Daily Archives: January 13, 2009

Catherine Hooper: “I wuv you Andy, but now it’s time to go back to your wife.”

The noose is growing tighter around the Madoff boys and Uncle Peter, all of whom claim no knowledge of Dad’s evil plan to bilk investors. The authorities are investigating Cohmad Securities, the Madoff feeder fund of all feeder funds.

Regulators probing aspects of Bernard Madoff’s alleged fraud are intensifying pressure on Cohmad Securities after Robert Jaffe, a Cohmad executive and partner of Mr. Madoff, failed to testify before Massachusetts officials.

Cohmad, a small brokerage firm registered in New York, operates out of the same Manhattan office as Mr. Madoff’s stock-trading operation. A spokesman for Mr. Jaffe said he did not know of the alleged fraud.

While Cohmad executed some trades for Mr. Madoff’s funds, its primary purpose appears to have been recruiting customers for Mr. Madoff’s now-fallen advisory business, according to company filings and interviews with current and former Madoff employees. Many such Madoff “feeders” have come under scrutiny in the days since Mr. Madoff’s admission to a $50 billion investor fraud.

Cohmad, a conjunction of the last names of investor Maurice “Sonny” Cohn and Mr. Madoff, carried especially tight ties. Cohmad was filled by employees with long-term or family relationships with the Madoffs, and its operations were enmeshed in the main Madoff businesses, interviews and records show.

Robert Jaffe

Greer Gattuso/Palm Beach Daily News

Robert Jaffe, pictured above in his vintage MG, didn’t know about the alleged Madoff fraud, according to a spokesman.

Cohmad has recently come under scrutiny of the Massachusetts Secretary of the Commonwealth, whose securities division has begun an investigation into Cohmad, saying the investigation is designed to protect Massachusetts investors.

After Cohmad vice president Mr. Jaffe failed to testify Tuesday morning in response to a subpoena, the office said it was “preparing to enforce the subpoena and take all other necessary actions to protect Massachusetts investors.”

A spokesman for the state said Mr. Jaffe was offered a two-day extension as long as Mr. Jaffe agreed to appear Thursday. The spokesman said Mr. Jaffe, who helped bring Palm Beach, Fla., investors to Mr. Madoff, refused to make such a guarantee.

Regulators also are keeping an eye on Cohmad’s trading. Cohmad long cleared its trades through Bear Stearns, now part of J.P. Morgan Chase & Co. J.P. Morgan has been asked by the Securities and Exchange Commission and the U.S. Attorney’s office to monitor Cohmad’s trades and is cooperating, a bank spokesman said.

A spokesman for Mr. Jaffe said Mr. Jaffe is under doctor’s care and had notified the state. The spokesman said the state had agreed to an adjournment, adding that Mr. Jaffe had no knowledge of Mr. Madoff’s alleged fraud and was a victim himself.

Cohmad’s sales representatives appear to have played a key role in the evolution of Mr. Madoff’s hunt for clients starting in the early 1990s, according to investors and documents. The company was formed in February 1985 as a venture involving Mr. Madoff and his longtime friend, Mr. Cohn.

At least since the 1990s, Mr. Cohn would at times act as a gatekeeper to Mr. Madoff partnerships, who promised investors unspectacular but steady returns, say investors. Individual investors who wanted to invest with Mr. Madoff were told to contact Mr. Cohn. Mr. Cohn would then pass the lead on, and potential clients would then either hear back from Mr. Madoff or Frank DiPascali, who worked closely with the advisory business, according to people close to Cohmad.

Mr. Cohn is listed as Cohmad’s largest stakeholder, according to current regulatory filings. Bernard Madoff owns between 10% and 25% of the partnership, these records show, while his brother Peter Madoff also owns a share. Other owners include Mr. Cohn’s daughter, Marcia, who held the title of president and chief compliance officer, and Mr. Jaffe, whose ownership was less than 5%, according to the filings.

Up until a few years ago, Cohmad employees sat in a small group near the main Madoff stock trading desk on the 19th floor of its midtown Manhattan headquarters.

Somehow, a defense that “we never noticed they were there, we never asked them why they were there and they told us they were doing nothing bad, nothing bad at all” is beginning to seem unconvincing. Anyone interested in a couple of houses on Cherry Valley Road and Tomac Avenue?

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What will happen to Bush Derangement Syndrome sufferers when Bush goes away?

Who said anything about him going away? House Democrats demand investigation of Bush Administration abuses. These people can’t afford to let Bush retire to obscurity in Texas. When, speaking to a liberal friend about Obama’s Sunday interview in which he admitted that Guantanamo’s prisoners were a more complicated problem than many had thought, my friend immediately changed the subject to Bush’s “garbled, bizarre press conference – than God we’re going to have an articulate president again.” Their poor minds just can’t grasp nuance, I suppose.

But it’s all good – with the economy rolling and the world once again a safe, secure place to raise our children, the entertainment provided by trying members of the past administration will prove priceless.

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California nightmares

There’s already plenty of documentation about the collapse of California and how its citizens legislated it from a land of opportunity to a hell hole that punishes anyone with ambition and a dream. In the annals of its decline, this small item will surely pass unnoticed but it’s emblematic of what happened. In fact, I think it sums up the whole sorry saga quite neatly.

Under a California law enabling people to sue for violations of the disabilities act, here’s a wheelchair-bound cripple who makes “in the low six figures” by suing companies for, say, having an outside towel dispenser too high off the ground. Each suit is for a few thousand dollars – to small to make it worthwhile defending against, to expensive to pay and stay in business. I again urge readers to give their kids a copy of Dr. Seuss’s “Thidwick, the Big Hearted Moose”. He described what was coming just around the same time Ayn Rand wrote “Atlas Shrugged.” Maybe it was the fallout from open air nuclear testing – who knows?

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Charleston South Carolina – Greenwich, CT

Same inventory glut, same problem.

The local real estate industry is beset by the glut of homes on the market. A five- to seven-month inventory is considered a healthy neutral market. The inventory now: 15 months.

At the end of 2007, it was about 10 months’ worth.

With 10,005 homes to choose from in the tri-county region, it is an extreme buyer’s market. The problem is that buyers aren’t making many moves, anticipating a further fall to the bottom. Still others might have trouble accessing lines of credit.

“Would people buy with access to credit? As an economist, I’ll have the answer for you in 10 years,” Hefner said.

A bright spot, inventory is down somewhat from a few months ago, when it peaked at 11,191 homes in November. Because so little turnover has occurred, people presumably are making other decisions about what to do with their homes. The two big options: live in them or rent them out.

“Most people can’t take a loss. That’s why you see rental numbers going up,” said Gettys Glaze, general manager of Coldwell Banker Real Estate and president of the Charleston Trident Association of Realtors multiple listing service.

Despite the sales slump, home prices remained relatively steady in 2008.

The median price of a home sold in 2008 was $203,270, down 3% from the previous year’s $209,742.

Meanwhile, median home prices are up almost 7% from 2005, when home sales were 45% higher than 2008 numbers.

“The current inventory level remains more than double its level on the first day of 2006,” Vince Graham, president of I’On Group, said in a recent 2008 market review. “Prices have not fallen sufficiently to allow the market to begin to clear.” [emphasis added]

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More Ponz scum surfaces

When the Madoff fun hit some pundit predicted that, just as a horrible market flushed out Bernie, it would also expose tons more Ponzi schemes, all of which had been hiding out nicely while assets were appreciating. As it turns out, that pilot who parachuted from his plane and fled the other day was a minor league Bernie. Minor league, that is, unless you were one of the small investors who lost millions. Some details here, courtesy of DealBreaker.com. More soon.

Fugitive money manager crashes plane, flees.

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Orvis

 Gideon Fountain (no relationship that he’s willing to admit to but “Brother Gid” to me) alerts me to a warehouse sale being conducted by Orvis through January 24th up on Route One, in Norwalk. Not at their store, if one still exists, in Darien, but in the shopping center with a Supermarket – perhaps where Compu US was? Anyway, they’re selling stuff for pennies, including fly rods for 80% off. Why would I need another fly rod? There’s always room for a fly rod – especially since another  brother seems to have disappeared my Powell custom 3 weight. I’ll go check it out and when I find the place I’ll report its exact location here. Of course, a better bet might be to just wait for either Andy or Mark Madoff to hold a garage sale which I’m sure is coming in the near future. But by then, I’m sure I’ll have discovered still more gaps in my arsenal. 

Funny thing – I seem to have rekindled quite an interest in fly fishing lately, even in the dead of winter. Can’t quite figure out why.

 

Hoops catches another one, Seychelles

Hoops catches another one, Seychelles

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Some sellers are finally getting it, but only after a great deal of pain

49 Pecksland Road: Originally priced way back when at $3.850, eight price cuts later, reduced today to $2.350. It still has a swamp for a backyard, but very nice inside.

25 Dorchester Lane: original price, $2.950, six price cuts before today’s, down to $2.190. Purchase price 2004? $2.150 million. I think we’ve fallen below 2004 pricing, myself.

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Indict Bush! Free the Guantanamo 500!

Released terrorists return to terrorism. Don’t they understand that Michael Moore loves them? I blame Cheny.

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What’s a good buy these days?

A reader suggests that the Pecora’s new construction on Cognewaugh, now priced at just $3.150 million, should attract a buyer and of course he’d be right if this were last year. But what’s the right price today? I think everyone: buyers, sellers, agents and even appraisers is at sea right now. I toured a house today that was on a great street, very desirable once and probably still today. The house itself was, to my eye (viewing it as my current brace of buyers might) a bit cramped and too spread out. I thought it was overpriced by a million – the selling agent suggested that at its price, “it would never have lasted last year.” I think she’s wrong; I think she would never have reached this price in even the strongest market but the real point is that I don’t think she or her clients have accepted today’s reality. She sounded resentful that it hasn’t sold and if she is, her clients probably are too.

If they ever existed, the days of pricing in the stratosphere and being confident that, if the address were right, someone would pay it, are gone. When sellers finally realize that, we’ll start seeing movement in our inventory. Until then, we won’t.

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So maybe Walt can run Treasury

Timothy Geithner, Obama’s nominee for Treasury Secretary, may have a problem with an illegal alien – housekeeper. Told that Geithner might be out and that there was now space for her husband to assume that role, Monica Noel was ecstatic. “Great!’ she said. “Walt’s a little off his feed right now but God knows we can use the money and honestly, can you truthfully say that anyone will notice the difference between his mental state and anyone else’s down in D.C.? And while it’s true that we had our own little problem with this issue,” she continued, “we shipped that wetback so far into Brazil that no one will ever find the ungrateful son of a bitch again. You won’t tell, will you?”

Mum’s the word, Monica.

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New Construction, 35% off

154 Cognewaugh

154 Cognewaugh

The Pecora Brothers listed this place for sale back in July 2007 for $4.895 million. Today, eight price cuts later, it’s dropped to $3.150. That might do it – it’s an okay house – but they can’t change the road and, so far at least, they haven’t been able to change the look of the house behind it. At some price, a buyer will probably be willing to ignore a 1960’s, tired ranch with a broken down boat and trailer and discarded jungle gym set as back yard neighbors but they certainly weren’t willing to do so at this place’s original price. We’ll see if their vision is obscured at this lower one.

UPDATE: Additional thoughts. Just as we agents should be meticulous about inspecting the condition of our vacant listings, builders of new houses, particularly in this one’s original price range, should zealously inspect the product they intend to present to the buying public. Fill in nail holes in the shingles, replace missing shingles and down spouts and in general, show that you know what you’re doing. There’s nothing fatal about a paint job that wasn’t properly prepared, but it’s off putting. I always ask myself, “if they missed the obvious stuff, what about the stuff I can’t see?” Buyers do, too.

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Bernie’s back in court tomorrow

Well his lawyers will be, anyway. A U.S, judge will review the lower magistrate’s descision yesterday that permitted Madoff to stay at home for the nonce.  A judge can always overrule a magistrate and some federal judges have egos that might encourage such a result on general principle but I think Bernie can probably plan on keeping his toothbrush above the sink in his penthouse for a while longer. The magistrate made a finding of fact (Bernie unlikely to flee) and that’s not appealable, I don’t believe, and a ruling of law that seemed pretty solid, however emotionally unsatisfying that was for many of us. Certainly there wasn’t such a clear misstatement or misunderstanding of the law that would justify overruling his decision. If we were on instant replay, I’d say that the decision on the field will stand.

But then, I though he’d be jailed yesterday, so what do I know?

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Just stuff him in one and we’ll still have 4,999

Washington Law Professor sues over lack of Porti-Potties. Calls 5,000 outhouses “grossly [sic] inadequate”.

Professor John Banzhaf, the so-called “Father of Potty Parity” sent a letter to the Presidential Inaugural Committee warning of potential lawsuits.

He says women, who take longer in the restroom, could be forced to wait in longer lines than men, and that amounts to discrimination.

Banzhaf says waiting in long lines is not just an inconvenience. It can trigger medical problems. He’s asking the Presidential Inaugural Committee to make the toilets gender-neutral so that women do not have to wait longer than men.

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Why?

Our eager Attorney General, Greenwich’s own Dick Blumenthal, is suing a golf “hole in one” insurer for failing to cough up $40,000 to some lucky (unlucky, later) Connecticut golfer. That’s a nice thing for the golfer, but are there no limits to the AG’s resources? By devoting money and manpower to this claim is he really not shortchanging anything else more important?

His office never helped out when I was chasing crooked stockbrokers who stole hundreds of thousands of dollars from local retirees. He’s not doing much on the Wall Street collapse (although it’s possible he hasn’t noticed yet). So far as I know, he isn’t investigating his separated-at-birth brother, Chris Dodd, for his own bit of banking fraud and extortion. So why this one golfer? Is Dick a fan? Is the golfer a contributor to the “Blumenthal for higher office, any higher office at all” slush fund? Something stinks here and I doubt it’s just that swamp behind the Blumenthal manse.

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Yes but Obama’s about change!

Besides, when Congress gets through with us in a year or so there will be no private money left so how else will we get medical care? Massachusetts Mandatory Health Care Plan a disaster.

Hat tip, Instapundit

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Oh horrors, snow!

The New Haven RR stalls in Cos Cob

The New Haven RR stalls in Cos Cob

The town’s complaining that its snowplow budget is being depleted

 It snows, we plow, and spend money doing it. This amazing occurrence has repeated itself every year in the 50+ I’ve been in town – how unlucky can we get? It’s my understanding that, because the only thing certain in this world is a steady income from FGG’s Madoff Fund, the town budgets for snow removal based on a historical average. On years it snows less, the money goes back into the general fund. More, and more comes out. Thus it has been, thus it always shall be, until Global Warming finally arrives and saves us further bother. So I’m puzzled why this year’s “shortfall” is newsworthy or why, for that matter, we get the same story from DPU every winter around this time. What’s changed?

What really frosts my toes is the comment in the article that  we can often recoup some of our expenses when a “state of emergency” is declared for the state. A state of emergency declared for snow falling in New England? I’m all for sticking our nose in the federal trough and seeing if there’s anything left for us – I see it as recovery of stolen property – but if you’ve been wondering whether there might be anything, anything at all wrong with this beautiful country, the federal government forcing pensioners  in Florida to pay for snow removal in Greenwich, Connecticut might supply a hint. Of course, I feel the same way about rebuilding high-rise condominiums built in hurricane zones but those, at least, are growing less expensive every day.

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Someone just made my year

I received the following email – the writer gave his name but I’m pretty sure it’s really from Monica and Walt Noel. But wow! (And no thanks, it would be against the law if I had so much fun doing this and was paid, too).

Somehow in 2004 when we were looking to move to Greenwich I stumbled upon your website and have been following it ever since, especially since your recent retirement from the Paper and the significant increase in activity.
I now follow the site a few times a day to provide me (and friends around me) with a fresh perspective on relevant events.
I wanted to thank you for the fantastic resource, the enjoyable commentary, and the relevant information on local and national issues.
If you decide to take on donations to help pay for the expense of running the site, please feel free to email me at anytime.  Your site is truly worthy of support and certainly better than any of the biased papers.
Please keep up the great work for us all to enjoy and let me/us know how we can help.
 
With great regard, but anonymously please,

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Whew! So you’re not mad?

"That's okay, Andy, just give us the mittens your dad sent you and we'll forget the rest."

"That's okay, Andy, just give us the mittens your dad sent you and we'll forget the rest."

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More from John Carney

Will someone kill Bernie Madoff? Carney points out that some of the people who lost big with Bernie are the type who don’t take losing well: Russian oligarchs, Colombian drug lords, tax evaders, etc. I don’t want to be too melodramatic here, but I’ve pointed out before that Walter Noel and particularly his sons-in-law seemed to specialize on peddling the FGG magic beans to the same crowd. If, as Carney speculates, angry losers can reach Madoff in a prison cell, can it be that much harder to find the guy on a sunny beach in Spain or, God forbid, a bucolic stretch of fly fishing water on the Madison?

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John Carney: no sympathy for Madoff losers

Rich people who invested with Madoff, albeit unintentionally through feeder funds like Walter Noel’s, are demanding that they receive a taxpayer bailout via SIPC funds. Mr. Carney suggests they pound sand.

Chew has noticed that the Securities Investor Protection Corp will only pay claims by investors who lose money from fraud by firms insured by the SIPC. Those firms happen to be registered brokers, who pay for the fraud insurance out of fees collected from their customers. People who reach outside the world of registered brokers, people whose wealth allow them the legal privilege of seeking greater gain through investing in unregistered hedge funds, give up the safety of this insurance.

That system worked fine for Chew until it didn’t. He was among those who invested in Madoff through a feeder fund, something most ordinary investors are prevented by law from doing. Now, however, he feels like someone should be made to pay for his fraud losses.

Who? He’s not clear on that.

Surely, Madoff, if he had the money, should be made to pay. Since he doesn’t, that’s a nonstarter. So Chew is left making a more general claim against the universe, or at least the bank accounts of others.

“How did Bernie Madoff come to have two classes of investors — the first-class crowd enjoying SIPC support, and the rest of us in coach?” Chew asks. This kind of mental gymnastics–describing the retail investors protected by the SIPC as “the first-class crowd” and the wealthy hedge-fund investors not protected “coach”–would be funny if it weren’t so self-serving. Oh, the horrors of the wealthy finding a small corner of the financial world that hasn’t yet been rigged in their favor. It feels like…gulp…flying coach.

To make things even worse, Chew admits that registration, regulation, etc, etc, would not have avoided the Madoff fraud. So his lament amounts to nothing more than a naked demand for other people’s money:

In fact, Chew’s probably better off than the SIPC – protected investors, whose coverage is limited. To the extent Chew and others can seize Walt Noel’s Round Hill Cottage, his villa on Mustique and, if they can track them down, his assets stashed offshore, they’ll probably come out better off. Not whole, but better off. And maybe he can grab a pair of those Hanukkah mittens from Bernie, too.

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