Wednesday, April 1, 2009

Fairfield Greenwich Charged With Fraud

Massachussets regulators charged Fairfield Greenwich Group, a Madoff feeder fund, with fraud. Regulators claim that the company breached its fiduciary duty to clients by failing to perform adequate due diligence. Meanwhile, a Connecticut judge on Monday froze the assets of the Madoff family members, as well as the feeder funds Tremont, Fairfield Greenwich, and Maxam Capital and their current and former top executives. The noose appears to be tightening around the neck of those that profited handsomely from the $50 ($65?, who really knows) billion Bernie Madoff ponzi economy. Investors who have been devastated by the Madoff ponzi scheme are sure to take some comfort from these measures, particularly those who read yesterday's Wall Street Journal article highlighting the fabulous life of Andres Piedrahita, Walter Noel's, Fairfield Greenwich's founder, son-in-law.

Mr. Piedrahita, by all accounts, particularly his own, had the lifestyle of the many rich people that were beeing fleeced by the Madoff ponzi scheme. Although Mr. Peidrahita was tasked with soliciting investment funds for Fairfield from the very wealthy Latin Americans and Europeans that he wooed with his impressive party skills, he once told a friend that his real job was "to live better than his clients." The article is filled with many juicy details of Mr. Peidrahita's lavish lifestyle. With homes in Manhattan, London, Madrid, a butler, a private jet, a yacht anchored off of Mallorca with accompanying hacienda, and an impressive art collection, Mr. Piedrahita, according to a friend, lived better than many billionaires. "I've never seen anybody live like him and spend like him and I know billionaires that are 10 times wealthier than him" said the friend. Needless to say, any Fairfield Greenwich investor's ire would be rising to dangerous levels by the third paragraph of the WSJ article.

The fabulous life of Walter Noel and his extended family had been closely chronicled by Vanity Fair and the society pages. It was all grand and enviable before the truth was revealed; they were merely parasites feeding off of one of the largest investment scams in history. If it's indeed the case that the Noels considered it their job "to live better than their clients" then they certainly suceeded, although they probably should've disclosed their primary objective to their clients. Just think of all the money Fairfield Greenwich wasted on marketing documents that detailed the extensive due diligence that the fund of fund was performing on behalf of its clients.

The article ends with a curious quote from Mr. Piedrahita, who doesn't appear to have gotten the message that the party is over: "I look at myself in the morning and I am very proud of what I've done, and so are my partners." In reference to the Madoff scandal he says "Nobody knew anything about anything." The problem for Mr. Piedrahita, and the other bozos at Fairfield, is that they were paid alot to know alot. That excuse is not going to fly with regulators.

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