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Money managers under the microscope

Lugano: Billions in Madoff losses

August 3, 2009

Lugano: Madoff hotspotThe sleepy town of Lugano, in the Italian-speaking Ticino region of Switzerland, has emerged as a key collection centre for Madoff-related funds.

Between $2 billion and $5billion lost in the Madoff fraud was gathered in the town–population 52,000–much of the money coming through the Italian cities of Milan, Turin and Rome, according to private banking and investment management sources who requested anonymity.

With losses of that size, one might imagine the Lugano courts are overflowing with investor-led legal actions, but civil and the criminal directors of public prosecutions said last week they are yet to receive any complaints related to the Madoff affair.

The above mentioned sources say representatives from some of the largest funds hit by Bernard Madoff’s reported $65 billion fraud regularly did the rounds in Lugano, located very close to Switzerland’s border with Italy.

Sales agents acting for Madoff feeder funds including Fairfield Sentry, Kingate and Thema or collecting assets to invest directly in Madoff either had bases in Lugano or were frequent visitors to the town, these sources said.

One of them was Yanko della Schiava, one of the five sons-in-law of Walter Noel, boss of Fairfield Greenwich Group whose Fairfield Sentry lost up to $7.5 billion. Sources say della Schiava marketed the fund from bases in Lugano and Madrid.

Sonja Kohn, head of Vienna-based Bank Medici which was behind the Herald funds which lost up to $2.1 billion and also distributed the $1.1 billion Thema Fund, also stopped off frequently while travelling between bases in Milan and Zurich.

Other frequent visitors include Carlo Grosso and Federico Ceretti, co-founders of London-based FIM Investment Advisors, two of the people behind the Kingate funds which lost up to $3.5 billion, who were indicted in New York along with others associated with Kingate in June.

FIM also advised Five Balanced Fund, a fund offered by Lugano-based Bipielle Suisse which invested in Madoff via the Kingate funds, which could have allowed FIM to claim two sets of fees, according to investment management sources who had meetings with the FIM founders.

Bipielle Suiss is owned by Milan-based Banco Popolare, which hit the headlines four years ago as Banca Popolare di Lodi. At that time the BPL supremo was Giampiero Fiorani, who eventually ran into legal trouble over BPL’s aborted attempt to buy larger rival Banca Antoniana Popolare Veneta.

Fiorani spent six months in a Milan prison in 2006 awaiting trial on a swathe of charges including fraud, conspiracy and money laundering, to which he admitted.

The cases are still to be heard, but changes in Italian law under the last Prodi government (with solid support from the Berlusconi-led ”Freedom Alliance”, then in opposition)  mean Mr. Fiorani is unlikely to spend any further time in jail.

In May it was announced that the Bipielle (Suisse) subsidiary would be liquidated, and certain assets passed to Banca Aletti, a private bank (also with a Lugano subsidiary) that is wholly-owned by Banco Popolare. Banco Popolare did not respond to an email asking whether the bank had filed a court action regarding its Madoff losses via Five Balanced and Bipielle (Suisse).

But who lost money to Madoff through Bipielle (Suisse) and its Five Balanced Fund? No-one has yet said anything to the Lugano courts, and neither Bipielle (Suisse), Banca Aletti or Banca Popolare returned emails or answered questions via telephone.

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