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.
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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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.
New York (HedgeCo.Net) – Writedowns from major banks have reached the $500 billion mark, only one year after the subprime fallout forced mortgage-backed securities to plummet in value. And it’s not over. Some economists estimate that number will ascend upwards to $2 trillion by the time all the damage is done.
UBS, the European bank hit hardest by the U.S. fueled mortgage crisis, announced its second quarter losses yesterday to be $6 billion, most of which can be attributed to subprime-backed assets.
This marks the fourth consecutive quarterly loss that the Zurich-based bank has posted. UBS has previously written down over $35 billion since the credit crisis started last summer.
Other major banks are dealing with the same dilemmas. Wachovia has already experienced over $22 billion worth of write downs, while Merrill Lynch and Citigroup each have written down over $50 billion.
The current probe launched by New York Attorney General Andrew Cuomo isn’t helping either. Since major banks are now being forced to buy back bad auction-rate securities, many financial institutions are finding themselves in way over their head. In addition to the subprime-related mess, UBS has to allocate $20 billion to buy back the shoddy securities from disdained clients.
In an attempt to restructure, UBS also announced it will separate some key divisions of the company. The investment bank, which has been experiencing the major losses, will pull away from the bank’s wealth management and asset management divisions.
UBS hopes to give each section “maximum strategic flexibility.” While some speculate UBS is positioning themselves to be sold, chairman Peter Kurer has insisted that the companies are not for sale.
Julie Scuderi Senior Editor for HedgeCo.Net Email: julie@hedgeco.net
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New York (HedgeCo.Net) – Less than one week after UBS and Citigroup were called upon to buy back over $30 billion in bad auction-rate securities, New York Attorney General Andrew Cuomo is forcing JPMorgan, Morgan Stanley and Wachovia to follow suit.
In a letter to the three banks, Chief of the Attorney General’s Investor Protection Bureau David Markowitz wrote, “Our investigation’s focus is shifting to the next group of market participants. Any resolution would need to address the same concerns addressed in the previous settlements.”
UBS was slapped with $150 million in fines and is being forced to buy back some $18.6 billion worth of the auction-rate securities. These securities, backed by municipal bonds and other debts, were sold under the assumption they were a safe investment. Instead, the $330 market collapsed in February, leaving investors and now the government, wondering if the banks were up front about the potentially high risks associated with such investments.
The probe launched by Cuomo will investigate 18 different banks. He is insisting that banks create auction-rate securities buyback programs for the customers who got stuck selling their securities far below par.
Citigroup also got slapped with a $100 million fine and had to deal with both state regulators and the Securities and Exchange Commission. They eventually agreed to buyback $7.3 billion worth of the securities from individual customers and small businesses. In addition, they must help over 2,500 clients sell about $12 billion of the securities.
Morgan Stanley has agreed to buy back $4.5 billion worth of the securities at par. According to the Wall Street Journal, Morgan Stanley will repurchase the securities beginning no later than September 30, from all charities and small to mid-size companies with accounts of $10 million or less that were purchased before February 13th of this year.
Merrill Lynch, in an attempt to quell the probe before it starts, offered last week to buy back about $10 billion in the auction-rate securities. However, Cuomo’s office stated that their plan didn’t contain certain “investor protection safeguards.” The Merrill case is currently under review in Cuomo’s office.
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. For more information, visit www.hedgeconetworks.com
New York (HedgeCo.Net) – Merrill Lynch and Citigroup, two banks that have already written down billions in losses, will buy back $30 billion in auction-rate securities as part of an agreement with regulators.
This comes after the threat made by New York Attorney General Andrew Cuomo, who said he would sue Citi for misleading trusting investors about the high risks associated with such securities.
Merrill then followed suit, and other big names firms like Morgan Stanley and Bank of America are expected to strike their own deals with state regulators and the SEC in the near future.
These securities, which accounted for nearly $350 billion, are backed by municipal bonds and other forms of debt, and were peddled as being “safe.” However, the credit crunch blindsided most banks, and those securities were quick to plummet in value.
Citi has to shell out the most cash, agreeing to purchase $7.5 billion in securities and promised to purchase another $12 billion from institutional investors. On top of it all, they were slapped with $100 million in fines. Merrill has agreed to buy back $10 billion in the auction-rate securities.
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. For more information, visit www.hedgeconetworks.com
