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Money managers under the microscope

Madoff Junkies

May 7, 2009

Bernard MadoffOne of the more striking aspects about the Madoff affair is the large number of people who appear to have been ‘hooked’ on Madoff products.

 

Money managers were drawn by Madoff’s air of mystique, his stellar reputation as a market timer, the apparently steady returns with rock bottom volatility and the absence of fees, which some collected from clients anyway.

 

Those wanting more could simply have increased allocations but some chose to create new investment vehicles instead. Behind the banks and asset managers which lost money, some names appear again and again.

 

Take the circle of managers revolving around Sandra Manzke, founder of Tremont, whose Rye unit lost substantially all of its roughly $3 billion in assets.

 

Tremont and Bermuda-based Kingate Management also set up Kingate Global, a Madoff feeder which lost $2.7 billion, and Manzke was on the board of the fund, the Financial Times reported earlier this year.

 

Manzke’s presence at the founding of Kingate was confirmed by a source close to Kingate who asked not to be named.

 

In 2006 Manzke left Tremont to found Maxam Capital, a Madoff feeder widely reported to have lost $280 million.

 

Returning to Kingate, there were other less well-known names who were also caught out by the Madoff bug. One was Christopher Wetherhill, president and director of Kingate Management and a director of Kingate Global and of another Madoff feeder, Kingate Euro.

 

Wetherhill was also founder and, until 2000, chief executive of Hemisphere Management Ltd, once reputedly the third-largest hedge funds administrator in the world, overseeing assets of over $51 billion, including those of the Kingate funds.

 

Thus Wetherhill could know how and where Kingate money was invested, as well as what happened to the commissions the company took in over the years.

 

Former Kingate clients are anxious to locate these commissions, one lawyer acting for them has told Reuters. He estimated they could total as much as $500 million.

 

The bulk of Kingate’s assets were sourced through its consultant, FIM Advisers, a London-based asset manager founded by Carlo Grosso and Federico Ceretti.

 

FIM has played down its relationship with Kingate but two sources familar with the situation have told Reuters that Grosso and Ceretti were synonymous with Kingate and had been present at its founding.

 

When Wetherhill left the helm of Hemisphere, he was replaced by Tom Healy, who later became chief operating officer and a board member of FIM.

 

Wetherhill is also the named by Madoff Trustee Irving Picard as the contact point for Whitechapel Management Ltd, a Bermuda-based firm which appears on Picard’s long list of Madoff clients.

 

Another ubiquitous presence in the FIM-Kingate-Tremont triangle is New York lawyer Michael Tannenbaum, a founding partner of the law firm Tannenbaum Helpern Syracuse and Hirschtritt LLP.

 

Kingate’s fund offering documents say Tannenbaum, an outside director of the manager since 2000, is a senior partner of a law firm that advises both funds, the manager (Kingate) and the consultant (FIM), a potential conflict of interests.

 

Tannenbaum’s firm is also legal counsel for affiliates of Tremont and Rye.

 

Perhaps understandably, none of those named is keen to revisit their Madoff experience, nor their links with each other.

 

Wetherhill offered a no comment, as did a spokesman for Manzke. Calls and emails to Tannenbaum went unanswered.

 

Numerous calls to FIM have not been returned, and questions on the relationship between Kingate, FIM and Hemisphere emailed to the company’s general counsel Philip Niel remain unanswered.

Comments

It’s hard to understand how this could happen, didn’t any of those (financial experts) see this coming or did they see the signs but didn’t care since they were gambling away other people’s money. Some other high profile Madoff feeders are Royal Bank of Scotland 600 million Pounds and Fortis Bank with an exposure of up to 1 billion Euros.

 

The top guys were close enough to know or suspect that something was weird. The other were just dumb to know that it will be known one day … they are not good market timers …

Posted by FrankCastle | Report as abusive
 

I agree it beggars belief that certain experts didn’t actually see it coming. In this particular case and a couple of others, I am surprised investigators have not at least told us what they have learned from the administrators.
After all, the administrators have initial control of the assets, and they know what happens to those assets in the first instance. So, for example, Hemisphere (CEO Mr. Wetherhill), administrator of Kingate until 2000, knew the Kingate funds (where Wetherhill was a director, both of the funds and the management company) were investing in Madoff. He could also easily have known (as administrator, it was his firm’s duty to do so) where the commissions paid by Kingate investors were going.
I think the dialogue between investigators and administrators will be one of the keys to finding out exactly what happened to the money.
Personally, I believe it time we were told what progress investigators have made.

Posted by Martin | Report as abusive
 

BERNARD MADOFF

I really did not get that surprised with the expectation this man had on his judgment day, right in New York City.

He is really worth it. He has the honour to be the most important robber in World´s history.

BM is the proof of how greedy we are !!!… While he returned a 20% return on investment to his customers, nobody asked. Nobody realised it was impossible such a sustained return along so many years.

The markets going down, and I continue receiving from my “advisor” BM a 20% annual profit.

I can imagine the conversations among the rich people spread all over the golf fields along the US:
” Are you losing money ???… Come on Clark, let me tell you the person you must trust within your investments. Call this guy, his name is Bernard Madoff.

But, is he a trustwirthy person ???…- Of course, I have been his customer for 10 years, and he is a money making machine… “”

Even, along the hollywood studios, I can also imagine Steven Spielberg talking to his crew during a film shooting break, teling them how fortunate he was to find Mr Madoff advisory and management services. Steven would have been saying something like this:
” I do not know how he gets it,… he is a really smart investor and he has a good team behind… very professional. He has many customers and a long career in Wall Street. Very respected, very shy, he does not like the spotlight, like Buffet or Soros… He is a great person !!! ” .

This is the world of CAPITALISM. The world that cannot fall because it is intrinsic to the human being condition. ” If I can play golf with Bill Gates, why do I have to keep on living under the poverty doorway ???

I already told in a previous article that today, you do not need a long stock covering your face and robbing a 7-ELEVEN night shop to be a robber … You only need a fancy suit and the promise of a high return on investmets. People will believe you and trust you if during some months you give them their profit money. They will never ask you how you get it.

It is incredible how we forget history.

Almost 20 years ago, Soros already played with HEDGE FUNDS located in TAX HAVENS. In fact, this was the source of his astonishing fortune.

Almost some time ago, we woke up with the ENRON scandal. The audit world crunched, but the only impact was to change the ARTHUR ANDERSEN brand to DELOITTE. The auditors continued being the same !!!

Almost 12 years ago, NICK LEESON, a young trader, bankrupted BARINGS BANK, playing with leveraged instruments in Singapore.

Now, politicians meet again during G-20 last week, and launch the following statement to the world:

” The lack of regulation, as well as, the hedge funds or the bank secrecy have been the main cause of this historic crisis, we are going to fight against them seriously”.

Come on !!!… 20 years ago, we already knew that. Ask Mr SOROS about it.

I do not know if Mr MADOFF will spend the rest of his days in jail. But, for sure, he will write a book, someone will make a biopic movie ( I would like this movie project to be conducted by Steven Spielberg… maybe with the box-office he could regain the money he lost… ) , and obviously, Mr MADOFF case will be studied in Wharton and Harvard.

But, I am also sure, that in the next 15 years, another MADOFF will arise, and nobody will remember the original one.

You will see…

Jose Luis Revilla Escudero
President
WWShares, Inc

 

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