Tag Archives: Sentry Fund

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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Must this family lose their house?

The town values Walter Noel’s manse at 175 Round Hill Road at $6 million which, judging from the tax card and this picture of the spread seems a bit conservative, even in today’s market. Eighteen rooms within 8,590 sf, 8 bedrooms, 9 1/2 baths, a pool and, naturally, stone walls around the perimeter of its 2.2 acres. When Fairfield Greenwich Group collapses sometime in the next few weeks, will the money that bought this place go with it? Probably not.

Assuming that Noel had good legal advice, his personal liability for the debts of his corporation should be nil. It’s very difficult to “pierce the corporate veil” and as long as all the corporate niceties were attended to, Nole’s villa in Mustique, his New York apartment, his Hampton’s weekend retreat and this cottage on Round Hill should all be safely out of reach from greedy, grasping creditors.

That’s if he can avoid being labeled a willing participant in Madoff’s fraud. If he plays the “I’m just an old dotard who relied on the word of my bestest friend” card right, he’ll escape Scot-free. There are a few clouds on his horizon, of course, not the least of which are the reports circulating that when he tried to unload a major portion of his Sentry fund to other investors he couldn’t and wouldn’t let them examine Madoff’s books and records. A wilful blindness to an ongoing fraud, especially when one is being enriched by that fraud, may be enough to bring liability crashing down on Walt’s head.

But would he want to stay on Round Hill? Wouldn’t it be uncomfortable to wander across the street to the Round Hill Club for a bit of golf where his impoverished former friends and investors now work as grounds keepers? For some people, sure; but for a man who just last Saturday, two days after he’d wiped out his pal’s fortunes, showed up at the Club’s annual Christmas party and brazened it out, probably not – “What? What’s the matter? Something wrong with your canape?” Don’t forget, Harvard obviously didn’t teach the man much but it did inculcate that fine sense of arrogance that permits him to look down on the “little people” (and without their money, his friends have shrunk to mere Lilliputians) and shrug off their envy and anger. I bet he stays.

But it will be fun to watch developments.

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More trouble for Greenwich’s Walter Noel

Nothing we haven’t pointed out here before, but burned investors in Noel’s Fairfield Greenwich Group’s Sentry Fund are beginning to ask some hard questions about what, exactly, Noel did to earn his fees. Nothing at all, it turns out.

In a “due diligence questionnaire” made available to potential investors in Sentry, Fairfield promised that it calculated the value of Sentry’s assets weekly and monthly. It also said Citco Fund Services, an independent hedge fund administrator based in the Netherlands, separately calculated the value of Sentry’s assets each month.

Further, Fairfield promised that both it and Citco double-checked the monthly statements from Mr. Madoff’s firm it received against records of the assets held in the fund. To prevent unauthorized stock trades or the unauthorized removal of cash from Sentry’s accounts, “the movement of cash among the Fund’s accounts requires two signatures,” Sentry said.

Mr. Mulligan did not respond to questions about whether Mr. Madoff could have moved money or securities out of Fairfield Sentry’s accounts without its approval. 

But what was bad for its investors certainly worked out well for the Noel clan.

According to the document, Fairfield generated $250 million in revenue and $200 million in profit for the year that ended Sep. 30, 2007. Nearly 65 percent of that money came from fees on Sentry, and nearly all the profits were distributed among the firm’s 21 partners. Fairfield’s employees were also lavishly compensated, with at least four receiving more than $5 million in pay.

It was, of course, all about Bernie Madoff, but who was he? Don’t ask, don’t tell:

In early 2008, several private equity and investment firms were approached by Fairfield about purchasing a share of the company. A partner of one that considered buying a stake that he estimated was between one-third and one-half of Fairfield — the firm was valuing itself somewhere between $1 billion and $1.5 billion — said that he was scared off about 20 minutes into his initial meeting with a team of Fairfield managers.

“They were just incredibly squishy and vague even during the warm-up,” said the prospective buyer, who spoke on condition of anonymity because of a non-disclosure agreement with Fairfield. “I asked them to tell me about the manager of the fund Sentry feeds into, and I was told, ‘We don’t really talk about him.’ ”

But while investors eat a thin gruel this Christmas they will no doubt be partially mollified by the thought of the Noels relaxing on Mustique, or elsewhere:

Like Mr. Madoff’s firm, Fairfield was at least in part a family business. Four of Mr. Noel’s sons-in-law worked at Fairfield. But unlike Mr. Madoff, Fairfield’s partners, led by Mr. Noel, were not shy about spending their money and taking a high profile in wealthy New York society circles.

“The last few years, they really made a play to be a part of that New York-Southampton social axis,” David Patrick Columbia, the editor of NewYorkSocialDiary.com, said of Mr. Noel and his family. “It happened so fast that you really noticed them.”

Mr. Noel, whose primary residence and office remain in Greenwich, has at least five luxury homes. Along with his Greenwich house, whose value has been estimated at $4.2 million, he has homes in Southampton and Palm Beach. And since 2000, the Noels have also maintained a pied-à-terre at 812 Park Avenue. The combined value of those homes is more than $20 million.

Update: the New York Social Diary mentioned in the Time’s article has lots of good Noel/Madoff stuff including that whistle blower’s futile attempt to interest the SEC in the Madoff fraud (his letter names all the players who, three years later, will go down in flames, including (especially) Fairfield Greenwich, and some photos of the Noels with their friends, including Greenwich’s own, John J. McCloy and his interior designer wife. Were they burned by their pal or did they just have the misfortune to share a photo frame with the blundering financial moke? Who knows – if you see a certain house n Stanwich Road go up for sale, perhaps that will be a clue.

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