Trouble ahead for Walter Noel?

People are beginning to question what, exactly, Greenwich’s Fairfield Greenwich Group did to justify earning as much as $135 million a year by merely shoveling money over to Bernie Madoff to steal. As this page (and its readers) have noted, there was zero due diligence conducted by Fairfield Greenwich, despite its fulsome praise of its abilities in that regard  posted on its website. The defense Fairfield Greenwich is trying out, that this was a “highly-sophisticated fraud” that could have been, and was missed by everyone, won’t carry much water with clients who paid their investment firm to detect such fraud, particularly when it appears that there was nothing complex about this scam at all, just a repeated assertion to “trust me”. Even Reagan knew better than that: “trust, but verify”.

“It’s mind-boggling that people like Tremont and Fairfield Greenwich had been doing this for so long,” said Brad Alford, who runs Alpha Capital Management LLC in Atlanta, which helps clients choose hedge funds. “It’s the job of these funds of funds to be doing due diligence. That’s why they get paid.”

In Palm Beach, the Wall Street Journal reports, defrauded investors are already putting their $17.0 million condominiums up for sale and hawking their Ferraris, yachts, and jewelry. Will Fairfield Greenwich’s founder, Walter Noel, have to sell his own Round Hill mansion? If he does, you’ll read it here first.

Update: The Journal article mentions a real estate agent who spent her weekend showing those newly-listed condominiums to New Yorkers who flew down to prey on their friends’ misfortunes. That’s mean, of course, but I’m guilty of pulling the tax cards for the houses of several of the Greenwich players in this drama and forwarding them to some of my own clients, just to give them a heads up on what might be coming on the market. Reagan may have advised to “trust but verify”; I learned in the Boy Scouts, “be prepared.”

9 Comments

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9 responses to “Trouble ahead for Walter Noel?

  1. Anonymous

    Something tells me that with Monica Noel’s South American lineage, there’s lots of money safely offshore, probably in cold, hard cash.

  2. Anonymous

    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.

  3. CEA

    Fairfield Greenwich was making $135 mil in fees, for the past 10-15 years. They did 0 due diligence, they just collected their fee. There were several fund-of-funds advisors (may their business quadruple!) who saw the weak accounting firm and the unreplicatable performance as warning signs and stayed away.

    There are two emotions that rule Wall Street: fear and greed. Clearly, Fairfield Greenwich only went for the latter. They SHOULD rightfully be sued for all the losses, with the restitution coming from the fees they collected.

    Funny, it mentions that two sons-in-law of Walter Noel were involved with the firm. Now, shouldn’t THEY be sued as well, since the whole family was negligent?

    To me, very little difference between crimes of commission (Madoff) and omission (Noel). You get paid to protect your clients. If you then do not do so – you should not get paid.

  4. christopherfountain

    During my career chasing bad stock brokers I heard the standard Wall Street excuse for the negligence of its brokers: “if you’re sophisticated enough to amass a million dollars, you’re sophisticated enough to know better than to trust and rely on us.” I wasn’t impressed by that logic then and I have no sympathy for people who pretended to be providing investment advice when they were simply collecting fees and doing nothing. Life has its ups and downs – I guess for this local family, one of those downs may have arrived.

  5. CEA

    Anonymous @ 8:31: That “local family” just lost $7.5 billion for other smaller investors they took money to protect. I feel far, far less sympathy for them than I do for their innocent clients who were paying handsomely ($135 mil a year!) for the supposed insights of someone who, let’s face it, was asleep at the switch.

    Individual investors were snookered by a charlatan. Investors who use fund-of-funds pay to be protected. Fairfield-Greenwich, Banco Santander, the whole lot of them deserve to be sued to replace every penny of their clients’ assets. $135 mil x 10 years = $1.35 billion. Clients lost $7.5 billion PLUS the $1.35 billion they’d paid out for this supposed “protective insight”.

  6. B1

    Glad to see that you are naming names, Chris. I’m thinking that one of the growth engines for the local commercial real estate in the coming years will be renting space to lawyers and government agencies setting up satellite offices to investigate Noel, the Madoff sons, Tremont, and miscellaneous other local malefactors.

    And for anonymous #2, above . . . please. Noel’s entire business model was that he and his family were richer. more sophisticated, and more beautiful than you, so you should trust us with your money. It was a castle built on the lie that they were diligently investigating and overseeing their managers, and the tide has just come in. About time.

  7. Riverside Dog Walker

    Ever wonder how due diligence is done by these huge hedge fund of funds? Sort of the way that audits of multi-national corporations are done by the Big 4 accounting firms (are there still four of them?).

    In most cases, it consists of (a) sending an analyst, someone in their mid 20’s (very bright but no real knowledge and overmatched any way you look at it) to fill out a questionaire which they take back to headquarters for review and (b) part of or related to a, asking who your other investors are. These people are such sheep. They like the rest of Wall Street are selling machines.

    It is guaranteed that they will miss the good early stage managers who will outperform because the size of their assets under management doesn’t cannibalize the returns from their strategy and that they will participate in flops, because everyone else was doing it.

    In case you missed it, Michael Lewis has an excellent article on the current financial mess. http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End-of-Wall-Streets-Boom

    Being prepared in case these fine fellows in town have to sell their houses? Man, that is hard, but in case you didn’t notice, these people play rough. If you can dish it out, you best be able to take it when it comes your turn.

  8. A Noel Holiday

    This christmas season may the judge say Noel,
    its time you find yourself in a jail cell,
    for not giving manager diligence its due,
    now its time for the investors to sue.

    This holiday season make merry you sleeze,
    for it wont be the same when they toss the keys,
    never again will you be rich,
    but in prison you can be that big dude’s bitch.

    Happy New Year.

  9. Jimmy

    Response to Anonymous at top.

    The Haegler family emigrated from Switzerland during the height of WWII, to Rio. Reportedly their family “business’ there is the sale of Swiss heavy machinery to the Brazilian Govt. Only the most cursory amout of research reveals that there have never been any bulldozers constructed in Switzerland. However Switzerland is one of the worlds largest producers of small arms? Now perhaps the Rio police will discover why the most advanced weapons in the world wind up in their poorest favellas