Tag Archives: Madoff

Good news for Walter Noel

Britain drops investigation into UK’s Madoff branch.

LONDON—Britain’s Serious Fraud Office said Tuesday it won’t take action against the directors of Madoff Securities International Ltd., the U.K. arm of Bernard Madoff’s investment and trading business.

“Following a thorough review of all the available evidence it has decided to take no action against either the company or its directors there being insufficient evidence to provide a realistic prospect of conviction,” the SFO said.

However, investigators have found it difficult to prove that workers at Mr. Madoff’s London office, which employed about 25, were knowingly involved. U.K. employees have said they were unaware of the fraud, people familiar with the matter told Dow Jones Newswires.

Investigators have had similar challenges building a case against fund firms that funneled client money to Mr. Madoff’s Ponzi scheme because they need to establish whether there were funds moved by these firms after the fraud came to light in mid-December 2008, meaning people at the funds would have been in full knowledge of allegations regarding criminal acts, these people added.

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Teri Buhl – why won’t Westport Bank settle its Madoff suit?

Because they’ll win – the claimants are trying to blame the bank for investment decisions their own financial advisors made. I made the same point last year when this suit was first filed, but here’s a good update, with comments from a better lawyer.

Jeffrey Blomberg, a partner in the Greenwich office of international law firm Withers Bergman LLP, commented that while he didn’t have an opinion as to the merit of the plaintiffs’ entire case, “They are trying to fit a square peg in a round hole. The plaintiffs are trying to impose fiduciary duties on a custodial relationship where they don’t generally apply.”

Even if the newly implemented SEC rules regarding investment advisers who have custody of client assets, which the NY Times’ Floyd Norris penned a column on today, had been in effect at the time the Westport National arrangements were entered into, they wouldn’t apply to the bank because it was acting as a custodian for the IRA and not as investment adviser to an IRA.

“In this case, I don’t see where the bank had a duty to monitor how the assets of their customers were invested,” says Blomberg. “This suit appears to be applying duties of an investment advisor to the bank, who appears to have been acting merely as a custodian with specific contractual obligations.”

With Westport Bank’s largest shareholder having very deep pockets it’s easy to see why plaintiffs would try to go after the bank, but it appears they are really trying to hold a third party accountable for someone else’s mistakes — a notion the bank reminds customers of when they question the ethics in this sad saga

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Madoff computer programmers arrested by FBI

It won’t provide much financial relief for the scam victims but these guys kept the game going for at least fifteen years and should have tales to tell. Will this bring down the boys? Want a house on Tomac? Cherry Valley?

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Your money vs. other’s

The SEC analysis of its bungling of the  Madoff matter is producing lots of interesting tidbits, including the fact that Renaissance Technologies grew suspicious of Madoff back in 2003 and eventually pulled its investments from him.

[....] Henry Laufer, Renaissance’s chief scientist, expressed amazement at Mr. Madoff’s ability to exit the market, selling its investments and holding primarily cash in a way that consistently staved off losses other investment firms suffered.

The timing of the moves, Mr. Laufer said, was almost statistically impossible. Mr. Laufer told the SEC in testimony earlier this year that “we would have loved to figure out how he did it so we could do it ourselves.”

He added: “And so that was very suspicious.”

Renaissance didn’t pull its Madoff investments immediately, according to the report. Nathaniel Simons told regulators that one reason was that the firm believed the SEC had closely examined Mr. Madoff’s investments, and that regulators could readily perform the same analysis Renaissance did of Mr. Madoff’s trading strategy.

“[Y]ou just assume that someone was paying attention to make sure that there was something on the other side of the trade,” the younger Mr. Simons told the SEC.

“We did feel that despite the fact that we’re kind of smart people, we were just looking at matters of public record,” he said, according to testimony in the report.

However, Renaissance’s discomfort with Mr. Madoff became greater, prompting the firm to withdraw money from the investments, people familiar with the matter said. Earlier this decade James Simons urged investors he knew also to withdraw, they said.

Renaissance employees expressed dismay to the SEC’s watchdog unit this year that regulators hadn’t unearthed Mr. Madoff’s fraudulent trades. “This is not rocket science,” Mr. Laufer told the inspector general’s office, according to Friday’s report. He added that an SEC examiner could “wander down, you know, to Goldman Sachs and wander over to their options department and ask them, how does somebody execute $10 billion of options, and find out it’s very difficult.”

So where was Walter Noel during this period? He and Andres were selling up a storm, pulling friends into the Madoff vortex not warning them away as Mr. Simons did. Why? I suggest that Simons wasn’t running a fund feeder, so he couldn’t pocket 20% of the illusory profits Madoff was claiming. And that affected his judgment.

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Breaking news from December 2008

Greenwich Bank & Trust’s parent has been sued in a class action brought by disgruntled Madoff investors. The first suits were filed last year within days of Madoff’s confession but now David Golub has stepped in with a new bunch of litigants. He’s an excellent lawyer, although I don’t remember him being involved in this field back when I was hunting wicked stockbrokers. Will he succeed? Who knows – his theory seems to be (and I’m basing this on a few scant newspaper paragraphs, not from a reading of the actual complaint) is that some “Investment Adviser”, a Ron Silverman, pooled clients’ assets, invested them with Madoff, and used GN&T’s parent as a custodian. Silverman went belly up as quickly as Walter Noel did so Golub is after the bank, claiming that if they had taken physical possession of the securities Madoff claimed to be purchasing, they’d have discovered the fraud.

Well, maybe, but Madoff was supposed to be going in and out of the market numerous times a day so what’s a custodian supposed to do to take possession? At first blush, I’d say this was a loser, but Golub’s a far better lawyer that I ever was, so I’ll make no prediction.

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This just in: Bernie Madoff was a crook!

He passed out investors’ money to all his family and spent most of it on himself. No sign yet of the Madoff boys’ houses on Tomac or Cherry Valley being put up for sale, but my guess is that they’ll be just behind Walt’s Round Hill cottage. Maybe a “Madoff real estate tour” should be organized for this fall?

Mr. Madoff listed family members, boat captains, housekeepers and others as employees of Bernard L. Madoff Investment Securities, even though they never actually worked for the firm, newly released documents show. Mr. Madoff also used his firm’s money to pay for real estate, yachts, private planes and country club memberships, according to court filings by the trustee charged with liquidating the Madoff firm and recovering money for victims of Mr. Madoff’s multibillion-dollar Ponzi scheme.

The documents back up a previous assertion by lawyers for the trustee, Irving H. Picard, that Mr. Madoff used his business as a personal “piggy bank.”

[snip]

In January, Mr. Madoff, his wife, Ruth, and other family members spent more than $100,000 on his firm’s American Express Corporate Card. Among the charges were $1,564 at Bistro Chez Jean-Pierre in Palm Beach, Fla.; $2,000 at Georgio Armani in Paris; and $2,813 at the Apple computer store in New York.

Mr. Madoff, the mastermind of the world’s biggest Ponzi scheme, doled out more than $7 million to various companies owned by his wife, Ruth, his two sons and his niece Shana. Peter Madoff’s wife, Marion, was paid a salary of $163,500 by the Madoff firm last year, even though investigators found no evidence that she actually worked there.

Mr. Madoff also paid out $471,000 to a marina in Long Island and nearly $1 million to a number of exclusive country clubs including the Breakers, the Atlantic Country Club on Long Island, the Palm Beach Country Club and the Trump International Golf Club.

If the IRS never audited this guy, who were they auditing? Just asking.

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Cuomo apes Massachusetts’s lead, Blumenthal to follow

Andrew Cuomo, who sat back in the weeds while Massachusetts assembled a civil fraud case against Madoff feeder funds, has now charged Ezra Merkin and his feeder fund, Ascot, with the same claim. Connecticut’s courageous Attorney General, Dick Blumenthal, now has a pretty good feel for which way the wind’s blowing and we can expect him to join in the fray any month now – probably after his betters get past the initial court hurdles. But he’ll be there at the end to claim credit, in front of the cameras, I promise you.

The Ascot fund was formed by Mr. Merkin in 1992 exclusively as “feeder” fund for Mr. Madoff, says the Attorney General. It grew to hold $1.7 billion from 300 investors by the end of December, 2008. Mr. Madoff then used the money in a massive Ponzi scheme.

About 85% of the investors in the Ascot fund did not know their money was siphoned to Mr. Madoff, the complaint says. For those that knew, the truth about the size and scope of the investment was obfuscated, says Mr. Cuomo. Mr. Merkin collected an annual fee from Ascot’s investors amounting to 1% to 1.5% of the total assets in the fund – a fee that included the fictitious Madoff returns, says the complaint. By 2008, Mr. Merkin was collecting about $25.5 million a year from managing Ascot.

And if you think that set up was similar to Walter’s, try this:

Mr. Merkin was not personally heavily invested in his own Ascot fund. He did not reinvest his $169 million in management fees for the years 1995 to 2007 back into his own fund, says the complaint. All told, Mr. Merkin invested personally and through family trusts and foundations $7 million in Ascot in its first six years, and less than $2 million over the following 10 years.

I’m waiting for criminal fraud charges to compliment the civil ones but I expect those will come from out-of-state, rather than Hartford. Tough to put your golfing buddy in jail, I guess.

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Back to Mustique, Walt – hurry!

The Noels prepare to travel (Photo GuestofaGuest.com)

The Noels prepare to travel (Photo GuestofaGuest.com)

Massachusetts regulators charge Fairfield Greenwich Group with fraud. This is a civil complaint by the Securities Division and not the sort of thing that will directly cause certain principals to join Bernie in Ossining, but the hell just continues, and where civil authorities smell fraud, can criminal charges be far behind? I’d ask where our own stalwart Greenwich AG Blumenthal is but, as always, he’s lurking on the sidelines, ready to dash out and snatch the baton once his work is done for him. Besides, he’s a friend and neighbor of Walt’s and probably doesn’t want to return his campaign contributions.

April 1 (Bloomberg) — Massachusetts Secretary of the Commonwealth William F. Galvin accused Fairfield Greenwich Group of fraud in misrepresenting to Massachusetts investors its lack of knowledge of the operation of Bernard L. Madoff Investment Securities.

The administrative complaint filed by Galvin in Boston seeks restitution to Massachusetts investors for losses and reimbursement for performance fees paid to Fairfield by those investors. It also seeks an administrative fine.

“Investment advisers have a fiduciary responsibility to their clients under law,” Galvin said in the statement. “The allegations against Fairfield in this complaint outline a total disregard for such responsibility, which helped the Madoff scheme stay afloat for so long.”

Fairfield founder Walter Noel admitted in testimony to the securities division that Fairfield was not involved in anything “but turning money over to” Madoff, according to Galvin’s statement.

Executives Coached

Galvin said Madoff coached Fairfield executives on how to respond to questions from the U.S. Securities and Exchange Commission who were looking into concerns of fraud by Harry Markopolos, a former money manager, who has told Congress he tried to persuade the agency for nine years that Madoff was a fraud.

Fairfield executives “were blinded by the fees they were earning, did not engage in meaningful due diligence and turned a blind eye to any fact that would have burst their lucrative bubble,” according to Galvin’s complaint.

Earlier this week a Connecticut judge froze the assets of Fairfield Greenwich Group and other so-called feeder funds that steered investors to Madoff, along with those of Madoff’s family members, a lawyer said.

 

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Walter Noel and 60 Minutes

I missed last night’s  show on Madoff (in fact, I don’t watch the show, but would have had I known Walt was going to be on) but a reader sends this link to Walter’s letter to CBS.

As far as I can see, Fairfield Greenwich Group’s defense is that they received phony trade confirmations and their clients got their money back when they asked for it – until they didn’t. Doesn’t help their case that Bernie in fact made no trades whatsoever during the years, so “monitoring” wasn’t very deep and the investigation of Madoff Securities was non-existent despite what FGG promised in their promotional materials.

The Fairfield Greenwich Group and its employees are victims of the Madoff fraud.  

Fairfield personnel invested with Madoff alongside our customers, and we appear to have lost 

$60 million of our own money.    

 Over the course of a 20-year relationship, Fairfield received trading confirmations from 

Madoff that purported to reflect the trades he was making for our investors. Our investors 

received over $3 billion in response to redemption requests that were honored promptly and 

without question by Madoff.   

 

 Contrary to speculation that has appeared in the media, Fairfield engaged in continuous, 

ongoing monitoring of Madoff’s activity.  That monitoring and the fact that every redemption 

request was honored — combined with Madoff’s then-impeccable credentials, reputation and 

technology, multiple reviews of Madoff by the SEC, the NASD and numerous auditors and 

investors, high credit ratings assigned to Madoff-related products by Fitch, S&P and Moody’s, 

and an unblemished course of dealing over many years — all contributed to our confidence that 

the investments with Madoff were appropriate and safe.   

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The More the Merrier up on Round Hill Road

Feeder funds like Walter Noel’s Fairfield Greenwich Group lost billions of dollars with Bernie Madoff and not surprisingly, their clients would like their money back. FGG alone is on the hook, perhaps, for $7.5 billion and no amount of real estate appreciation in either Greenwich or Mustique (or Southampton or Manhattan) will permit enough cash to be squeezed from the Noel real estate holdings to make people whole.

But the Wall Street Journal reports today that a number of accounting and legal experts see liability on the part of the feeder funds’ auditors to at least support actionable claims of negligence. I don’t know if the accounting firms’ insurers have anything left after paying off Enron claims but if they do, maybe Walt’s friends will forgive him and at least let him play the back nine at the Club, out of sight.

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Shark attack!

While the father if all class action suits sits in prison repenting his own crimes, his progeny are busy. The first (to my knowledge) class action lawsuit has been filed against Madoff and everyone associated with his fraud, including Greenwich’s own Fairfield Greenwich Group and Walter Noel, alleging various and sundry violations of ERISA. Anyone who’s IRA or pension fund was affected by Madoff and Walt probably will fall into ERISA’s protection and will thereby gain a nice variety of legal theories to perhaps recover on. But win or lose, Walter’s going to be busy the next few years. If you had a golfing date set with him before, say, 2019, he sends his regrets.

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Jaffe pleads the Fifth on Madoff Inquiry. Where’s Walto?

Pressure mounts on Madoff middlemen. Er, Walt? That would mean you, too.

The documents and Jaffe’s silence in the face of a barrage of questions by Massachusetts Secretary of State William Galvin illustrate the intensifying focus on middlemen and so-called “feeder-funds” that funneled investor money to Madoff.

“Galvin is taking a novel and aggressive approach to scrutinize the middlemen more closely and find out what they knew and when,” said Jay Gould, who heads law firm Pillsbury Winthrop Shaw and Pittman LLP’s hedge-fund practice.

“Ultimately he is looking if any of these middlemen committed criminal fraud,” added Gould, who once worked for the U.S. Securities and Exchange Commission. “Even being stupid could end up getting you a very severe penalty.”

When Galvin’s team asked Jaffe about commissions and other issues on February 4, Jaffe invoked the Fifth Amendment.

Jaffe has said he is as much a victim as anyone, telling the Palm Beach Post in December that while he earned 1-to-2 percent of an investor’s first profits in Madoff’s fund, he knew nothing about his “dark side.”

That sounds familiar.

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A bridge too far?

Thanks to my (only?) Vermont reader, I found this article in today’s NY Post describing the sorry plight of Walt Noel and his partner in nonfeasance, Jeffry Tucker. Tucker’s preparing to sell his horse farm and the two of them have sold their interest in a private jet.

Even Tucker’s wife Melanie, an avid bridge player, has had to tighten her belt.

Sources told The Post that as a member of the Midtown bridge club Honors, Melanie Tucker was accustomed to using her husband’s jet to fly herself, and the bridge pros hired to play on her team, to bridge tournaments across the country.

She recently told some of the professional players she employs that she’s had to postpone attending tournaments that would have required air travel, though she continues to play bridge at Honors six days a week, sources said.

Ignorant fool that I am, I was unaware that one could hire professional bridge players. I couldda been a contenda! But what does my favorite bridge-playing blogger, Peg from Minnesota think about all this? Peg, as someone who’s whupped Warren Buffet’s behind, how about Miss Melanie? Ever have to bitch-slap her? Take away her martinis? We’re dying to know and of course, any secrets you may choose to divulge will be kept in strictest confidence.

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The Democrats talk about putting people back to work, Bernie’s doing it!

Elderly, savings lost to Madoff, forced to seek employment as supermarket clerks, flyer-distributors. And when Walt’s friends end up caddying at Round Hill, maybe they’ll stop complaining that I’m picking on him.

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Bernie’s list – early report

Over a thousand names in non-alphabetized order, all I can do is a quick scan. I ran down backwards from p. 163 to 100 and came up with Greenwich’s own Met, Tim Teufel (at least, one Timothy S. Teufel, c/o Sterling Equities, FL), another Met, sort of, Jeffrey Wilpon, a Marshall Zieses, Old Greenwich (lost an IRA, poor fellow), and a Doug Brown – a Noel son in law? I think not. The Potamkins of Manhattan Cadillac fame and now of Fisher Island got whacked, too. of interest is the large number of what I guess were feeder funds with literally pages of separate accounts, each entry representing one angry investor. The legal fees spun off from this mess are going to keep lawyers happy for years. More later if time permits. It is open house day today, and there’s at least one new spec house I’m dying to see, even if none of the people on these 163 pages can afford it any longer. Perhaps their lawyer.

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Palm Beach pawn shop selling off Madoff victims belongings.

Old silver, mink coats, it’s all for sale, reports CityFile. And if you missed out, CityFile says that the same joint’s unloading ex-Lehman executives’ prized possessions in a week or two. Plenty of time to get down there, but perhaps I can save you the trip: I stopped Monica Noel this morning as she was clambering out of her Range Rover, burdened with armloads of nice-looking men’s suits and a few couture dresses. I asked if she was packing the stuff off to Florida and she gave me a look she’d normally reserve for a Brazilian gardener who might dare to file a workman’s comp claim against her. “That is completely undignified,” she sniffed. “The Noels have always given our castoffs to the Greenwich Hospital Thrift Shoppe and we see no reason to stop now. Imagine, selling Walter’s used underwear. Hmmmf!” I did notice a sign in the Thrift store’s window promising cash for the newly-unemployed’s unwanted clothing but I’m sure Monica would never take advantage of that bit of charity. But if you want to see what she’ll no longer be wearing, stop on in.

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Stop me before I kill again!

Madoff feeder fund sues its auditors for not preventing it from doing something stupid. No, not Walt’s fund but that Darien group run by a Fairfield Greenwich alumnus. FGG made noises about doing the same thing to its auditors but has taken no such action. Not enough money to pay the legal fees involved, probably. I’m still looking for that yard sale at 175 Round Hill Road – any day now.

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Before the collapse,Bernie and Peter Madoff’s wives applied for Florida homestead exemptions

Turns out that Dickie Fuld wasn’t the only troubled Wall Streeter who used Florida’s shield to protect his assets by transferring property to his wife. The older Madoffs did too, at a time when Peter Madoff, at least, claims he had no inkling of what his brother was up to. Hmmm. No such behavior seen, yet, by  the Greenwich side of  this, the two Madoff boys, Andy and Mark, but there’s plenty of time.

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We’ve said this all along

Surprise! Feeder funds fed Madoff because they thought he was front running. As I’ve suggested before, if you’re participating in a fraud, make certain you know who the victim is.

New York-based Fairfield Greenwich, which was founded by Walter Noel in 1983 and named after the county and city where he lives, was an international money machine. Its Fairfield Sentry Ltd. fund channeled all of its $7.3 billion in assets to Madoff, taking a cut of 1 percent of the total and 20 percent of the gains each year.

Family Ties

Noel, who declined to comment, built his global business in part on marriage. Three of his five daughters — who were profiled in a 2002 Vanity Fair piece titled “Golden in Greenwich” –married husbands who took Fairfield Greenwich’s business to far-flung lands.

One husband, Yanko Della Schiava, based in Lugano, Switzerland, was responsible for selling Fairfield’s offshore funds in Southern Europe, according to the firm’s Web site.

Another, Colombian-born Andres Piedrahita, led the European and Latin American businesses, working out of London and Madrid.

The third, Philip Toub, son of Swiss shipping magnate Said Toub, marketed the group’s funds in Brazil and the Middle East.

A fourth son-in-law, Matthew Brown, worked for the firm in New York.

For Madoff, the feeder funds weren’t only a way to gather money. They also enabled him to distance himself from individual investors. He didn’t like to socialize or hustle or answer questions, friends say.

Royal Treatment

The feeders were the gatekeepers, and they qualified for royal treatment. A money manager for a family office recalls accompanying Sonja Kohn, whose Vienna-based Bank Medici AG funneled $3.2 billion to Madoff, to a meeting with Madoff in New York in 1991.

He says Madoff treated her as if she were the Queen of England. The money manager also says Madoff wouldn’t answer any questions about his strategy.

A delegation from Credit Suisse Group AG, led by Oswald Gruebel, then head of private banking, had a similar experience in 2000. Gruebel, whose bank had about $500 million invested in Madoff funds at the time, wanted to know why the firm had an obscure auditor, why Madoff didn’t have a third-party custodian hold his clients’ assets and how much money he was running.

After the fifth or sixth query, people who were at the meeting say, Madoff ended the session.

Gruebel’s Warning

“You guys, if you are not happy with the returns you are getting,” he said, “you can take your money.”

Gruebel, 65, who retired as chief executive officer of Credit Suisse in 2007, urged clients to withdraw from Madoff’s funds, according to three people familiar with the matter.

Only about half of the money was taken out, the people say, indicating that many clients preferred Madoff’s returns to Gruebel’s advice.

That’s why it’s hard to weep for some of Madoff’s victims, says James Walsh, author of You Can’t Cheat an Honest Man (Silver Lake, 1998), a study of Ponzi-scheme perpetrators and victims.

“We’ve become a nation of investors, but nobody wants to do the work of applying Benjamin Graham’s analysis tools,” Walsh says, referring to the father of value investing. “They want a genius to give them a shortcut. That’s what made it a target-rich environment for Madoff.”

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Who knew she was still alive?

Zsa Zsa Gabor lost $10 million with Bernie Madoff. She’s 91 and on husband number five, if you were wondering.

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