Each business day HedgeCo.Net keeps you informed with the top hedge fund industry news, opinion and insight from around the globe. From the latest hedge fund launches, to the impact of regulation, competition, and investor activism - we track the topics and people that make a difference to you.
Bloomberg – Bank of America Corp. Chief Executive Officer Kenneth Lewis faces more queries about his purchase of Merrill Lynch & Co. after a federal judge refused to approve a $33 million settlement of a lawsuit over bonuses.
The bank agreed on Aug. 3 to settle U.S. claims the bank misled investors while buying Merrill. Yesterday, U.S. District Judge Jed Rakoff in New York said the amount isn’t appropriate if the bank lied about billions of dollars in payments. Rakoff asked for more filings by Aug. 24 and said he won’t rule on the accord before Sept. 9.
Chicago Tribune – Illinois hedge-fund manager Gregory Bell, who was charged with wire fraud for his role in an alleged Ponzi scheme, was granted $1.5 million bail and required to wear an electronic monitor, a federal judge in Minnesota ruled Wednesday.
Bell, founder of Lancelot Investment Management LLC, was accused Friday by U.S. prosecutors and regulators of feeding client assets to the alleged scheme run by businessman Thomas Petters. Magistrate Judge Jeffrey Keyes, citing Bell’s cooperation with authorities, ordered Bell to put up interest in his home in Highland Park to satisfy the bail.
The London Free Press – A hedge-fund swindler who faked his own death in an effort to skip out on a 20-year prison term was sentenced yesterday to two extra years.
Federal Judge Kenneth Karas said Samuel Israel III was "thumbing his nose at the system" when he staged a suicide and jumped bail last year rather than do time for taking hundreds of millions from investors in his Stamford, Conn.-based Bayou hedge funds.
New York Daily News – Park Avenue lawyer Marc Dreier was sentenced to 20 years in prison Monday by a judge who scolded prosecutors for wanting to jail him for as long as Ponzi swindler Bernard Madoff.
"Is the government serious about asking for 145 years?" Manhattan Federal Judge Jed Rakoff asked.
"To me, for the government to ask for 145 years is to demean the sentence Judge [Denny] Chin imposed on Mr. Madoff.
Herald Tribune – At a bail hearing in which Arthur G. Nadel was sent back to his cell to come up with better co-signers, a federal judge heard from the receiver in the case about a previously unknown multimillion-dollar hedge fund account controlled by Nadel in the Cayman Islands.
Receiver Burton Wiand, a Tampa lawyer, testified that he had discovered a hedge fund in the Caymans that at one point contained $15 million. He was able to follow $5 million back to one of the six funds at Nadel’s Scoop Management in Sarasota. The whereabouts of the remaining $10 million is unclear.
Law.com – Marc S. Dreier on Wednesday sent a confessional letter to the federal judge who will sentence him on Monday (pdf), describing in remarkable detail how he funded the once-admired expansion of Dreier LLP by committing frauds totaling more than $400 million.
Facing a recommendation from the government that he serve the rest of his life in prison but pleading for a measured sentence, Dreier, 59, said his seven-year downward spiral began with a simple theft from a client settlement fund and ended at the point where "I found myself running a massive Ponzi scheme with no apparent way out."
Dreier’s letter was submitted as defense attorney Gerald L. Shargel and Assistant U.S. Attorney Jonathan R. Streeter sent competing memos to Southern District of New York Judge Jed S. Rakoff taking a dramatically different view of the U.S. Sentencing Guidelines.
Denver Post – Bernard Madoff asked a federal judge this week to sentence him to as little as 12 years in prison after he pleaded guilty earlier this year to operating a massive, decades- long Ponzi scheme.
In a letter filed late Monday and made public Tuesday, Ira Sorkin, a lawyer for Madoff, asked U.S. District Judge Denny Chin to sentence his client to less than a life sentence.
"Mr. Madoff is currently 71 years old and has an approximate life expectancy of 13 years," Sorkin said. "A prison term of 12 years — just short of an effective life sentence — will sufficiently address the goals of deterrence, protecting the public and promoting respect for the law without being greater than necessary to achieve them."
HedgeFund.Net – Samuel Israel III, the Bayou Group founder who led the FBI on a merry chase after failing to show up to serve his prison term, has recovered sufficiently to plead guilty to escape, a federal judge said last week.
But Israel still hasn’t pleaded guilty as the proceeding was delayed until March 16, to give the convicted ex-hedge fund manager more time to talk to his lawyers, according to news reports.
West Palm Beach (HedgeCo.net) – Federal Judge Stanley R. Chesler of the Federal District Court of New Jersey, Friday threw out a Canadian pharmaceutical company shareholder lawsuit against a group of hedge funds including SAC Capital Advisors LP.
The Judge dismissed the lawsuit, saying "The conduct is so egregious, and the futility of imposing alternate sanctions is so clear, that dismissal is the only appropriate sanction."
Apparently the shareholders had violated a New York judge’s order sealing documents in a related Biovail case.
"The record before the court suggests that these proceedings and the RICO action proceedings were all part of a choreographed strategy by Biovail and its attorneys designed to constitute a counterattack against the Biovail securities action," the Judge wrote.
"We are gratified that the court has seen through this charade and has dismissed the case," A spokesman for SAC said.
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Herald Tribune – A federal judge extended a freeze on the assets of Sarasota’s Arthur G. Nadel on Tuesday, but failed to include other partners — a measure some investors with the accused hedge fund swindler have been pushing for aggressively because Nadel shared $95.5 million in incentive fees with other Scoop Management Inc. principals.
Nadel did not contest U.S. District Judge Richard A. Lazzara’s order freezing personal and business bank accounts, property and other assets Nadel controls solely or with others, so a hearing scheduled for today was canceled.
Investors like Fort Lauderdale’s Louis Paolino Jr., who is out $5.8 million since the Jan. 14 implosion of the six funds Nadel managed, had hoped the hearing might shed light on why the U.S. Securities and Exchange Commission was not seeking to include Nadel partners Neil or Chris Moody in the freeze.
New York Daily News – A federal judge charged with slapping his wife hired a big shot defense attorney as he faces a misdemeanor charge that could land him in the clink.
James Peck, 63, the bankruptcy judge overseeing the breakup of Lehman Brothers, hired Barry Bohrer, a prominent criminal defense lawyer whose clients have included Sam Israel, the hedge fund swindler who went on the lam last summer after faking his own suicide to avoid a 20-year jail term.
Peck, who was briefly assigned to handle the Bernard Madoff bankruptcy until he recused himself in December, told cops when they came to his Park Ave. apartment Saturday afternoon that "I was defending myself."
Bloomberg - Marc Dreier, the New York lawyer jailed since his arrest for allegedly cheating hedge funds, won’t be able to post the $20 million bond that would free him, his lawyer told a federal judge.
U.S. Magistrate Judge Douglas Eaton in New York today modified an earlier ruling that ordered Dreier held without bail until trial. Eaton required Dreier to have four co-signers and submit to home detention and electronic monitoring. Dreier’s lawyer, Gerald Shargel, said he will probably appeal.
“Effectively, that will keep my client in jail,” Shargel told Eaton, the same judge who set $10 million bail for accused swindler Bernard Madoff, who is charged with running an unrelated $50 billion Ponzi scheme.
Dreier, 58, was arrested Dec. 7 on charges that he persuaded two unidentified hedge funds to give him more than $100 million by falsely claiming he was selling at a discount notes issued by Sheldon Solow, a New York developer. Prosecutors later said “very sophisticated investors” lost $380 million. In a letter to the judge yesterday, they said that the loss topped $400 million.
Dreier, a graduate of Harvard Law School and Yale College, hasn’t formally responded to the wire- and securities-fraud charges. Prosecutors, who arrested Dreier on a criminal complaint, must file an indictment with the court by Feb. 7, Shargel said outside the courtroom.
