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.
Reuters – New York Attorney General Andrew Cuomo, probing illegal marketing and sales of auction rate securities (ARS), is likely to file a lawsuit on Monday against Charles Schwab Corp (SCHW.O) for civil fraud, the Wall Street Journal said, citing people familiar with the matter.
As a part of the lawsuit, Cuomo will likely present transcripts of recordings between Schwab brokers and customers that allegedly show how the ARS were misrepresented by brokers as easy-to-sell alternatives to cash, according to the paper.
Law.com – Goodwin Procter partner David B. Pitofsky was appointed Monday as receiver of the $1.7 billion Ascot fund put together by financier J. Ezra Merkin, almost all of which was invested with Bernard L. Madoff and lost.
Justice Richard B. Lowe appointed Pitofsky receiver in a lawsuit (People of the State of New York v. Merkin, 450879/09) brought by the New York attorney general’s office seeking recovery from Merkin of $2.4 billion in his client’s funds which he had "recklessly" invested with Madoff despite "clear warning signals" that the funds were being mishandled.
Bloomberg – Barrett Wissman, a Dallas hedge fund manager, pleaded guilty to securities fraud as part of an investigation of corruption at New York’s $122 billion pension fund, state officials said.
Wissman, 46, an executive of HFV Asset Management LP, also agreed to a $12 million settlement as part of the probe of illegal kickbacks to arrange pension-fund investments for hedge funds and private-equity firms, according to New York Attorney General Andrew Cuomo. Today, Cuomo announced charges against former New York State Liberal Party Chairman Ray Harding as part of the two-year-old investigation.
MSN MoneyCentral – A corruption scandal at the state’s retirement fund is the latest in a long string involving politically connected intermediaries called placement agents sometimes hired by investment firms hoping to land rich investment deals with pension officials, experts said.
New York Attorney General Andrew Cuomo and the Securities and Exchange Commission are examining millions of dollars in payments that several hedge funds and private equity firms paid to placement agents during the tenure of state comptroller Alan Hevesi.
New York (HedgeCo.Net) – J. Ezra Merkin, head of Gabriel Capital Corp., has been sued by New York Attorney General Andrew Cuomo, after it was discovered he had placed investor’s money into funds managed by Bernard Madoff without their knowledge or consent.
Cuomo alleges that the former GMAC Financing Chairman allocated about $2.4 billion worth of client capital to the man who bilked $50 billion out of investors through an elaborate Ponzi scheme.
Cuomo claims Merkin invested the money of many prominent individuals and charities through his hedge funds Ariel, Gabriel Capital LP and Ascot Fund Limited. In exchange, Merkin received about $470 million in management and performance fees.
One investor, New York Daily News publisher Mort Zuckerman, suffered $40 million in losses after placing his funds with Merkin.
“There is no way Merkin could make such a representation without learning basic facts about Madoff’s operation, including the fact that Madoff had not made any stock purchases for at least 13 years,” said Zuckerman in his statement, referring to Merkin’s claim that he exercised “periodic reviews” on his investments.
The Merkin case is the latest in a string of suits brought on by the Attorney General. Last month, Cuomo blew the lid off two high-ranking officials who worked in the New York State’s Comptroller Office after discovering they took millions of dollars in kickbacks from private equity firms and hedge funds.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (HedgeCo.Net) – Two high-ranking men who worked in the New York State comptroller’s office were arrested yesterday after it was discovered they took millions of dollars in kickbacks from private equity and hedge funds, said Attorney General Andrew Cuomo.
David Loglisci, who was the top investment officer of the state’s $122 billion pension fund, along with Henry Morris, who fund-raised for former comptroller Alan Hevesi, were nailed in a 123-count indictment, which included charges of money laundering, securities fraud and bribery.
It was discovered that over 20 transactions made by the pension fund involved kickbacks, with five of those coming from the renowned private equity fund The Carlyle Group.
Morris, who was released after posting a $1 million cash bail, allegedly received $13 million from The Carlyle Group, from investments that totaled $730 million.
“Morris used the fund as his own piggy bank and took approximately $30 million in fees for himself and his business partners on investments which Morris himself had a role in approving,” Cuomo said.
Lawyers for both men contend their clients are innocent, saying that all of the transactions benefited the pension fund and were agreed upon by outside financial institutions. The Carlyle Group has stated they have “fully cooperated with the New York Attorney General’s Office and is not a target of the investigation.”
If convicted, both men could face a life sentence in prison.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
HedgeCo.Net is a premier hedge fund database and community for qualified and accredited investors only. Membership on www.hedgeco.net is FREE and EASY. We also offer FREE LISTINGS for Hedge Funds! Be sure to check out our sister sites. www.hedgefundlounge.com, www.hedgefundtools.com, and www.hedgefundemployment.com
Reuters – Hedge fund founder Ezra Merkin is being cooperative with New York state’s top legal officer in its investigation of three funds as part of the probe into accused swindler Bernard Madoff, officials said on Wednesday.
New York Attorney General Andrew Cuomo is seeking information from Merkin and his Gabriel Capital Corp, Ariel Fund Ltd and Ascot Partners funds, Cuomo’s office said last month.
All of the funds have been sued by nonprofits and individual investors who accuse them of investing with Madoff without their knowledge.
TheStreet.com – Two contemporaries rushed to the defense of hedge fund manager Ezra Merkin, who is reportedly being investigated by New York Attorney General Andrew Cuomo after his investors lost billions of dollars linked to disgraced money manager Bernard Madoff.
William Ackman, who manages Pershing Square Capital, and Michael Steinhardt of Steinhardt, Fine, Berkowitz & Co. both called Merkin, a partner at hedge funds Cerberus Capital, Gabriel Capital and Ascott Partners, an "honest" man at a panel discussion of Madoff Thursday night at the Yivo Institute for Jewish Research.
"I’ve known him for 15 years," Ackman said. "I think he’s an honest person, an intelligent person, an interesting person, a smart investor. People don’t want to hear that because if you invested with Ascot you lost all your money."
International Herald Tribune – J. Ezra Merkin, a New York financier, wrote his investors last month that he too was shocked by the news that Bernard Madoff’s hedge fund was an elaborate Ponzi scheme.
But not everyone sees him as a victim. The New York attorney general, Andrew Cuomo, has issued subpoenas in an effort to determine whether Merkin had defrauded universities and charities when he invested their money with Madoff, a person with knowledge of the case said Thursday.
Cuomo’s office is seeking information from Merkin, the three investment funds that he operated and 15 nonprofit institutions that gave him money to manage. Many of the institutions are now suing Merkin, claiming that they lost millions of dollars when he had invested money with Madoff without telling them.
Reuters HK – David Bonderman, one of the the most influential figures in the U.S. private equity industry, said on Thursday his firm, buyout giant TPG Capital TPG.UL, wanted to buy debt assets offloaded by troubled hedge funds.
Bonderman, speaking at the Asian Venture Capital Journal (AVCJ) conference, also said a global recession would be deep and prolonged, and the U.S. housing market would probably fall further.
"When people are giving you debt that is grossly mis-priced, you opt to take it," he said at the conference in Hong Kong.
Volatile markets have forced hedge funds to sell off assets and securities to pay back investors who are keen to scale back on risk and hold cash.
But private equity firms typically have long-term investors, with up to 10-year lock-up periods.
Reuters – David Bonderman, one of the the most influential figures in the U.S. private equity industry, said on Thursday his firm, buyout giant TPG Capital , wanted to buy debt assets offloaded by troubled hedge funds.
Bonderman, speaking at the Asian Venture Capital Journal (AVCJ) conference, also said a global recession would be deep and prolonged, and the U.S. housing market would probably fall further.
"When people are giving you debt that is grossly mis-priced, you opt to take it," he said at the conference in Hong Kong.
Volatile markets have forced hedge funds to sell off assets and securities to pay back investors who are keen to scale back on risk and hold cash.
But private equity firms typically have long-term investors, with up to 10-year lock-up periods.
"Since a lot of hedge funds have a side pocket with a two- to three- to four-year lock-up period, that means that liquid assets are under great pressure," Bonderman said. "And guys like us who have the capital should be buying them."
Asia would emerge from the global downturn earlier than elsewhere and was well-positioned for recovery, said Bonderman, TPG’s founding partner.
SEOUL (Reuters) – South Korea will allow mutual savings firms and online-based companies to sell investment funds from next February, and draw up measures to cut sales fees for long-term investors, a regulator said on Sunday.
The Financial Services Commission FSC.L said in a statement that it will also tighten investor protection rules for fund sellers to teach customers risks from an investment, as well as its commissions and fees.
"South Korea’s fund sales market has been in the oligopolistic structure, which lacked competition for services and commissions between sellers," the statement said.
Currently, only banks, securities houses and insurance companies are authorised to sell investment funds which accounted for nearly 10 percent of the country’s household financial assets in 2007.
