Fairfield Greenwich Group
Encyclopedia
Fairfield Greenwich Group is an investment firm founded in 1983 in New York City
. The firm had among the largest exposures to the Bernard Madoff
fraud.
in 1983. At one time, the firm operated from Noel's hometown in Greenwich, Connecticut
, before relocating its headquarters to New York City.
In 1989, Noel merged his business with a small brokerage firm whose general partner was Jeffrey Tucker, who had worked as a lawyer in the enforcement division of the Securities and Exchange Commission. Both Noel and Tucker are semi-retired.
Fairfield offered feeder fund
s of single-strategy trading managers. Fairfield also started several fund of funds, each investing in a basket of hedge funds, though the offering of feeder funds has been the primary business of Fairfield. It described its investigation of investment options as “deeper and broader” than competitive firms because of Tucker’s regulatory experience.
Fairfield Greenwich's web site says it "employs a significantly higher level of due diligence work than typically performed by most fund of funds and consulting firms." It is an employee-owned firm with 140 employees, 21 of whom are shareholders. At one time, it reported $16 billion in assets under management
.
It is reported that foreign investors provided 95% of its managed assets, 68% from Europe, 6% from Asia, and 4% from the Middle East. Each of Noel's four daughters married into international families.
In 2008, Fairfield Greenwich reported more than $14 billion in assets under management.
Noel had previously been a private banker in Lausanne, Switzerland, then worked at Citigroup
before becoming the head of Chemical Bank's international private banking practice in Nigeria
, Switzerland
, and Brazil
.
Noel met his Portuguese-speaking wife, Monica, 66, from the prominent Swiss
Haegler family of Rio de Janeiro
and Zurich
, while she was studying at Wellesley College, near Boston. They have five daughters and 19 grandchildren. They married into families that provided additional connections for the firm and helped fund money into Madoff's fund.
The eldest, Corina, 48, who in 1989, married Andrés Piedrahita, a Colombian, lives in Madrid
London
and Manhattan
. Lisina, 44, who lives in Milan
, married Yanko Della Schiava, the son of the editor of Cosmopolitan
in Italy and of the editor of Harper’s Bazaar in Italy and France. Ariane, 42, who married Florence
-born Marco Sodi, head of VSS
's London
-based affiliate, Veronis Suhler Stevenson International, and a partner and managing member of Veronis Suhler Stevenson
Funds, lives in Notting Hill
, London
.
Alix, 41, who married Philip J. Toub, the son of a director of the Saronic Shipping Company, in Lausanne
, Switzerland
lives in Greenwich. Marisa, 31, who married Matthew Brown, the son of a former mayor of San Marino, California
, lives on the Upper East Side
of Manhattan
. They had originally purchased a townhouse but then were forced to sell it after the Madoff revelations. Brown also had worked for the feeder fund to Madoff, and Marisa started a costume jewelry business in the fall of 2008, although its not clear if that business is still viable given the Madoff news.
In 1974, the Noels purchased a five-bedroom home for $225,000, borrowed from both of their families.
It has evolved into an 8,600 square foot 8-bedroom, 9-bath colonial home, valued in 2005 at $6 million, on two acres in Greenwich. They also own an apartment on Park Avenue
in Manhattan, a home in Palm Beach, FL, a summer home in the Southampton, NY
and a 42-room retreat on Caribbean island of Mustique
.
Three of Noel’s sons-in-law eventually became partners, promoting the firm’s funds in either their home countries or regions where they had their own family connections, and funneled money into Bernie Madoff's funds. Piedrahita, named a Fairfield founding partner in 2007, owns 22 percent, is based in Madrid and London and became one of the firm’s dominant representatives of European and Latin American banking and investment. Mr. Della Schiava was based in Madrid and Lugano, Switzerland. Piedrahita, Della Schiava and others, reaped many millions of dollars in investor capital from Europe. Toub was the “agent” for the Abu Dhabi Investment Authority
, the Safra National Bank of New York
and the National Bank of Kuwait
. His niece, Bianca Haegler, a well-known Brazilian socialite, and her father, Alex, reportedly steered Brazilian investors to the firm,
as well as, Monica Noel’s cousin Jorge Paulo Lemann
, Brazil’s richest financier, co-owner of InBev
, Budweiser
’s parent company.
of Singapore
, now Lion Global Investors, and created Lion Fairfield Capital Management, a joint venture meant to introduce Asian investors to the firm. Richard Landsberger, a Fairfield partner is director.
In mid-December 2008, it terminated the merger due to the Madoff crisis. It had $47.5 million of client assets at risk with Madoff.
and Harvard Law School
, and Tucker were introduced to Madoff in 1989 by Tucker’s father-in-law, from Scarsdale, New York
who knew Madoff and had invested with him.
In 2006, the Securities and Exchange Commission, as part of an investigation into Madoff's activities, determined that Fairfield Greenwich had not properly disclosed that Madoff oversaw its investment decisions, though no evidence of fraud was found. Subsequently, Fairfield Greenwich formally disclosed Madoff's role – and in the process raised about $1.7 billion from investors in the US and Europe.
During the summer of 2007, several private-equity firms were discussing taking a large investment in the firm, but Madoff ended any potential deal by refusing to grant the potential investors access for due diligence
.
By 2008, the firm had 48 percent of its capital tied to Madoff.
The Fairfield Sentry fund required a $100,000 minimum investment and was billed as a way to tap Madoff's trading expertise using "algorithmic technology" while Fairfield with due diligence
conducted "systematic investment compliance". It had more than $7 billion invested with Madoff, and became one of his largest victims. It was Fairfield's signature fund, one of several feeder fund
s through which money from wealthy foreign investors could capitalize on Mr. Madoff’s supposed investment acumen. Its marketing prospectus promised low volatility and steady returns, and boasted 11 percent annual return over the last 15 years, with only 13 losing months, a record that grew increasingly desirable over recent years of volatility. The fund was backed by loans from banks including Banco Bilbao Vizcaya Argentaria
and Nomura Holdings
, which invested about $304 million.
The Mugrabis, extremely wealthy art collectors from Colombia who have lived in New York for more 20 years, and long time friends of Piedrahita (a Colombian who had married Mr. Noel’s eldest daughter, Corina), were investors.
In early 2005, The Abu Dhabi Investment Authority
invested approximately $400 million. After redemptions in 2005 and 2006, it continued to $132 million, 2% of the funds assets. One of the largest of the world’s sovereign wealth funds, its assets were estimated in early 2008 to be approaching $700 billion.
In August 2008, JPMorgan Chase pulled $250 million from this Madoff feeder fund account. Chase had become "concerned about lack of transparency", and had performed due diligence
which had "raised doubts" about Madoff's operation.
The firm set up feeder programs with such banks as Banco Santander, SA private banking unit, Banif, Swedish Bank Nordea
, Zurich
-based NPB
Neue Privat Bank, Banque Benedict Hentsch and Cie
of Geneva
, all conduits of fresh money to Mr. Madoff which extended his global reach.
Madoff didn't charge additional fees, rather a commission on trades he allegedly executed. This arrangement raised suspicions and doubt among other money managers.
Massachusetts regulators alleged that in 2007, Tucker earned more than $30 million in fees from Madoff, and that even in down markets Madoff helped Fairfield earn steady returns.
, the auditor of the funds. The complaint alleges fraud, violations of Rule 10b-5, violations of Section 20(a), negligent misrepresentation, gross negligence, breach of fiduciary duty, third-party beneficiary breach of contract, constructive trust, mutual mistake, negligence, negligent misrepresentation, aiding and abetting breach of fiduciary duty, aiding and abetting fraud and unjust enrichment.
Fairfield is also a defendant in a lawsuit filed in Miami against PricewaterhouseCoopers Ireland
by investors in a fund marketed by defendant, Banco Santander SA, Europe's second-largest bank by market value, which lost an estimated $3 billion.
' complaint about Madoff's operations.
The Secretary of State had stated that he had no plans to settle the lawsuit in spite of Fairfield Greenwich's offer to repay all Massachusetts investors, and said he was going to force Fairfield to explain e-mails and other evidence that appear to show company officials knew about potential problems with Madoff but failed to disclose them to clients. However, the action was settled on September 8, 2009. Fairfield Greenwich neither admitted nor denied wrongdoing, agreed to provide restitution to Massachusetts investors, and paid a civil penalty.
Noel agreed to the attachment on his house “with no findings, including no finding of liability or wrongdoing." Andres Piedrahita's assets continue to remain temporarily frozen because he was never served with the complaint. The principals are all involved in a lawsuit filed by the town of Fairfield
's pension funds. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport).
On May 18, 2009, Irving Picard
sued Fairfield Greenwich Group seeking the return of $3.2 billion during the period from 2002 - Madoff's arrest in December, 2008. $1.2 billion was withdrawn in the final three months of the fraud. Since 1995, the Fairfield funds invested about $4.5 billion with Bernard L. Madoff Investment Securities LLC, or BLMIS, through 242 wire transfersThe funds are Fairfield Sentry Ltd., Greenwich Sentry LP, and Greenwich Sentry Partners LP. However, the money may already be in the hands of Fairfield’s own clients, who are likely off-limits to Picard, since they weren’t direct investors with Madoff.
On May 29, 2009, Fairfield Sentry, based in the British Virgin Islands, filed a complaint filed in New York State Supreme Court in Manhattan
seeking to recover more than $919 million in investment management and performance fees that it paid to Fairfield, based upon “inflated net asset value reports of its investments with Bernard L. Madoff Investment Securities LLC...The Fairfield entity defendants recklessly disregarded their duties as the fund’s risk and investment adviser and their actions and inactions constitute gross negligence.” The lawsuit alleges breach of fiduciary duty, and unjust enrichment
. It is “the largest victim of the fraud perpetrated by Bernard L. Madoff,” losing $7 billion.
The defendants include founders Walter Noel and Jeffrey Tucker and other fund partners who the plaintiffs allege “failed to fulfill their contractual obligations to use best efforts to supervise the operations” of Madoff-related investments and to “oversee the day-to-day investment activities of the fund.” The case is Fairfield Sentry Ltd. v. Fairfield Greenwich Group, 601687/2009, New York State Supreme Court (Manhattan).
On July 20, 2009, Justice Edward Alexander Bannister granted the request to liquidate the Fairfield Sentry funds, worth more than $7.2 billion in December, 2008, now less than $70 million, incorporated in 1990 under the mutual fund statutes of the British Virgin Islands and technically are under the control of their local directors.
Spanish anticorruption prosecutors are investigating Fairfield Greenwich as well as Mr. Piedrahita to determine what they knew about Mr. Madoff's fraudulent funds when they sold them to Spanish clients. According to Fairfield's offices in Spain, Spanish investments totalled $89.1 million.
On November 19, 2010, both Greenwich Sentry, L.P. and Greenwich Sentry Partners, L.P. voluntarily filed for chapter 11 bankruptcy protection in New York. Court filings blamed the bankruptcy filings on the cost of the Madoff-related litigation and asserted a goal of reaching a global settlement of the litigation for the bankruptcy cases.
testified before Congress. In his prepared statement, on page 20, he discussed Fairfield Greenwich's accounting practices regarding its choice of auditors and accused it of frequently switching them, or "auditor shopping." However, Markopolos did not distinguish between separate auditors for separate funds within Fairfield Greenwich, which did not actually change as he alleged.
560XL private jet, purchased in late 2006. Tucker wants to sell his three horse farms, Stone Bridge Farms, in Schuylerville and Gansevoort, NY, which he bought in 2004 for $18 million. They each include furnished homes. Most of his horses have been sold.
Some hedge-fund experts predict the firm will not survive the Madoff scandal.
Tucker's wife Melanie, an avid bridge
player, was accustomed to using her husband's jet to fly herself, and the bridge pros hired to play on her team, to bridge tournaments across the country. She now has postponed attending tournaments requiring air travel.
Executive Charles Murphy initially offered for sale his 1882, 12000 square feet (1,114.8 m²) limestone townhouse, located at 7 East 67th Street, Lenox Hill
, Manhattan
, but as of December 2009, the home is no longer listed. He bought the residence from Seagram
liquor heir Matthew Bronfman in 2007 for $33 million.
Matthew Brown and his wife, Marisa Noel Brown, were forced to sell their Upper East Side townhouse at 12 East 78th Street for $9.75 million, $3.75 million less than what they had paid in January 2008.
New York City
New York is the most populous city in the United States and the center of the New York Metropolitan Area, one of the most populous metropolitan areas in the world. New York exerts a significant impact upon global commerce, finance, media, art, fashion, research, technology, education, and...
. The firm had among the largest exposures to the Bernard Madoff
Bernard Madoff
Bernard Lawrence "Bernie" Madoff is a former American businessman, stockbroker, investment advisor, and financier. He is the former non-executive chairman of the NASDAQ stock market, and the admitted operator of a Ponzi scheme that is considered to be the largest financial fraud in U.S...
fraud.
History of the Firm
The firm was founded by Walter M. Noel, Jr. (born 1930), a native of Nashville, TennesseeTennessee
Tennessee is a U.S. state located in the Southeastern United States. It has a population of 6,346,105, making it the nation's 17th-largest state by population, and covers , making it the 36th-largest by total land area...
in 1983. At one time, the firm operated from Noel's hometown in Greenwich, Connecticut
Greenwich, Connecticut
Greenwich is a town in Fairfield County, Connecticut, United States. As of the 2010 census, the town had a total population of 61,171. It is home to many hedge funds and other financial service companies. Greenwich is the southernmost and westernmost municipality in Connecticut and is 38+ minutes ...
, before relocating its headquarters to New York City.
In 1989, Noel merged his business with a small brokerage firm whose general partner was Jeffrey Tucker, who had worked as a lawyer in the enforcement division of the Securities and Exchange Commission. Both Noel and Tucker are semi-retired.
Fairfield offered feeder fund
Feeder fund
A feeder fund is an investment fund which does almost all of its investments through a master fund via a master-feeder relationship.It is a situation similar to a fund of funds, except that the master fund performs all the investments....
s of single-strategy trading managers. Fairfield also started several fund of funds, each investing in a basket of hedge funds, though the offering of feeder funds has been the primary business of Fairfield. It described its investigation of investment options as “deeper and broader” than competitive firms because of Tucker’s regulatory experience.
Fairfield Greenwich's web site says it "employs a significantly higher level of due diligence work than typically performed by most fund of funds and consulting firms." It is an employee-owned firm with 140 employees, 21 of whom are shareholders. At one time, it reported $16 billion in assets under management
Assets under management
Assets under management is a financial term used denote the market value of funds being managed by a financial instutition on behalf of its clients, investors, depositors, etc. This metric is a sign of size and success against competition...
.
It is reported that foreign investors provided 95% of its managed assets, 68% from Europe, 6% from Asia, and 4% from the Middle East. Each of Noel's four daughters married into international families.
In 2008, Fairfield Greenwich reported more than $14 billion in assets under management.
Walter Noel
Presently, Walter Noel has a 17% ownership interest.Noel had previously been a private banker in Lausanne, Switzerland, then worked at Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
before becoming the head of Chemical Bank's international private banking practice in Nigeria
Nigeria
Nigeria , officially the Federal Republic of Nigeria, is a federal constitutional republic comprising 36 states and its Federal Capital Territory, Abuja. The country is located in West Africa and shares land borders with the Republic of Benin in the west, Chad and Cameroon in the east, and Niger in...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
, and Brazil
Brazil
Brazil , officially the Federative Republic of Brazil , is the largest country in South America. It is the world's fifth largest country, both by geographical area and by population with over 192 million people...
.
Noel met his Portuguese-speaking wife, Monica, 66, from the prominent Swiss
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
Haegler family of Rio de Janeiro
Rio de Janeiro
Rio de Janeiro , commonly referred to simply as Rio, is the capital city of the State of Rio de Janeiro, the second largest city of Brazil, and the third largest metropolitan area and agglomeration in South America, boasting approximately 6.3 million people within the city proper, making it the 6th...
and Zurich
Zürich
Zurich is the largest city in Switzerland and the capital of the canton of Zurich. It is located in central Switzerland at the northwestern tip of Lake Zurich...
, while she was studying at Wellesley College, near Boston. They have five daughters and 19 grandchildren. They married into families that provided additional connections for the firm and helped fund money into Madoff's fund.
The eldest, Corina, 48, who in 1989, married Andrés Piedrahita, a Colombian, lives in Madrid
Madrid
Madrid is the capital and largest city of Spain. The population of the city is roughly 3.3 million and the entire population of the Madrid metropolitan area is calculated to be 6.271 million. It is the third largest city in the European Union, after London and Berlin, and its metropolitan...
London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
and Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
. Lisina, 44, who lives in Milan
Milan
Milan is the second-largest city in Italy and the capital city of the region of Lombardy and of the province of Milan. The city proper has a population of about 1.3 million, while its urban area, roughly coinciding with its administrative province and the bordering Province of Monza and Brianza ,...
, married Yanko Della Schiava, the son of the editor of Cosmopolitan
Cosmopolitan (magazine)
Cosmopolitan is an international magazine for women. It was first published in 1886 in the United States as a family magazine, was later transformed into a literary magazine and eventually became a women's magazine in the late 1960s...
in Italy and of the editor of Harper’s Bazaar in Italy and France. Ariane, 42, who married Florence
Florence
Florence is the capital city of the Italian region of Tuscany and of the province of Florence. It is the most populous city in Tuscany, with approximately 370,000 inhabitants, expanding to over 1.5 million in the metropolitan area....
-born Marco Sodi, head of VSS
VSS
-Organizations:* Vernon Secondary School, a high school in Vernon, B.C.* Valley Stream South High School in Valley Stream, New York* Vaughan Secondary School, a public highschool located in Thornhill, Ontario operated by the York Region District School Board...
's London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
-based affiliate, Veronis Suhler Stevenson International, and a partner and managing member of Veronis Suhler Stevenson
Veronis Suhler Stevenson
Veronis Suhler Stevenson, or VSS is a private equity firm whose investments are exclusively concentrated in the Media industry and related sectors including information, education, marketing services and business services...
Funds, lives in Notting Hill
Notting Hill
Notting Hill is an area in London, England, close to the north-western corner of Kensington Gardens, in the Royal Borough of Kensington and Chelsea...
, London
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
.
Alix, 41, who married Philip J. Toub, the son of a director of the Saronic Shipping Company, in Lausanne
Lausanne
Lausanne is a city in Romandy, the French-speaking part of Switzerland, and is the capital of the canton of Vaud. The seat of the district of Lausanne, the city is situated on the shores of Lake Geneva . It faces the French town of Évian-les-Bains, with the Jura mountains to its north-west...
, Switzerland
Switzerland
Switzerland name of one of the Swiss cantons. ; ; ; or ), in its full name the Swiss Confederation , is a federal republic consisting of 26 cantons, with Bern as the seat of the federal authorities. The country is situated in Western Europe,Or Central Europe depending on the definition....
lives in Greenwich. Marisa, 31, who married Matthew Brown, the son of a former mayor of San Marino, California
San Marino, California
San Marino is a small, affluent city in Los Angeles County, California. Incorporated in 1913, the City founders designed the community to be uniquely residential, with expansive properties surrounded by beautiful gardens, wide streets, and well maintained parkways...
, lives on the Upper East Side
Upper East Side
The Upper East Side is a neighborhood in the borough of Manhattan in New York City, between Central Park and the East River. The Upper East Side lies within an area bounded by 59th Street to 96th Street, and the East River to Fifth Avenue-Central Park...
of Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
. They had originally purchased a townhouse but then were forced to sell it after the Madoff revelations. Brown also had worked for the feeder fund to Madoff, and Marisa started a costume jewelry business in the fall of 2008, although its not clear if that business is still viable given the Madoff news.
In 1974, the Noels purchased a five-bedroom home for $225,000, borrowed from both of their families.
It has evolved into an 8,600 square foot 8-bedroom, 9-bath colonial home, valued in 2005 at $6 million, on two acres in Greenwich. They also own an apartment on Park Avenue
Park Avenue (Manhattan)
Park Avenue is a wide boulevard that carries north and southbound traffic in New York City borough of Manhattan. Through most of its length, it runs parallel to Madison Avenue to the west and Lexington Avenue to the east....
in Manhattan, a home in Palm Beach, FL, a summer home in the Southampton, NY
Southampton (village), New York
Southampton is a village in Suffolk County, New York, USA. The village is named after the Earl of Southampton. The Village of Southampton is in the southeast part of the county in the Town of Southampton...
and a 42-room retreat on Caribbean island of Mustique
Mustique
Mustique is a small private island in the West Indies. The island is one of a group of islands called the Grenadines, most of which form part of the country of St Vincent and the Grenadines....
.
Three of Noel’s sons-in-law eventually became partners, promoting the firm’s funds in either their home countries or regions where they had their own family connections, and funneled money into Bernie Madoff's funds. Piedrahita, named a Fairfield founding partner in 2007, owns 22 percent, is based in Madrid and London and became one of the firm’s dominant representatives of European and Latin American banking and investment. Mr. Della Schiava was based in Madrid and Lugano, Switzerland. Piedrahita, Della Schiava and others, reaped many millions of dollars in investor capital from Europe. Toub was the “agent” for the Abu Dhabi Investment Authority
Abu Dhabi Investment Authority
The Abu Dhabi Investment Authority is a sovereign wealth fund owned by Abu Dhabi, United Arab Emirates founded for the purpose of investing funds on behalf of the Government of Abu Dhabi....
, the Safra National Bank of New York
Safra National Bank of New York
Safra National Bank of New York is a full-service commercial banking institution engaged in international banking operations, as well as domestic business activities emphasizing short and intermediate term financing for business ventures in industry and trade...
and the National Bank of Kuwait
National Bank of Kuwait
-The National Bank of Kuwait:The National Bank of Kuwait was incorporated in 1952 as the first local bank and the first shareholding company in Kuwait and the Gulf region. Over the years, NBK has maintained its position as the leading bank in Kuwait and built a well-established banking franchise...
. His niece, Bianca Haegler, a well-known Brazilian socialite, and her father, Alex, reportedly steered Brazilian investors to the firm,
as well as, Monica Noel’s cousin Jorge Paulo Lemann
Jorge Paulo Lemann
Jorge Paulo Lemann is the third wealthiest individual in Brazil. He is ranked as the 55th richest person in the world by Forbes, with an estimated net worth of as of September 2011.-Biography:...
, Brazil’s richest financier, co-owner of InBev
InBev
InBev is a subsidiary of Anheuser-Busch InBev. The company existed independently for several years - since the merger between Interbrew and AmBev and until the acquisition of Anheuser-Busch. InBev has operations in over 30 countries and sales in over 130 countries...
, Budweiser
Budweiser
Budweiser is a German adjective describing something or someone from the city of České Budějovice in Southern Bohemia, Czech Republic.Beer brewing in České Budějovice dates back to the 13th century...
’s parent company.
Jeffrey Tucker
Jeffrey Tucker also had a 17% interest in the firm. Though he is not as prominent as the Noels, Tucker benefited from Fairfield’s success. In 2007, Tucker, chairman of Empire Racing, led the group of thoroughbred investors, who sought to bid for New York State’s horse-racing franchise.Joint Venture
In 2004, the firm formed a partnership with Lion CapitalLion Capital
Lion Capital can refer to:* The Lion Capital of Asoka, a sculpture used as the national emblem of India* Lion Capital LLP, a British private equity firm formerly affiliated with Hicks Muse Tate & Furst* Lion Capital, a former affiliate of Apollo Management...
of Singapore
Singapore
Singapore , officially the Republic of Singapore, is a Southeast Asian city-state off the southern tip of the Malay Peninsula, north of the equator. An island country made up of 63 islands, it is separated from Malaysia by the Straits of Johor to its north and from Indonesia's Riau Islands by the...
, now Lion Global Investors, and created Lion Fairfield Capital Management, a joint venture meant to introduce Asian investors to the firm. Richard Landsberger, a Fairfield partner is director.
Merger
In September 2008, Banque Bénédict Hentsch, a private Swiss bank, managing $2 billion in assets, merged with Fairfield Greenwich Group, intending to yield an $18 billion venture in combined assets. Bénédict Hentsch, founder and chairman of the board of directors, stated that clients would gain access to Fairfield Greenwich's funds, while Fairfield Greenwich clients would be able to access BBH's wealth management services. Bénédict Hentsch and Robert Pennone became directors of Fairfield Greenwich Group and Charles Murphy and Mark McKeefry joined the board of Banque Bénédict Hentsch Fairfield Partners SA.In mid-December 2008, it terminated the merger due to the Madoff crisis. It had $47.5 million of client assets at risk with Madoff.
The founding shareholders of the bank have terminated their partnership with the Fairfield Greenwich Group. They have concluded an agreement with the latter whereby they have repurchased the total capital of the bank [...] Banque Bénédict Hentsch have immediately taken all appropriate steps in order to protect the interests of its clients and those of the bank.
Relationship with Bernard L. Madoff
Noel, a graduate of Vanderbilt UniversityVanderbilt University
Vanderbilt University is a private research university located in Nashville, Tennessee, United States. Founded in 1873, the university is named for shipping and rail magnate "Commodore" Cornelius Vanderbilt, who provided Vanderbilt its initial $1 million endowment despite having never been to the...
and Harvard Law School
Harvard Law School
Harvard Law School is one of the professional graduate schools of Harvard University. Located in Cambridge, Massachusetts, it is the oldest continually-operating law school in the United States and is home to the largest academic law library in the world. The school is routinely ranked by the U.S...
, and Tucker were introduced to Madoff in 1989 by Tucker’s father-in-law, from Scarsdale, New York
Scarsdale, New York
Scarsdale is a coterminous town and village in Westchester County, New York, United States, in the northern suburbs of New York City. The Town of Scarsdale is coextensive with the Village of Scarsdale, but the community has opted to operate solely with a village government, one of several villages...
who knew Madoff and had invested with him.
In 2006, the Securities and Exchange Commission, as part of an investigation into Madoff's activities, determined that Fairfield Greenwich had not properly disclosed that Madoff oversaw its investment decisions, though no evidence of fraud was found. Subsequently, Fairfield Greenwich formally disclosed Madoff's role – and in the process raised about $1.7 billion from investors in the US and Europe.
During the summer of 2007, several private-equity firms were discussing taking a large investment in the firm, but Madoff ended any potential deal by refusing to grant the potential investors access for due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
.
By 2008, the firm had 48 percent of its capital tied to Madoff.
Fairfield Sentry Fund
Noel and Tucker created the Fairfield Sentry fund in 1990 with $1 million in "seed money" and began expanding it a year later. At the time, Noel and Tucker said Madoff provided more information and transparency than most hedge funds, and operated a reputable Wall Street firm.The Fairfield Sentry fund required a $100,000 minimum investment and was billed as a way to tap Madoff's trading expertise using "algorithmic technology" while Fairfield with due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
conducted "systematic investment compliance". It had more than $7 billion invested with Madoff, and became one of his largest victims. It was Fairfield's signature fund, one of several feeder fund
Feeder fund
A feeder fund is an investment fund which does almost all of its investments through a master fund via a master-feeder relationship.It is a situation similar to a fund of funds, except that the master fund performs all the investments....
s through which money from wealthy foreign investors could capitalize on Mr. Madoff’s supposed investment acumen. Its marketing prospectus promised low volatility and steady returns, and boasted 11 percent annual return over the last 15 years, with only 13 losing months, a record that grew increasingly desirable over recent years of volatility. The fund was backed by loans from banks including Banco Bilbao Vizcaya Argentaria
Banco Bilbao Vizcaya Argentaria
Banco Bilbao Vizcaya Argentaria, S.A. is a multinational Spanish banking group. It was formed in 1999 from the merger of Banco Bilbao Vizcaya and Argentaria, both of which in turn had previously amalgamated three important banks in Spain, namely Banco de Bilbao, Banco de Vizcaya, Banco Exterior de...
and Nomura Holdings
Nomura Holdings
Nomura Holdings, Inc. is a Japanese financial holding company, and a principal member of the Nomura Group.In October 2008 the company acquired Lehman Brothers Holdings's investment banking and equities unit in Asia and Europe and kept on most of its employees. Nomura paid $225 million for the...
, which invested about $304 million.
The Mugrabis, extremely wealthy art collectors from Colombia who have lived in New York for more 20 years, and long time friends of Piedrahita (a Colombian who had married Mr. Noel’s eldest daughter, Corina), were investors.
"We had very little money with the fund — just under a million dollars — so I am not that upset personally," said Alberto Mugrabi, a son of the family patriarch. "It was a very informal thing. We know Andrés (Piedrahita) since forever, from Bogotá, he’s a great guy, and he says to us, ‘This is the Madoff thing, he’s the master.’ I trusted Andrés. I still trust him."
In early 2005, The Abu Dhabi Investment Authority
Abu Dhabi Investment Authority
The Abu Dhabi Investment Authority is a sovereign wealth fund owned by Abu Dhabi, United Arab Emirates founded for the purpose of investing funds on behalf of the Government of Abu Dhabi....
invested approximately $400 million. After redemptions in 2005 and 2006, it continued to $132 million, 2% of the funds assets. One of the largest of the world’s sovereign wealth funds, its assets were estimated in early 2008 to be approaching $700 billion.
In August 2008, JPMorgan Chase pulled $250 million from this Madoff feeder fund account. Chase had become "concerned about lack of transparency", and had performed due diligence
Due diligence
"Due diligence" is a term used for a number of concepts involving either an investigation of a business or person prior to signing a contract, or an act with a certain standard of care. It can be a legal obligation, but the term will more commonly apply to voluntary investigations...
which had "raised doubts" about Madoff's operation.
The firm set up feeder programs with such banks as Banco Santander, SA private banking unit, Banif, Swedish Bank Nordea
Nordea
Nordea Bank AB is a Stockholm-based financial services group operating in Northern Europe. The bank is the result of the successive mergers and acquisitions of the Swedish, Finnish, Danish and Norwegian banks of Nordbanken, Merita Bank, Unibank and Kreditkassen that took place between 1997 and 2000...
, Zurich
Zürich
Zurich is the largest city in Switzerland and the capital of the canton of Zurich. It is located in central Switzerland at the northwestern tip of Lake Zurich...
-based NPB
NPB
NPB can refer to:* NAS Parallel Benchmarks, a set of benchmarks developed by the NASA for measuring the performance of supercomputers* National Printing Bureau of Japan...
Neue Privat Bank, Banque Benedict Hentsch and Cie
CIE
-Organizations:* Cambridge International Examinations, an international examination board* Cleveland Institute of Electronics, a private technical and engineering educational institution — the International Commission on Illumination...
of Geneva
Geneva
Geneva In the national languages of Switzerland the city is known as Genf , Ginevra and Genevra is the second-most-populous city in Switzerland and is the most populous city of Romandie, the French-speaking part of Switzerland...
, all conduits of fresh money to Mr. Madoff which extended his global reach.
Fees
Fairfield's fee arrangement earned them approximately $400 million from 2005-2008. The firm charged clients larger fees than most similar firms do, including a 20% share of profits on investments, about double what competitors charge that farm out clients' money to a variety of fund managers. In October 2004, it also began collecting a 1% fee on assets under management.Madoff didn't charge additional fees, rather a commission on trades he allegedly executed. This arrangement raised suspicions and doubt among other money managers.
Massachusetts regulators alleged that in 2007, Tucker earned more than $30 million in fees from Madoff, and that even in down markets Madoff helped Fairfield earn steady returns.
New Funds in 2008
As recently as December 11, 2008, the day Madoff was taken into federal custody, Madoff was working with Fairfield Greenwich to raise money for new funds, which promised about a 16% return, using more leverage than the 3–1 ratios he claimed he used in existing funds. It has been reported by one client that Fairfield warned investors they would be excluded from any future Madoff product if they declined to participate in the new fund and/or withdrew from any existing funds.Investor Lawsuits
Fairfield Greenwich is a defendant in a class action which seeks to recoup losses resulting from Fairfield Greenwich funds' investments with Bernard L. Madoff Investment Securities. The class action is a result of the consolidation of multiple cases filed in federal and state court against Fairfield Greenwich. On September 29, 2009, a second amended consolidated complaint was filed. The complaint also names as defendants the placement agent for the funds; Citco, the administrator and sub-custodian of the funds; and PricewaterhouseCoopersPricewaterhouseCoopers
PricewaterhouseCoopers is a global professional services firm headquartered in London, United Kingdom. It is the world's largest professional services firm measured by revenues and one of the "Big Four" accountancy firms....
, the auditor of the funds. The complaint alleges fraud, violations of Rule 10b-5, violations of Section 20(a), negligent misrepresentation, gross negligence, breach of fiduciary duty, third-party beneficiary breach of contract, constructive trust, mutual mistake, negligence, negligent misrepresentation, aiding and abetting breach of fiduciary duty, aiding and abetting fraud and unjust enrichment.
Fairfield is also a defendant in a lawsuit filed in Miami against PricewaterhouseCoopers Ireland
Ireland
Ireland is an island to the northwest of continental Europe. It is the third-largest island in Europe and the twentieth-largest island on Earth...
by investors in a fund marketed by defendant, Banco Santander SA, Europe's second-largest bank by market value, which lost an estimated $3 billion.
Massachusetts Action
On April 1, 2009, the Commonwealth of Massachusetts filed a civil action charging Fairfield Greenwich with fraud, breaching its fiduciary duty to clients by failing to provide promised due diligence on its investments. The complaint sought a fine and restitution to Massachusetts investors for losses and disgorgement of performance fees paid to Fairfield by those investors. It alleges that in 2005 Mr. Madoff coached Fairfield staff about ways to answer questions from SEC attorneys who were looking into Harry MarkopolosHarry Markopolos
Harry M. Markopolos is a former securities industry executive and independent financial fraud investigator for institutional investors and others seeking forensic accounting expertise. He has received public acclaim for uncovering evidence over a period of nine years that Bernard Madoff's wealth...
' complaint about Madoff's operations.
The Secretary of State had stated that he had no plans to settle the lawsuit in spite of Fairfield Greenwich's offer to repay all Massachusetts investors, and said he was going to force Fairfield to explain e-mails and other evidence that appear to show company officials knew about potential problems with Madoff but failed to disclose them to clients. However, the action was settled on September 8, 2009. Fairfield Greenwich neither admitted nor denied wrongdoing, agreed to provide restitution to Massachusetts investors, and paid a civil penalty.
Other Lawsuits and Investigations
On April 13, 2009, a Connecticut judge dissolved a temporary asset freeze from March 30, 2009, and issued an order for Walter Noel to post property pledges of $10 million against his Greenwich home and $2 million against Jeffrey Tucker's.Noel agreed to the attachment on his house “with no findings, including no finding of liability or wrongdoing." Andres Piedrahita's assets continue to remain temporarily frozen because he was never served with the complaint. The principals are all involved in a lawsuit filed by the town of Fairfield
Fairfield
-Australia:*Fairfield, New South Wales, the most populous place in Australia with that place name**Electoral district of Fairfield, the corresponding seat in the New South Wales Legislative Assembly*Fairfield, Queensland*Fairfield, Victoria...
's pension funds. The pension fund case is Retirement Program for Employees of the Town of Fairfield v. Madoff, FBT-CV-09-5023735-S, Superior Court of Connecticut (Bridgeport).
On May 18, 2009, Irving Picard
Irving Picard
Irving H. Picard is a partner in the law firm Baker Hostetler. He graduated from the Wharton School, University of Pennsylvania, with a B.S. degree , from Boston University School of Law with a J.D. degree , and from the New York University School of Law with an LL.M. degree in 1967, and was...
sued Fairfield Greenwich Group seeking the return of $3.2 billion during the period from 2002 - Madoff's arrest in December, 2008. $1.2 billion was withdrawn in the final three months of the fraud. Since 1995, the Fairfield funds invested about $4.5 billion with Bernard L. Madoff Investment Securities LLC, or BLMIS, through 242 wire transfersThe funds are Fairfield Sentry Ltd., Greenwich Sentry LP, and Greenwich Sentry Partners LP. However, the money may already be in the hands of Fairfield’s own clients, who are likely off-limits to Picard, since they weren’t direct investors with Madoff.
On May 29, 2009, Fairfield Sentry, based in the British Virgin Islands, filed a complaint filed in New York State Supreme Court in Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
seeking to recover more than $919 million in investment management and performance fees that it paid to Fairfield, based upon “inflated net asset value reports of its investments with Bernard L. Madoff Investment Securities LLC...The Fairfield entity defendants recklessly disregarded their duties as the fund’s risk and investment adviser and their actions and inactions constitute gross negligence.” The lawsuit alleges breach of fiduciary duty, and unjust enrichment
Unjust enrichment
Unjust enrichment is a legal term denoting a particular type of causative event in which one party is unjustly enriched at the expense of another, and an obligation to make restitution arises, regardless of liability for wrongdoing.Definition:...
. It is “the largest victim of the fraud perpetrated by Bernard L. Madoff,” losing $7 billion.
The defendants include founders Walter Noel and Jeffrey Tucker and other fund partners who the plaintiffs allege “failed to fulfill their contractual obligations to use best efforts to supervise the operations” of Madoff-related investments and to “oversee the day-to-day investment activities of the fund.” The case is Fairfield Sentry Ltd. v. Fairfield Greenwich Group, 601687/2009, New York State Supreme Court (Manhattan).
On July 20, 2009, Justice Edward Alexander Bannister granted the request to liquidate the Fairfield Sentry funds, worth more than $7.2 billion in December, 2008, now less than $70 million, incorporated in 1990 under the mutual fund statutes of the British Virgin Islands and technically are under the control of their local directors.
Spanish anticorruption prosecutors are investigating Fairfield Greenwich as well as Mr. Piedrahita to determine what they knew about Mr. Madoff's fraudulent funds when they sold them to Spanish clients. According to Fairfield's offices in Spain, Spanish investments totalled $89.1 million.
On November 19, 2010, both Greenwich Sentry, L.P. and Greenwich Sentry Partners, L.P. voluntarily filed for chapter 11 bankruptcy protection in New York. Court filings blamed the bankruptcy filings on the cost of the Madoff-related litigation and asserted a goal of reaching a global settlement of the litigation for the bankruptcy cases.
Allegations of Auditor Shopping
On February 4, 2009 Madoff whistleblower Harry MarkopolosHarry Markopolos
Harry M. Markopolos is a former securities industry executive and independent financial fraud investigator for institutional investors and others seeking forensic accounting expertise. He has received public acclaim for uncovering evidence over a period of nine years that Bernard Madoff's wealth...
testified before Congress. In his prepared statement, on page 20, he discussed Fairfield Greenwich's accounting practices regarding its choice of auditors and accused it of frequently switching them, or "auditor shopping." However, Markopolos did not distinguish between separate auditors for separate funds within Fairfield Greenwich, which did not actually change as he alleged.
Effect on Executives and Other Employees
Walter Noel and Jeffrey Tucker recently sold a one-sixteenth shared interest in a CessnaCessna
The Cessna Aircraft Company is an airplane manufacturing corporation headquartered in Wichita, Kansas, USA. Their main products are general aviation aircraft. Although they are the most well known for their small, piston-powered aircraft, they also produce business jets. The company is a subsidiary...
560XL private jet, purchased in late 2006. Tucker wants to sell his three horse farms, Stone Bridge Farms, in Schuylerville and Gansevoort, NY, which he bought in 2004 for $18 million. They each include furnished homes. Most of his horses have been sold.
Some hedge-fund experts predict the firm will not survive the Madoff scandal.
Tucker's wife Melanie, an avid bridge
Contract bridge
Contract bridge, usually known simply as bridge, is a trick-taking card game using a standard deck of 52 playing cards played by four players in two competing partnerships with partners sitting opposite each other around a small table...
player, was accustomed to using her husband's jet to fly herself, and the bridge pros hired to play on her team, to bridge tournaments across the country. She now has postponed attending tournaments requiring air travel.
Executive Charles Murphy initially offered for sale his 1882, 12000 square feet (1,114.8 m²) limestone townhouse, located at 7 East 67th Street, Lenox Hill
Lenox Hill
Lenox Hill is a neighborhood on Manhattan's Upper East Side. It forms the lower section of the Upper East Side, closest to Midtown. While it is agreed that the neighborhood ranges from 72nd Street to 59th Street, its eastern border is disputed, though The Encyclopedia of New York City cites Fifth...
, Manhattan
Manhattan
Manhattan is the oldest and the most densely populated of the five boroughs of New York City. Located primarily on the island of Manhattan at the mouth of the Hudson River, the boundaries of the borough are identical to those of New York County, an original county of the state of New York...
, but as of December 2009, the home is no longer listed. He bought the residence from Seagram
Seagram
The Seagram Company Ltd. was a large corporation headquartered in Montreal, Quebec, Canada that was the largest distiller of alcoholic beverages in the world. Toward the end of its independent existence it also controlled various entertainment and other business ventures...
liquor heir Matthew Bronfman in 2007 for $33 million.
Matthew Brown and his wife, Marisa Noel Brown, were forced to sell their Upper East Side townhouse at 12 East 78th Street for $9.75 million, $3.75 million less than what they had paid in January 2008.
See also
- Accounting scandalsAccounting scandalsAccounting scandals, or corporate accounting scandals, are political and business scandals which arise with the disclosure of misdeeds by trusted executives of large public corporations...
- Allen StanfordAllen StanfordRobert Allen Stanford is a former prominent financier and sponsor of professional sports who is in prison awaiting trial on charges his investment company was a massive Ponzi scheme and fraud. Stanford was the chairman of the now defunct Stanford Financial Group of Companies. A fifth-generation...
- Bernie Madoff
- Con ManConfidence trickA confidence trick is an attempt to defraud a person or group by gaining their confidence. A confidence artist is an individual working alone or in concert with others who exploits characteristics of the human psyche such as dishonesty and honesty, vanity, compassion, credulity, irresponsibility,...
- FBI
- Financial crisis of 2007–2010
- FraudFraudIn criminal law, a fraud is an intentional deception made for personal gain or to damage another individual; the related adjective is fraudulent. The specific legal definition varies by legal jurisdiction. Fraud is a crime, and also a civil law violation...
- Greenwich, ConnecticutGreenwich, ConnecticutGreenwich is a town in Fairfield County, Connecticut, United States. As of the 2010 census, the town had a total population of 61,171. It is home to many hedge funds and other financial service companies. Greenwich is the southernmost and westernmost municipality in Connecticut and is 38+ minutes ...
- Hedge FundHedge fundA hedge fund is a private pool of capital actively managed by an investment adviser. Hedge funds are only open for investment to a limited number of accredited or qualified investors who meet criteria set by regulators. These investors can be institutions, such as pension funds, university...
- IRS
- Madoff investment scandalMadoff investment scandalThe Madoff investment scandal broke in December 2008 when former NASDAQ chairman Bernard Madoff admitted that the wealth management arm of his business was an elaborate Ponzi scheme....
- Ponzi schemePonzi schemeA Ponzi scheme is a fraudulent investment operation that pays returns to its investors from their own money or the money paid by subsequent investors, rather than from any actual profit earned by the individual or organization running the operation...
- Pyramid schemePyramid schemeA pyramid scheme is a non-sustainable business model that involves promising participants payment or services, primarily for enrolling other people into the scheme, rather than supplying any real investment or sale of products or services to the public...
- Stanford Financial GroupStanford Financial GroupThe Stanford Financial Group was a privately held international group of financial services companies controlled by Allen Stanford, until it was seized by United States authorities in early 2009....
- White Collar Crime
External links
- Commonwealth of Massachusetts Admininistrative Complaint and Exhibits. 4/1/09
- Amended Class Action Complaint Anwar et al. v. Fairfield Greenwich Limited, et al. Case No. 09-cv-118 U.S. District Court, Manhattan, filed April 24, 2009.