Two Florida Hedge Fund Managers Accused In Petters Scheme

HedgeCo.net - The SEC has charged two Florida-based hedge fund managers and their funds with defrauding investors out of more than a billion dollars into a Ponzi scheme run Tom Petters, Reuters reports.

The SEC’s complaint filed in U.S. District Court for the District of Minnesota alleges that hedge fund managers Bruce Prévost and David Harrold, along with their firms Palm Beach Capital Management LP and Palm Beach Capital Management LLC invested more than $1 billion in hedge fund assets with Petters while pocketing more than $58 million in fees.

Petters promised investors that their money would be used to finance the purchase of vast amounts of consumer electronics by vendors who then re-sold the merchandise to such “Big Box” retailers as Wal-Mart and Costco. In reality, the “purchase order inventory financing” business was merely a Ponzi scheme. There were no inventory transactions.

Petters sold promissory notes to feeder funds like those controlled by Prévost, Harrold, and their firms, and Petters used some of the note proceeds to pay returns to earlier investors, diverting the rest of the cash to his own purposes.

Comments from the defense were not available at the time, the SEC is seeking a permanent injunction against the hedge funds and their managers, as well as disgorgement, including interest and financial penalties, the WSJ said.

Rajaratnam Challenges Wiretap Evidence

New York (HedgeCo.net) - Hedge fund founder Raj Rajaratnam is again seeking to throw out the evidence gained by the prosecution's wiretapping evidence.

"In applying for wiretap permission in March 2008, an FBI agent failed to tell a judge about prior lengthy probes of his client by securities regulators and the FBI." Rajaratnam's lawyer, John Dowd, told Monday's Manhattan federal court hearing, according to Reuters.

In Feburary, Dowd attacked the U.S. government’s wiretap evidence saying he would file a motion to suppress the telephone recordings which were used to arrest Rajaratnam and more than a dozen other people in the Galleon raid. Rajaratnam then won an emergency order relieving him from having to turn over wiretap recordings because of legal hurdles in obtaining the 14,000 wiretap intercepts.

"The recordings were cherry picked and mismanaged and someone did not do their homework." Dowd told the Judge in the Feb hearing.

The hedge fund millionaire was taken into custody in New York on Oct. 16, 2009 in what is being called the USA’s largest hedge fund insider-trading scheme. He and his co-defendant, Danielle Chiesi, face up to 20 years in prison if convicted on the charges.

World Habitat Day Today

HedgeCo Blogs - The United Nations has designated the first Monday in October as annual World Habitat Day. So on October 4, 2010 Habitat for Humanity (US) is echoing the United Nations’ theme for 2010: “Better City, Better Life” by focusing on neighborhood revitalization. Habitat is also releasing the 2011 Shelter Report, which focuses on the need for more research on the connections between homes and family health.

Habitat for Humanity-NYC is currently building a 41-unit affordable condominium building on Atlantic in Brooklyn made with environmentally-friendly materials. ”I can think of no better way to maximize our return-on-investment in human capital than by joining with Habitat for Humanity – New York City to build homes for families in need.” Stuart Feffer of Hedge Funds for Habitat NYC, said.

Habitat for Humanity Ireland is holding its first-ever Women Build in Romania from October 2-10. Fifteen women will travel to Romania to work with local families to build simple, decent, affordable homes. Global Habitat for Humanity offices have also organized local World Habitat Day events, click to find one in your area.