosure and his refusal to blog about it).

    I somewhat share your sentiments about wanting Chris to report on more real estate specific topics but this Noel stuff is just too good to pass up. I am still waiting for a Noel girl porn tape…..

    • christopherfountain

      Sheesh! I’m down to using bare-assed fishermen for blog filler – someone’s got to buy a house. Frustrating to me is that I have four buyers from $1.5 to $5 million and I’m having a hard time recommending much of anything for any of them. But we’ll get there and you’ll read about it here first!

    • christopherfountain

      And that wasn’t a colleague’s house, it was a friend’s. Maybe next time they’re planning to go up in smoke Walt and Monica will have me over for coffee. It might help.

  9. Towny

    Walt and his baba boohey daughters are small potatoes to what’s comin’ down the Greenwich Society pike. There may be others around here that are hoping, if not prayin, that the SEC/Justice dont follow trade ticket’s too closely. Some say Bernie had access to order flow from ALOT of different sources.

    Would’nt it be funny if it were discovered that a secret ECN was programmed into NASDAQ and only NASDAQ insiders knew about it?

    Ahhh fugetaboutit, I lie about everything……

    • christopherfountain

      It seems as though Bernie wasn’t actually trading anything at all, at least in the last few years of his scam. If that proves true then (some of) his Greenwich pals might be off the hook. But large volume or none at all, what was his brother Peter doing in his executive capacity? Not minding the books, that’s for sure.

  10. Towny

    Someone said even though he was a broker dealer and could scratch his own tickets, outside he traded OTC exclusively with the UBS and Merril equity derivative desk. Maybe they felt the heat (in 2005) and shut it down.

    Anyway……what ya hear about Ann Lamont’s Oak Investments, buying a 25M/25% stake in Huff Post?

  11. Towny

    “what was his brother Peter doing in his executive capacity? Not minding the books, that’s for sure.”

    What books? LOL

  12. Sunset Shazz

    Chris,

    Please continue your valuable work on the Noels. Also, everyone should note that for anyone doing an ounce of due diligence, it was painfully obvious that something was awry with Madoff:

    http://tinyurl.com/9yy7jr

    No serious, diligent investor was hurt.

  13. anonymous

    Even if Madoff wasn’t trading at all in the last few years, I still believe the guys at FC thought he was front running and didn’t care.