Daily Archives: April 1, 2009

Walter has a lot to lose

If you follow the link to the Dealbook blog , you’ll see the spread sheet detailing FGG payments to its partners. Walter made $18 million in 2008, hardly chump change, but kept $37 million in 2007, a better year. Understand that this was for doing absolutely nothing. I did absolutely nothing last year and no one paid me anything close to $18 million. I should have gone to Harvard, damn it. 

And here’s a nice story from Business Insider – the day after Bernie was busted, when the boys at FGG knew they’d lost all their clients’ money, Walt arranged for $1.5 million to be wired to another partner. Hey, Christmas was coming on, the poor guy must have needed some pocket money to see him through.

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More fun with Walt

There’s this, from ABC News:

Fairfield Greenwich Group released a statement saying: “The allegations in the complaint brought against FGG by the Massachusetts Securities Division are false and misleading. Contrary to the allegations, FGG conducted vigorous and robust monitoring on an ongoing basis of the Madoff investments. This monitoring was consistent with the representations made to investors in the Sentry funds. FGG has fully and completely cooperated with the Massachusetts Securities Division investigation.”

Fairfield had earned about $100 million per year in fees based on the money it placed in Madoff’s hands, according to the complaint citing testimony from Fairfield executives.

The Massachusetts complaint included excerpts from testimony taken from Fairfield officials that suggested due diligence performed on Madoff’s outside auditor – a tiny accounting firm located in a suburban strip mall – consisted of taking the accounting firm’s word that they had hundreds of clients.

“How did you determine that they had hundreds of clients?”

“That’s what the partner said on the phone to me,” Dan Lipton, Fairfield’s Chief Financial Officer, replied.

Someone is going to have a blast cross examining these turkeys and I’m so sorry it won’t be me.

 

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It’s all Noel, all the time

While I was out, readers sent along tons of links on Walter Noel stories. Here’s a good one from the NYT Dealbook.com

Shortly before Bernard L. Madoff confessed to a Ponzi scheme that burned through tens of billions of dollars, partners of Fairfield Greenwich Group, one of Mr. Madoff’s biggest feeder funds, were on track to collect a combined $117 million in pay for 2008.

The estimated compensation figures were disclosed in an exhibit to a lawsuit filed Wednesday by Massachusetts securities regulators, who contend that Fairfield’s inadequate due diligence on Mr. Madoff’s operations amounted to a fraud on its investors.

The exhibit consists of spreadsheets attached to an e-mail that Daniel Lipton, Fairfield’s chief financial officer, apparently e-mailed to himself on Dec. 11, 2008 — the same dayMr. Madoff was arrested by authorities in connection with running a vast investment scheme.

Fairfield’s $7 billion Sentry funds were more than 95 percent invested with Mr. Madoff, but Fairfield also managed billions of dollars in other funds, all of which performed poorly last year. Even before Mr. Madoff’s arrest, the firm had already conducted two rounds of layoffs.

Nevertheless, Jeffrey Tucker and Walter Noel, Fairfield’s co-founders, were each expected to earn about $19 million in 2008, the document shows. In 2007, before the markets went south, both men made over $30 million. Andrés Piedrahita, the managing partner of Fairfield Greenwich and Mr. Noel’s son-in-law, was to make over $28 million for 2008. In 2007, Mr. Piedrahita took home over $45 million.

I started covering the Noel story December 12, when Bernie’s arrest was announced. By December 15th, one of Walt’s loyal friends wrote in to express her dismay – I wonder what she thinks now?

How singularly unpleasant and vindictive you are to prey on the misfortunes of a local family. Let us hope that such misery does not descend upon you and your family out of the blue at the instigation of others. I would hate someone to defame your character and talk about you as if you were so much “meat” to be hacked apart. Not that I expect you will allow this comment to be shown on your site – goodness knows we don’t want any balance to the whole thing, or heaven forbid, you may not be able to make a buck or two out of this unhappy mess.

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Buy in haste, repent at leisure

10 Greenway

10 Greenway

This is a nice house off of Pemberwick on 10 Greenway Rd, . Built in 2005, listed for $1.995 million, sold for $2.0225 million in May 2006. Now it’s back for sale. The owners listed it just below $2 million originally and today dropped it to $1.869. The market has changed from the bidding wars of ’06.

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From the same folks who brought you the sub-prime mortgage

Congress has demanded that the Accounting Standards Board get rid of the “mark to market” rule and, probably as early as today, banks will now be able to value their toxic assets at whatever they say they’re worth.

This is the same philosophy that drives so many of my fine colleagues in this town when dealing with real estate: if you don’t like what the market says your client’s house is worth, just come up with a value they do like. When it doesn’t sell, look around for someone to blame.

If he hasn’t retired by then, look for Chris Dodd to be in front of the cameras three years from now, face red, finger jabbing, demanding to know why bankers lied to the American public. In this case, since it is the bankers who have asked to discard the rule, they’ll deserve everything that slimy blowhard sends their way.

UPDATE: The NYT’s Floyd Norris is on the story:

Under intense political pressure, the board that sets accounting rules in the United States will meet on Thursday to complete changes in accounting rules that are aimed at reducing the losses banks have been forced to report as the values of their mortgage-backed securities have crumbled.

The changes, proposed two weeks ago after a Congressional hearing in which Robert H. Herz, the chairman of the Financial Accounting Standards Board, was essentially ordered to change the rules or face Congressional action, are generally supported by banks, although some want the board to go even further.

But they have produced a strong reaction from some investors, with one investor group complaining that the changes would “effectively gut the transparent application of fair value measurement.” The group also says changes would delay the recovery of the banking system.

UPDATE II: Lest we forget, three years from now, Barney, “There’s nothing wrong with Fannie Mae!” , Frank is also behind this rule change.

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Chris Dodd leaves Senate, will grow ethanol in Iowa with Countrywide funding

Chris Dodd, already in trouble with his sweetheart mortgage deals, his Irish castle and his attempt to protect the AIG bonuses, is encountering serious difficulty raising money for his upcoming reelection campaign. I heard yesterday from a reader that her father, a great guy who actually took a chance hiring a 23-year-old philosophy major as a Colombian drug runner – where do you think I met Andres?) is pretty connected to the local political scene and reports that Dodd will not run. I would be cheered by that news were it not for the name of his replacement: Dick Blumenthal. In this state, Blumenthal is a shoo-in (the only kind of campaign Blumenthal will risk), and that’s a shame. I doubt he’s as crooked as Dodd – who could be? – but his overweening egotism and opportunism will hardly be an addition to the Capital. Ugh.

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It’s not all doom and gloom

31 N. Porchuck

31 N. Porchuck

I wrote about this house just a month ago when it came up for sale. The owners bought it new for $7.850 million in August, 2007, added a pool and, when their plans changed and they decided to sell it this year, priced it at $6.995 million. It is a fabulous house – absolutely beautiful, with great views, a pond, that pool (and, of course, it’s right across the street from my own listing at 34 N. Porchuck – buy it now! cheap!) and really everything a house this size should have. I wondered if, in this market, a million dollar reduction with a pool thrown in would be enough to move it but it’s reported as under contract today, so I guess it was.

Losing a million bucks on Greenwich real estate is a new phenomenon but I still find it encouraging that there are buyers out there who can appreciate value and pay for it. I think someone is getting a good buy here – and there’s almost certainly no truth to the rumor that Andy Madoff’s moving in to hide from his creditors.

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