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KWCH.com – A prominent New York law firm is expected to seek bankruptcy protection.
That’s according to a receiver appointed to run the firm — which has been scandalized by charges that its founder was behind a massive fraud.
The receiver also predicted that the founder — Marc Dreier — will soon seek bankruptcy protection as well.
Dreier was jailed last week after being charged in a criminal complaint and by the Securities and Exchange Commission in the alleged sale of fraudulent promissory notes.
He’s accused of an elaborate charade aimed at convincing three hedge funds that the investments were real.
Prosecutors have estimated total loses could top $380 million.
Washington Post – New evidence has emerged in an insider-trading investigation that the Securities and Exchange Commission closed two years ago without filing charges, raising questions on Capitol Hill about the government’s oversight of what was once one of the nation’s most prominent hedge funds.
According to documents, the hedge fund — Pequot Capital Management — secretly began to pay $2.1 million to a key witness in the case last spring, just three months after several senators called on the SEC to reopen its investigation.
Top Republicans on the Senate Finance and Judiciary committees asked Pequot’s chairman this week to provide records related to the payments. The FBI is also looking into the matter, according to people familiar with the case.
Law.com – As Marc S. Dreier was being arrested for attempting to defraud hedge funds of more than $100 million, some of the 10 affiliates of Dreier LLP were peeling off and others were trying to hold the firm together even as money for insurance and some operating expenses is frozen.
Declarations filed Monday by the Securities and Exchange Commission in connection with a civil case it brought against Dreier also indicated that some firm attorneys were concerned that escrow accounts, which Dreier controlled, had been depleted.
One named partner of an affiliated firm, Vincent Pitta of Pitta & Dreier, stated in a declaration that the firm could not meet its expenses. The reason, Pitta said, was that he and Dreier were the sole signatories to the firm’s operating account, and Pitta had only limited authority to approve spending.
Forbes – A group of Dillard’s Inc. investors is asking the family that controls most shares in the department store chain for corporate records containing information on family and business relationships and perks given to directors or executives of the department store chain.
The request was detailed in a filing with the Securities and Exchange Commission and comes as softening consumer spending has many retailers, including Dillard’s, posting weak sales ahead of the crucial holiday season.
New York (HedgeCo.Net) – A prestigious New York City lawyer has been arrested and charged with masterminding a $100 million real-estate scheme that targeted large institutional investors and hedge funds.
Marc Dreier, of Dreier LLP on Park Avenue, was arrested on Sunday at LaGuardia Airport and is now facing both federal charges of securities and wire fraud, along with civil fraud charges filed by the U.S. Securities and Exchange Commission. In addition, Dreier was already dealing with criminal impersonation charges brought on by Canadian authorities.
"Our complaint alleges a stunning, brazen fraud that targeted some very sophisticated institutional investors," said Linda Chatman Thomsen, Director of the SEC’s Division of Enforcement.
Among the allegations, Dreier allegedly marketed bogus promissory notes that included ones tied to a real estate development company based in New York. Prosecutors said Dreier then covered it up by producing phony documentation and false financial statements to keep the investors from discovering the scheme.
According to the prosecution, Dreier convinced hedge funds to purchase these notes by highlighting the discount they would receive due to the original investors facing a cash crunch brought on by the current economic turmoil. Though the hedge funds weren’t specified, prosecutors say that one New York fund wired $100 million to one of Dreier’s accounts, while another fund in Connecticut wired about $13.5 million.
"This is a very complicated matter, and the facts are beyond reach of a sound bite," Dreier’s lawyer, Gerald Shargel told reporters at the scene.
Marc Dreier is a 58-year-old graduate of Harvard Law School. His bail hearing is scheduled for this Thursday.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
istockAnalyst.com – Mutual funds and hedge funds are very similar. An investor puts $10,000 into a mutual fund or hedge fund, and the manager uses that $10,000—along with the rest of the fund’s capital—to buy and sell securities.
Though often shrouded in mystery, hedge funds are pretty easy to understand. A mutual fund has to register with the Securities and Exchange Commission; a hedge fund does not. Why? Hedge funds are exempt from registration because they generally operate under one of two exemptions provided by the Investment Company Act of 1940:
Section 3(c)(1): Hedge funds are exempt from registration if they have "not more than one hundred" investors, all of which are accredited investors; or,
New York (HedgeCo.Net) – Activist investor Carl Icahn purchased another 6.8 million shares of Yahoo stock last week at a price tag of about $67 million, further boosting his already vast stake in the company to almost 5.5 percent.
According to a filing with the Securities and Exchange Commission, that stake is equal to 75.6 million shares in the Internet giant, or about $870 million.
The Corporate Raider has been outspoken about his beliefs that Yahoo should strike a deal with Microsoft Corp. in hopes of better competing with Google. Although no merger talks are currently in the works, some believe Icahn is still pushing for the deal.
Icahn was also vocal about his desire to dump Jerry Yang, saying that the former Yahoo CEO did everything he could to discourage a deal with Microsoft. Yahoo is currently seeking a replacement for Yang after he stepped down on November 17. Yang had previously rejected a $31-a-share offer by Microsoft earlier this year, prompted Icahn and other board members to question his leadership.
After news circulated on Friday that Icahn had increased his stake in the struggling company, Yahoo shares rallied almost 9%, up to $11.51 in the shortened trading session. Icahn may be trying to reverse the massive losses he incurred this year, after shares of Yahoo plummeted almost 60 percent.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
eBrandz – In a move expected to fuel speculation over Yahoo Inc.’s search for a new chief executive — Corporate raider and billionaire investor Carl Icahn augmented his stake in Yahoo, has bought up close to 7 million additional shares of the Internet Company over three days this week, paying around $67 million, according to regulatory filings.
Icahn, a billionaire hedge-fund manager who now holds a seat on Yahoo’s board, acquired 6.77 million additional shares of Yahoo stock during November 24-26 for 67 million dollars, now owns 75.6 million of the company’s shares, or a 5.4 percent stake valued at around $870 million based on Yahoo’s closing share price on Friday, according to the documents filed with the Securities and Exchange Commission and dated Wednesday.
The company’s stock moved up 93 cents, or nearly 9%, to $11.51 in the shortened trading session after Icahn, a Yahoo board member who has been pushing a strategy shift or a sale to Microsoft Corp., said he had bought about 6.8 million shares.
EasyBourse.com – Global securities regulators have formed three task forces targeting short selling, hedge funds and unregulated financial trading, in an effort to take "urgent action" to coordinate responses to current market turmoil, Securities and Exchange Commission Chairman Christopher Cox announced Monday.
The newly formed short-selling task force, chaired by the Securities and Futures Commission of Hong Kong, will work to eliminate different approaches to "naked" short sales, including delivery requirements and disclosure of short positions, while minimizing any harm to legitimate securities lending, hedging and other transactions. Read Complete Article
West Palm Beach (HedgeCo.net) – Securities and Exchange Commission Chairman Christopher Cox announced a meeting of the International Organization of Securities Commissions (IOSCO) Technical Committee today, Monday, November 24 by teleconference to discuss urgent regulatory issues in the ongoing credit crisis.
"In addressing turbulent market conditions, it is essential not only that regulators act against securities law violations, including abusive short selling, but also that there be close coordination among international markets to avoid regulatory gaps and unintended consequences," said Chairman Cox. "This high-level coordination among international regulators will allow us to review the steps we have taken thus far and ensure that our ongoing and future actions are effective and mutually reinforcing."
The Technical Committee meeting will consider Short Selling and the effectiveness of recent regulatory responses in reducing manipulative short selling without stifling legitimate short selling activity, also explore possible coordination on rules relating to naked short sales, in particular with regard to position reporting and delivery and pre-borrowing requirements.
The teleconference also covers Under-Regulated or Unregulated Products. Development and disclosure principles to promote transparency in OTC markets for derivatives and other financial instruments which will contribute to enhanced investor protection and mitigating systemic risk.
The meeting also will focus on Credit Rating Agencies. Assessing members’ progress in adopting rules based on IOSCO’s revised Code of Conduct, and accelerating work on developing a common examination module.
Also to be covered are the International Accounting Standards, ensuring that the process of developing international accounting standards continues to take account of the interests of investors.
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Vineland Daily Journal – So Mark Cuban — internet billionaire, Dallas Mavericks owner, blogging geyser — is in the soup for alleged insider training, the feds claiming he saved himself $750,000.
That’s chump change. It wouldn’t even pay his NBA fines. But the folks down at the Securities and Exchange Commission can be a little touchy.
The upside to all this, though, is we could well be treated to another episode of one of the more entertaining grudge matches in the public domain.
New York (HedgeCo.Net) – New York hedge fund Peconic Partners was sued yesterday for firing an employee who reportedly was running his mouth about some shady insider trading activities.
The suit, filed by former Chief Compliance Officer Joseph Sullivan in New York State Supreme Court, accuses CEO William Harnisch of wrongfully firing him.
According to the 30-page complaint, Sullivan said he was let go after voicing reservations regarding Harnisch’s trading activity involving fertilizer company Potash Corp., whose stock plummeted last month.
Sullivan alleged that Harnisch got rid of his 600,000 shares, selling them for $130 a share. He then sold a chunk of his client’s shares for around $90 each. This may have helped to drive the price down of Potash, which is now trading at around $82.
The Securities and Exchange Commission has also been contacted by Sullivan’s legal team to alert them of the possible insider trading activities.
Peconic Partners was founded in 2004 and has approximately $1.5 billion under management.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
