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To: LLCF who wrote (192198)	3/22/2009 7:53:23 AM
From: stockman_scott	Read Replies (1) \| Respond to of 306849

Madoff Employee Breaks Silence thedailybeast.com

To: LLCF who wrote (192198)	3/23/2009 6:52:59 PM
From: stockman_scott	Respond to of 306849

Hedge-Fund Investors Hire Private Eyes to Avoid New Madoffs By Saijel Kishan March 23 (Bloomberg) -- Randy Shain said he wasn’t stunned when hedge-fund managers Paul Greenwood and Stephen Walsh were arrested last month for allegedly misappropriating $554 million in client funds. A probe three years ago by his First Advantage Investigative Services LLC found in public documents that a brokerage run by the pair had agreed to settle regulators’ claims that it improperly used customer assets as loan collateral and had been fined at least 11 times for violating rules at several U.S. exchanges. The firm neither admitted nor denied the allegations, which covered actions from August 1985 to January 1986. “It’s a case of turning over the stones and finding what’s underneath,” said Shain, who doesn’t know if the client of his New York-based firm steered clear of the fund managers. Firms like Shain’s say they are seeing an increase in requests for background checks on fund managers in the wake of high-profile fraud cases against Bernard Madoff in New York, Florida’s Arthur Nadel and R. Allen Stanford and his Antigua- based bank. In all, the men are accused of cheating clients out of as much as $73 billion. “Investors are being more careful in checking out where they put their money,” said Pete Turecek, a senior managing director overseeing hedge funds at Kroll Inc., a risk-consulting company in New York “As the economy continues to weaken, some people including money managers may be drawn to taking shortcuts.” ‘Really Fruitful’ Sharath Sury, whose S4 Capital LLC oversees $2 billion in assets, hired an investigative firm three years ago to look into a hedge fund before making a planned investment. Sury said the probe revealed that the New York-based fund, which had $600 million in client assets, didn’t reconcile trades daily as the manager had claimed, reported inconsistent asset values and used an auditor related to its founder. The fund shut down in 2007, he said, declining to name the firm. “This was a case of the background checks proving to be really fruitful,” said Sury, chief executive officer of Chicago-based S4 Capital. “It helped us avoid major losses.” Investigators trawl through court filings and public databases such as LexisNexis and interview former employees to get information on managers that may raise concerns. They dig up records of violations of trading rules, faked resumes, drunk- driving offenses and drawn-out divorce cases. $1,000 Cost Background checks can take from two to six weeks, and may cost about $1,000 for each individual or company investigated, according to the firms. “Basically you don’t want managers to have distractions that will impact their decision making,” said Michael Dubin, president of New York-based The LongChamp Group Inc., which allocates client money to hedge funds. Background searches helped Cole Partners Asset Management LLC stay away from managers that were later found to have had run-ins with regulators, said Rian Akey, chief operating officer of the Chicago-based firm, which channels money into hedge funds. Akey said a check done three years ago on a New York-based hedge fund found that in 1999 the managers had paid fines amounting to $500,000 for violating trading rules. “That was enough to put us off,” he said, declining to name the fund. Public records show that Nadel, founder of Scoop Management Inc. in Sarasota, Florida, was disbarred as a lawyer in New York in March 1982. Nadel faces federal charges of defrauding investors of more than $300 million. Undetected for Decades Madoff fooled clients and regulators for decades as he used money from new investors to pay off old ones. Fairfield Greenwich Group, Tremont Group Holdings Inc. and Bank Medici AG were among victims that channeled client money to Madoff’s firm. Harry Markopolos, a former money manager, told Congress that he had tried to convince the agency for nine years that Madoff was a fraud. Madoff, 70, pleaded guilty last week to defrauding investors of as much as $65 billion in the biggest Ponzi scheme in history. He will be sentenced on June 16 and faces 150 years in prison. “There is now a rethinking of diligence practices,” said Mitch Nichter, a partner at Paul, Hastings, Janofsky & Walker LLP, a New York-based law firm. “This will translate into enhanced efforts to verify information provided by hedge funds.” Not all investors hire outside firms to perform background checks. In-house teams can do the same work, says Cem Habib, portfolio manager at London-based Altedge Capital Ltd., which invests in hedge funds. “In addition, we have an extensive network of people in the industry that we can speak with to check up on other people’s backgrounds if we need to,” he said. Driving Records Fraudulent activity is not the only thing that can be unearthed in investigations. Drunken driving can highlight character issues, according to Kroll’s Turecek. “It may signify an inability to handle stress properly,” he said. “We look for patterns of behavior that may be indicative of a larger issue or of someone’s character.” A background check on a New York-based hedge fund in 2005 found that one of its analysts had recently resisted arrest after being caught shoplifting, according to Jeff Brenner, a principal at Intelysis Corp. in Cherry Hill, New Jersey. The analyst was due to appear in court a week before the Intelysis client was about to put money in the fund, he said. “At the end of the day he’s helping to determine where money is being invested,” said Brenner, whose firm has done more than 500 hedge-fund investigations since 1998. Allegations in divorce filings, such as adultery with a co- worker, can also raise red flags, said Turecek. “Such situations may warrant looking at the individual’s expenses to see if there were improperly charged to the company.” To contact the reporter on this story: Saijel Kishan in New York at skishan@bloomberg.net Last Updated: March 22, 2009 20:11 EDT

To: LLCF who wrote (192198)	3/26/2009 12:04:59 AM
From: stockman_scott	Read Replies (2) \| Respond to of 306849

Hedge funds: Still making a killing independent.co.uk Parts of the hedge fund sector may have suffered during the credit crunch, but it is business as usual for the industry's big names, who earned staggering sums again last year. Mathieu Robbins reports Thursday, 26 March 2009 James Simons, Renaissance Technologies; 2008 earnings: $2.5bn Jim Simons, based in New York state, was the best-paid manager in hedge fund land last year, according to Alpha magazine's annual ranking of the world's highest earners in the industry. Mr Simons bagged himself a whopping $2.5bn (£1.71bn) through his Renaissance Technologies fund management company. With markets crashing and banks imploding across the world, his flagship Medallion fund – which has, since 2002, been limited to investments from his own employees – generated an 80 per cent return last year. Mr Simons, 70, is a chain-smoking, award-winning mathematician, whose trading strategy relies on computer programmes designed by an army of more than 100 PhD graduates. His high personal earnings are partly due to the terms he levies on clients: a 5 per cent management fee – large for the industry – as well as a 44 per cent performance charge. The value of Mr Simons' share of the profit means Medallion, which has about $7bn in assets – was up almost 160 per cent before the fees were taken. But even Mr Simons is not immune to that bane of hedge funds at the moment – redemptions by investors. Renaissance started this year with about $20bn of assets, down from about $25bn at the end of 2008. John Paulson, Paulson & Co; $2bn John Paulson is widely known for cashing in on the fall on banking shares in the past year. The fund he founded in 1994 has made more than £300m shorting shares in banks such as Lloyds and can boast the former US Federal Reserve chairman Alan Greenspan on its advisory board. Mr Paulson, 53, formerly an M&A banker at now-defunct Bear Stearns, is among the 100 richest Americans listed by Forbes magazine. And the $2bn he raked in last year from bets on the credit crunch will hardly undermine his rich-list ranking or status. John Arnold, Centaurus Energy; $1.5bn As they can bet on assets rising in price as well as losing value, hedge funds thrive on one thing more than any other – volatility. Having first learned the ropes at the infamous Houston-based trading company Enron, John Arnold, who is still only aged 34, specialises in energy trading, where the spectacular rise and fall of oil prices last year provided speculators with a string of opportunities for huge gains. Enter Mr Arnold, whose Centaurus Energy, also in Houston, managed to generate 80 per cent returns in 2008, enabling its founder to earn $1.5bn. George Soros soros fund management $1.1 billion Needing few introductions, 78-year-old George Soros is yet again among the hedge-fund industry's top earners – and yet again one of his successful plays last year was a bet against Britain, reminiscent of his uncanny premonition about Black Wednesday in 1992. This time, Mr Soros made a good part of his $1.1bn by gambling that UK interest rates would fall – an inspired investment decision because most people last summer expected them to go up. Raymond Dalio bridgewater associates $780m Raymond Dalio is the first hedge fund man in these rankings to have made less than $1bn last year, claiming a measly $780m, mostly from currency fluctuations, having correctly bet on the rise of the Japanese yen. While the struggling Japanese economy may not be grateful for the rise, which has killed exports, Mr Dalio cashed in. He has since told clients it is "well within the realm of possibilities", for 2009 and 2010 to be as bad as 2008. Bruce Kovner, Caxton Associates; $640m Bruce Kovner's firm, Caxton Associates, achieved a 13 per cent return for 2008 on its $4.3bn Caxton Global Investments fund after he took his 30 per cent performance fee, earning him $640m. Mr Kovner, 64, is far from a lifelong financier, having worked in roles ranging from New York taxi driver to harpsichord player. He also enjoyed a stint as a consultant to the Republican Party. In 1977, he used $3,000 to try his hand at commodities trading and clearly had a talent for it, going on to found Caxton in 1983 with $13m. David Shaw, DE Shaw & Co; $275m The former science professor David Shaw founded DE Shaw in 1988. The hedge fund is one of the world's largest and has 1,700 employees. Mr Shaw made $275m last year. After handing over the running of the fund in 2002, he now spends more time at DE Shaw Research. His team of scientists has built a supercomputer for molecular simulations. Stanley Druckenmiller, Duquesne Capital Management; $260m Stanley Druckenmiller, 55, was once George Soros's chief investment officer, a post he held from 1989 to 2000. Since then, he has very successfully struck out alone and is now one of America's richest men. He slashed his US stock market holdings last year, while investing heavily in the dollar, profiting from its rebound. Mr Duquesne's profits earned him $260m. David Harding, Winton Capital Management; $250m The only London-based manager to have made the top 10 hedge-fund earners, David Harding made $250m for himself last year. Futures trading, which involves anticipating and, even more importantly, timing the direction of the markets – is what enabled him to rake in the cash at Winton Capital Management, based in Kensington. John Taylor Jr, FX concepts; $250m Currency trader John Taylor Jr is, at 65, head of New York-based FX Concepts. He made his $250m by gambling on falling interest rates, as well as short selling the currencies of emerging markets including Russia. Mr Taylor founded FX in 1981 as a currency forecaster, and it started taking clients' funds in 1988.