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.
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.
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."
Hedge funds have begun to raise leverage levels again in recent weeks as prime brokers and other lenders become bolder about extending credit in more stable markets, a lawyer specializing in the sector said on Tuesday.
Henry Bregstein, attorney at law at Katten Muchin Rosenman, said that some strategies, such as multi-strategy funds and funds of funds, had tentatively started to increase leverage to as much as 50 percent within the last six weeks.
"We’re starting to see some leverage come back into the hedge fund industry," he told Reuters on the sidelines of the GAIM hedge fund industry conference here.
"With the stronger funds, we’re beginning to see some working on new leverage transactions… Markets appear to have stabilised."
The Lawyer – Offshore giant Appleby is to merge with Isle of Man firm Dickinson Cruickshank to create the world’s largest offshore firm in terms of partner numbers.
The combined firm will have 73 partners and nine offices worldwide, including in Dubai and Zurich, where Appleby opened last year.
It is the first major offshore merger since Appleby first moved into the Channel Islands by combining with Jersey-based firm Bailhache Labesse in June 2006.
Law.com – Federal prosecutors Thursday unsealed an indictment charging the chief executive of what used to be one of the world’s largest investment funds with constructing elaborate tax shelters for some of his wealthiest clients. The executive, Jeffrey Greenstein, the former head of the Seattle-based fund Quellos Group, and two lawyers face 18 counts related to tax evasion and fraud for a scheme that netted them $86 million in fees and allowed six clients to avoid paying about $400 million in federal taxes, according to the indictment.
What’s interesting for our purposes is that the indictment details how lawyers from Cravath, Swaine & Moore and Bryan Cave blessed the shelters with letters indicating to the taxpayers that they were legal and would withstand scrutiny from the Internal Revenue Service. (The firms are identified as "C.S.M." and "B.C." in the indictment, but two sources familiar with the matter confirm they are Cravath and Bryan Cave. In addition, a 2006 congressional investigation mentioned the role the two firms played in the Quellos tax shelters, and at least one lawyer, Lewis Steinberg, then of Cravath and currently at Linklaters, testified before a congressional subcommittee.)
The Associated Press – A Silicon Valley hedge fund manager wanted in the U.S. on charges he duped investors out of at least $5 million challenged his extradition from Hong Kong on Wednesday.
Fund manager Albert Hu, an American citizen, told a Hong Kong court through his lawyer that he wanted to exercise his right to see evidence in his case, in which U.S. officials are seeking his extradition to California.
"He feels that he must seek evidence (from) the prosecution," said defense counsel Jonathan Acton-Bond.
Hu had indicated he was willing to surrender to the U.S. during his first court appearance last week, according to Hong Kong’s Department of Justice.
Wall Street Journal – A lawyer for the court-appointed trustee liquidating Bernard Madoff’s firm confirmed they have located an additional $75 million in Madoff assets — a figure that would put the total above $1 billion.
A lawyer for the court-appointed trustee also said Monday that French authorities are moving to seize Mr. Madoff’s residence in France, to satisfy claims by victims in that country. The residence in Cap d’Antibes, France, was valued at about $1 million, according to a statement of Madoff’s assets as of Dec. 31, 2008.
Last week, U.S. prosecutors indicated they plan to seek the forfeiture of the residence in Mr. Madoff’s criminal case, in which he pleaded guilty earlier this month to perpetrating a massive Ponzi scheme. It wasn’t clear if French efforts would conflict with U.S. recovery efforts. A spokeswoman for U.S. prosecutors did not immediately comment.
Financial Times – The trustee charged with tracking down money for victims of Bernard Madoff’s alleged $50bn Ponzi scheme will target big investors – such as hedge funds – that pulled "substantial amounts" of "false profits" out of the broker’s operation.
Under federal and New York law, investors who withdrew either principal or profits in the 90 days before Mr Madoff’s December 11 arrest are particularly vulnerable to so-called "clawbacks", but the trustee will be able to reach back up to six years in some cases.
With billions in claims and only about $940m in recovered assets, Irving Picard, the trustee, must rely on money from investors who cashed out early as a source of restitution.
He and David Sheehan, a lawyer working with him, told a creditor meeting last week that they intended to focus on large investors, particularly if they had suspicions about Mr Madoff’s operation.
Mr Sheehan cited the example of "someone who may have been well informed and may have had red flags".
Bloomberg – Royal Bank of Canada, the country’s biggest bank by assets, was sued by investors in Olympus United Funds who claim they lost more than $90 million in the funds’ collapse.
Royal Bank, based in Toronto, “secretly managed” the funds, according to a complaint filed Jan. 23 in U.S. District Court in Manhattan. The funds’ parent company Norshield Financial Group filed for receivership in June 2005 amid probes by securities regulators.
“In its dealings and relationships with Norshield, Royal Bank of Canada assumed control of investments, exercised discretion in key areas and thus became liable for my clients’ losses,” Lee Squitieri, a lawyer for the investors, said in an interview.
Bloomberg – Royal Bank of Canada, the country’s biggest bank by assets, was sued by investors in Olympus United Funds who claim they lost more than $90 million in the funds’ collapse.
Royal Bank, based in Toronto, “secretly managed” the funds, according to a complaint filed Jan. 23 in U.S. District Court in Manhattan. The funds’ parent company Norshield Financial Group filed for receivership in June 2005 amid probes by securities regulators.
“In its dealings and relationships with Norshield, Royal Bank of Canada assumed control of investments, exercised discretion in key areas and thus became liable for my clients’ losses,” Lee Squitieri, a lawyer for the investors, said in an interview.
New York Daily News – Disgraced Park Ave. lawyer Marc Dreier gave fellow scamsters $100,000 to impersonate others in calls to victims, Manhattan federal prosecutors said Tuesday.
The new details emerged at a bail hearing for former broker Kosta Kovachev, 57, arrested yesterday for allegedly helping Dreier try to steal some $100 million from hedge fund managers.
Prosecutors say Kovachev pretended to be a real estate developer’s controller in an October sitdown with hesitant hedge fund managers. Kovachev also impersonated the developer’s CEO in a conference call, prosecutors say.
