Funds Hub
Money managers under the microscope
Looking ‘Bleak’ for Madoff investors
In Charles Dickens’ novel, Bleak House, a long-running dispute over a legacy only ends when the estate’s assets have been completely devoured to pay the army of lawyers involved in the litigation. Delighted, the lawyers move on to the next case, while one heir of the estate ends up a nervous wreck, his assets all gone.
Madoff investors may feel they are in a similar predicament, watching on helplessly as the scant assets so far recovered dwindle while liquidators and trustees wrangle over how to apportion them.
A recent dispute between Madoff trustee Irvin Picard and the liquidators of the Kingate feeder funds, which lost an estimated $3.5 billion in Madoff’s fraud, involved the trustee, the liquidators Zolfo Cooper and a phalanx of other legal advisors including the liquidator’s British Virgin Islands advisers Whithers BVI; and their US advisers Quinn Emanuel Urquhart Oliver & Hedges.
The liquidator advised investors to vote to settle the dispute with the trustee, reasoning that money tied up in legal action against the trustee could not be used in the attempt to recover investor funds or, via requests for restraining orders and the like, to prevent assets discovered from being spirited away.
Would it be naive to think they should all be on the same side, with the goal of recovering as much Madoff money as possible and dividing it among wronged investors?
In what looks like another legal red herring, shareholder group Deminor has announced it is considering bringing a class action, in Amsterdam, against auditor PricewaterhouseCoopers, funds administrator Citco and possibly other companies which provided services to the Fairfield funds, the biggest Madoff feeders with losses of $7 billion or more.
“But class actions against the service providers have already been lodged in the US against and have now been consolidated into one case,” complained one legal adviser.
Lugano: Billions in Madoff losses
The 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.
Madoff Junkies
One 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.
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
