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To: John Plasky who wrote (7160)	3/28/2000 9:35:00 PM
From: Sir Auric Goldfinger	Read Replies (2) \| Respond to of 10354

Fraud victims target third parties By Joshua Chaffin in New York - 28 Mar 2000 12:00GMT Victims of one of the costliest hedge fund disasters are taking aim at the third-party firms that were charged with issuing statements, clearing trades and auditing the books of Manhattan Investment Fund. A civil complaint, filed in the United States district court in Manhattan, alleges that misconduct by Deloitte & Touche, Bear Stearns and Fund Administration Services (Bermuda), an affiliate of Ernst & Young International, allowed Manhattan and its head, Michael Berger, to perpetuate a fraud that ultimately cost investors more than $350m. The class action lawsuit, filed on behalf of Cromer Finance, a British Virgin Islands investment company, accuses Deloitte, the fund's auditor, and FASB, its administrator, of recklessly overlooking trading statements from Bear Stearns, a prime broker, that revealed Manhattan was incurring huge losses even as it reported double-digit gains to investors. The suit alleges that executives at Bear Stearns were aware of the fund's losses and tipped off select investors with whom it had prior business dealings. It is also alleged that Bear Stearns profited handsomely by clearing trades for the losing fund even after it failed to satisfy minimum margin requirements set out by the New York Stock Exchange. Bear Stearns said the allegations were baseless and without merit. At least two other law suits are expected to be filed that will make similar assertions. They will be filed on behalf of individual investors, and could seek hundreds of millions of dollars in damages. The allegations come less than a year after the bank agreed to pay $38.5m to settle claims in connection with former client AR Baron, the now defunct brokerage firm. Officials at Ernst & Young and Deloitte & Touche could not be reached. Mr Berger, who was also named in the Cromer suit, declined to comment. The lawsuits return attention to a little-regulated industry that has been rocked by scandal. Last fall, authorities accused a New Jersey hedge fund manager of falsely selling $3bn in bonds to foreign investors, mostly in Japan. More recently, they brought charges against a Florida hedge fund manager for concealing at least $59m in investor losses. Mr Berger rose to prominence as his fund racked up gains using a contrarian investment strategy that had bankrupted many others. Mr Berger short-sold stocks, primarily in the internet and technology sector, betting that they would decline in value. The strategy appealed to investors, including the Bank of Austria, because it hedged against a feared tumble in the equity markets while also offering a competitive return. In January, the Securities and Exchange Commission brought charges against Mr Berger, accusing him of falsifying performance figures to hide losses. Manhattan Investment is under the management of court-appointed receivers.