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Seattle Times – An official appointed to recover the assets of a prominent Manhattan lawyer accused of defrauding hedge funds of at least $400 million says he has safeguarded more than $100 million in assets, including an $18.5 million yacht.
The court-appointed receiver, Mark Pomerantz, outlined his findings about lawyer Marc Dreier and his 150-lawyer firm, Dreier LLP, in a report made public Wednesday in U.S. District Court in Manhattan.
Dreier, 58, was arrested in December on securities fraud charges. He remains under house arrest while his lawyer, Gerald Shargel, prepares what he says is likely to be a guilty plea for his client.
New York (HedgeCo.Net) – UBS AG will pay $200 million to settle the SEC charges that the Swiss Bank acted as an unregistered broker-dealer and investment adviser.
According to the original compliant, UBS helped certain U.S. individuals to set up and maintain undisclosed Swiss bank accounts, which enabled these clients to evade U.S. taxes. In addition, UBS acted as an unregistered broker-dealer and investment adviser from 1999 to 2008, to thousands of U.S. clients while holding billions of dollars in assets for them. UBS allegedly raked in profits of up to $140 million a year from this business.
“UBS avoided compliance with U.S. securities laws for many years, at the same time they were engaged in other illegal conduct, which makes this one of the most egregious cases of its kind," said Scott W. Friestad, Deputy Director of the SEC’s Division of Enforcement in a recent press release.
The SEC alleges that UBS was fully aware that it was required to register with their agency. They believed that UBS lured clients by sending them to exclusive events such as art shows, yacht outings and sporting events, all sponsored by the bank. In addition, client advisors who traveled abroad to the U.S. were given encrypted laptops and were trained on how to avoid detection by authorities.
In addition to the $200 million fine, UBS will settle criminal charges with the Department of Justice in which they will pay an addition fine of $180 million, and another $400 million in tax-related payments.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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Globe and Mail – Daniel Gross, writing on Slate, makes an interesting point about the latest version of the U.S. government’s bailout plan: The plan, officially known as the Emergency Economic Stabilization Act of 2008, looks a lot like the prospectus for a hedge fund.
“In the past, hedge funds – secretive pools of capital – were open only to qualified (read: rich) investors,” he said. “But with the stroke of a pen, President Bush will soon make all American citizens investors in the world’s biggest fund – and a democratic one at that.”
Hedge funds often use leverage, or borrowed money, to amplify their returns and often use the money to buy beaten up assets. Similarly, the bailout plan, which Mr. Gross dubs the Universal Hedge Fund, will use $750-billion (U.S.) of borrowed money to buy distressed assets. But the similarities don’t end there. The manager of the Universal Hedge Fund can hold bonds to maturity or flip them for a profit. The manager can also bring in outside expertise, making the fund look like a fund of funds.
“Like many of today’s sharpest hedge funds, the Universal Fund will also have the ability to drive a harder bargain by demanding equity stakes, or new debt securities, from the institutions it is helping,” Mr. Gross said.
