From Madoff to Stanford, sleuths chase assets

NEW YORK, (Reuters) – While accused hedge fund  swindler Arthur Nadel sits in a Manhattan jail, Burton Wiand is  busy seizing control of his assets — a 453-acre mountainside  tract of land in North Carolina, several airplane hangars and a  jumble of bank accounts.

Wiand, a Florida lawyer, is a court-appointed receiver, a  job that has

Allen Stanford
Allen Stanford

become increasingly in demand in blockbuster fraud  cases ranging from the Bernard Madoff scandal to the case  against Texas tycoon Allen Stanford.

These appointees and their teams are third parties that  step in and try to sort out the mess, and their efforts are  crucial for investors who want to get at least some of their  money back.

Receivers must juggle their search for assets with the  oversight of employees at the companies they take control of,  while providing updates to the court and dealing with panicked  investors who may have lost their life savings.

“If you do it well, you can feel like you’ve benefited some  people,” said Wiand, the receiver in the Nadel case in which a  76-year-old Florida money manager is charged with bilking  clients of as much as $300 million.

But “it’s very disappointing to get into these things and  see what awful things people have done to others. It’s  depressing at times to see how investors have really been  hurt.”

Bernard Madoff
Bernard Madoff

The role of receiver, or in the Madoff case a trustee  liquidating the accused swindler’s brokerage firm, is typically  assigned to lawyers, accountants or banking experts. They are  financial sleuths who try to unearth any remaining assets that  could ultimately be converted to cash and returned to the  former customers of a collapsed firm. They often must look far afield — especially when dealing  with globe-trotting wealth managers who have accumulated all  kinds of luxuries. Madoff, for instance, owns properties in  Manhattan, New York’s Long Island and France, while Stanford  has property in the United States and the Caribbean. Receivers in financial fraud cases typically step in at the  request of regulators. Their first step is to seize control of  a company and change the locks on the doors, often sending in  forensic accountants to scour computer records.

They are not government officials. But receivers often seem  like law enforcement officers because they can swoop in  unannounced, take possession of premises and at least  temporarily manage the employees, who they often tell not to  return to work.

“We seize things, tell people to step away from their  computer terminals — that way they don’t have a chance to  touch and disturb anything,” said Robb Evans, who has served as  a receiver or other court-designated role many times. “We come  in and basically become the chief executive officer of the  operation.”

Evans was appointed last month as the temporary receiver in  a case against Paul Greenwood and Stephen Walsh, New York money  managers for pension funds and universities arrested and  charged with stealing more than $500 million from client  accounts.

Regulators and prosecutors say the men stole from investors  to cover trading losses and used the money for personal  expenses, including the upkeep of a horse farm and the purchase  of an $80,000 collectible teddy bear. Evans said his team has taken control of “substantial  assets” linked to the case, but “without knowing the likely  claims against those assets” the outlook for the net recovery  is unclear.

TOUGH ROLE
TO PLAY

Decisions made by receivers, who say their first and  foremost job is to lock down assets, are not always popular.

In the Stanford case, receiver Ralph Janvey angered some  investors by freezing their brokerage accounts at Stanford  Financial Group — portfolios that were not at the centre of  fraud charges. A judge later unlocked some smaller client  accounts at Janvey’s request.

Trustees and receivers say they must give all former  customers equal treatment, which can make some people unhappy.  One former trustee said dealing with bilked investors was one  of the hardest aspects of her job.

“You have to sit face to face with them and tell them that  you have to make life fair for everyone and that may mean more  pain for them,” said New York attorney Aurora Cassirer.

The Madoff firm’s trustee, lawyer Irving Picard, recently  faced a group of angry clients who peppered him and two  colleagues with questions.

Some customers said they feared Picard would sue them to  try to recoup past profits. Others denounced the U.S.  Securities and Exchange Commission, which had looked into  Madoff over the years but never pinpointed the purported fraud  U.S. prosecutors say he confessed to in December.

“I think this is unfair. We are the victims, not only of  Madoff,” said retiree Raymond Spungin.

In response, David Sheehan, one of the trustee’s colleagues  told Spungin: “There is nothing we can react to. I think it is  good that the public hears it and the press hears what you have  to say. I wish we could react to it, but we can’t.”

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