Hedge fund

NJ Man Improperly States Where Fleet is Located to Scam Insurance Co. - It's expensive to insure commercial vehicles in Manhattan.  So one innovative commercial truck fleet owner filled out insurance forms that stated his fleet was located outside of the Big Apple, when it was in fact right in the middle.  The result, insurance companies were denied $10 million in fees that should have been paid.  It's so hard to feel bad for insurance companies being denied a premium, but it is a violation of federal law to send false informaiton through the mail (mail fraud).  Fleet owner, Scott Sanders is finding that out the hard way.

The First "Informant" is Named in Libor Scandal - Once the U.S. government let it leak that it had people who were cooperating, it was only a matter of time before we got a name.  Ryan Reich, a portfolio manager at hedge fund WCG Management, used to work for Barclays before he was fired in March 2010 for allegedly sending inappropriate emails about Libor pricing.  One could imagine that anyone who had any contact with Mr. Reich is now talking with their own lawyers on what they should do next.

Former Tyco CEO Kozlowski Settles With Company - Dennis Kozlowski, famously known for wild parties and expensive shower curtains, was released earlier this year to live in a Manhattan halfway house.  While he is awaiting his final release from prison, he's cleaning up some unfinished business and came to an agreement with Tyco to give back some of the money Tyco claims he owes it.  The amount was not disclosed but the company had initially asked for $500 million.  Safe to say that they probably did not get that much.

Update on Winifred Jiau - In continuing coverage on Primary Global's Winifred Jiau, we were disappointed to learn that she had been kicked out of the alcohol and drug program that would have led to an earlier release from prison.  Jiau, who has been in prison since her arrest in December 2010 for insider trading is now expected to be released from prison in June 2014.  She is suing the Bureau of Prisons to be reinstated into the program....and she is acting as her own lawyer.

Top 10 List of White-Collar Felons Who Faked Their Own Death - People will go to extremes to avoid paying their debt to society, including going as far as to fake their own demise.  Here are some good ones from faking a jump off a bridge to jumping from a crashing airplane.

Federal Prison Guard in San Diego Sentenced to 10 Months Prison For Sex With Inmates - Brandon McKinney pleaded guilty to having sex with a female inmate at the Metropolitan Correctional Center in downtown San Diego.  Enough said.

SAC's Steven A. Cohen Deposed - The Securities and Exchange Commission asked questions of hedge fund billionaire Steven Cohen of SAC Capital Advisors LP.  Cohen has been close to a number of other SEC inquiries, some of which have resulted in criminal charges.  The questioning concerned some of the "timely" trades in a few stocks.  SAC Capital has returned an average of 30%/year since its inception in 1992.  Pretty good.....maybe too good.

Fair Finance Executives Found Guilty - Three executives, of the now defunct Fair Finance, were found guilty of multiple counts of fraud.  The management team was accused of using funds from the consumer finance company to enrich themselves (you know, boats, cars, vacations, etc.).  The amount of the fraud is over $200 million, so these guys are looking at decades in prison.

People Near Butner Prison Camp Upset Over Escape(s) - People who live near the Butner federal prison camp were outraged when they were not notified that an inmate had escaped (walked away) from the federal prison camp in Butner, NC.  The man, Ernest Thomas, was a 60 year old man in the final years of a 27-year sentence for cocaine.  He was captured after 3 days on the run (walk).  However, local police were not notified until more than 24 hours after they knew Thomas was missing.  One resident said she was concerned, "We've had several incidents of them [inmates] walking away."  Sounds like the local fence company in Butner is going to be getting a call.

FBI Badge & gun. (Photo credit: Wikipedia)

Let's say you have a friend, a close friend, and the two of you have a dark secret .... one that involves criminal activity.  Nothing grossly sinister like a murder or armed heist, but still obviously illegal .... something along the lines of a hot stock tip from an inside source.  Could you trust that friend with the secret to never tell on you?  Well the answer has revealed itself in recent insider trading cases and that answer is "NO".

Winifred Jiau worked as a consultant at Primary Global Resources, which provided "expert" consultations with hedge fund managers.  Jiau recruited two friends at Nvidia and Marvell to provide her information on those companies' corporate earnings prior to being released to the public .... inside information.  When approached by authorities, Jiau's source at Nvidia, Sonny Nguyen, began cooperation with authorities and testified against Jiau at her trial and provided incriminating information to the FBI on the source at Marvell, who was also a friend.  Did the betrayal of friendship payoff?  Jiau is currently serving four (4) years in prison while Mr. Nguyen walked away with probation.

In the same case, hedge fund portfolio managers Noah Freeman and Donald Longueuil were on the receiving end of Winifred Jiau's information, making trades that would yield their firms millions in profits.  When the FBI approached Freeman with a recording of him speaking with Jiau, he decided quickly to cooperate.  Part of that cooperation would be making a call to his friend, and best man at his wedding, Donald Longueuil.  That call was recorded by the FBI and the information led Longueuil to plead guilty of charges, including one for obstruction of justice (destroying evidence) that Longueuil did at the behest of his friend (now former friend) Freeman.  Longueuil is now serving 30 months in federal prison.  Freeman also went on to testify at the trial of Winifred Jiau ... what are friends for.  While both Longueuil and Jiau are well into their prison terms, Freeman has yet to be sentenced and remains free on bond.  It is expected that his prison term, if he gets one, will be significantly less than that of Longueuil.

In another case, Garrett Bauer had been friends with Kenneth Robinson for over twenty (20) years.  For seventeen of those years, Robinson fed inside information to Bauer that he received from a lawyer friend on pending acquisitions.  The triad went about making trades on the information and sharing in millions in profits, until the feds showed up to talk to Mr. Robinson about some suspicious trading and cash withdrawals from his bank.  Once confronted, Robinson began to cooperate with authorities and even wore a wire to record incriminating conversations.  Bauer, who is scheduled to be sentenced on June 4th, is looking at a guideline sentence of 9-11 years ... the same for the lawyer who provided the tip.  As for Robinson, he could walk away with probation.

The real lesson here is not that you cannot trust your friends, it is that you have no friends when the FBI shows up at the door.  It is a fight for self-preservation and instinct rules the day.

At a recent event at Baruch College, high-profile white-collar attorney Michael Bachner gave a warning to an audience of students, "Stay as far away from this stuff [white-collar crime] as you can."  I could not agree more .... and I think I also speak for the "friends" mentioned above.