Reuters – General Motors Corp and Chrysler LLC are considering accepting a pre-arranged bankruptcy as the last-resort price of getting a multi billion dollar government bailout, Bloomberg reported, citing a person familiar with internal discussions.

In response to automakers’ bailout plea, staff for three members of Congress have asked restructuring experts if a pre-arranged bankruptcy — negotiated with workers, creditors and lenders — could be used to reorganize the sector without liquidation, Bloomberg said.

General Motors and Chrysler could not be immediately reached for comment by Reuters.

Industry executives and analysts say the immediate carnage from a bankruptcy of General Motors Corp, Ford Motor Co or Chrysler would spread throughout an industry that is bleeding cash in a global slowdown.

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New York (HedgeCo.Net) – Hedge fund fraudster Salman Shariff has been sentenced to 57 months behind bars, years after swindling millions from trusting investors. 

The Miami-based funds raked in almost $11 million from 1998 to 2001, while Shariff afforded himself all of the luxuries indigenous to South Florida, including an oceanfront South Beach condo, a Ferrari Testarossa and a 43-foot yacht.  Shariff also purchased a modeling agency and gave it to his girlfriend to run.

 Shariff had admitted guilt at his plea hearing earlier this summer.  The ponzi-like scheme took place within several funds, including Vestron Investment Club and Crescent Capital. 

Ponzi-schemes are commonly found in cases of hedge fund fraud.  They involve using new capital coming in to pay “returns” to existing investors.  Investors are usually duped into thinking the fund is posting admirable returns, when in fact, the fund is probably suffering. 

Shariff admitted to exaggerating the performance of his funds in order to present them in a favorable light.  When the fund was experiencing sharp losses, Shariff claimed it was posting returns between 58 and 86 percent.

Shariff had been on the run until February, when FBI agents tracked him down in Queens.  In addition to his sentence, U.S. District Court Judge Federico A. Moreno insisted on an extra three years of supervised release.

Julie Scuderi
Senior Editor for HedgeCo.Net
Email: julie@hedgeco.net

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Boston Globe – A federal judge barred Samuel Israel, the convicted founder of hedge fund firm Bayou Group LLC, from entering a plea to bail jumping, saying his addiction to methadone may have impaired his judgment.

Israel, who sought to plead guilty yesterday in US District Court in White Plains, N.Y., told US District Judge Kenneth Karas that his ability to understand the proceedings was "60 to 70 percent."

Prosecutors said the 49-year-old faked suicide and fled the day he was to begin a 20-year sentence for his conviction in a $400 million fraud.

"I have to be satisfied that you’re competent," Karas said, rejecting the plea to one count of failure to appear. "The fact that there is some doubt about that makes it imprudent to go forward today."

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