Hedge fund funds and hedge fund manager missing. Another Madoff ponzi scheme?

[Magda Hassan]

Fears of Madoff-style Scandal As Florida Fund Manager Goes Missing

FBI called in after Arthur Nadel disappears amid claims his hedge fund is empty. By Andrew Clark
The disappearance of a Florida hedge fund manager has raised the possibility of another Madoff-style scandal in the United States, with fears mounting that an estimated $350m (?242m) of investments may have evaporated.

Police in Sarasota, a city of 52,000 people south of Tampa, have called in the FBI to help in the hunt for Arthur Nadel, president of Scoop Management, who was last seen by his wife when he left home for work on Wednesday.

Nadel's green Subaru car was found at Sarasota's airport on Thursday. The 76-year-old called his stepson that day to try to retrieve a letter interpreted by family members as a possible suicide note.

Associates at Nadel's firm have told clients that the company's funds appear to be empty. In a letter to investors, Nadel's business partner, Neil Moody, said the funds "may have virtually no remaining value". The Securities and Exchange Commission, the US financial watchdog, has begun an investigation.

Moody said Scoop was facing hefty redemption calls from customers who wanted to take out their money. The case has drawn comparisons with the scandal surrounding the Wall Street financier Bernard Madoff, who is accused of hiding losses of $50bn.

Scoop's clients include an estimated 300 local residents and non-profit organizations. The local YMCA Foundation had $1.1m invested, originally a gift from Nadel's business partner, given on condition it was managed by the firm.

The foundation's president, Karin Gustafson, told the Guardian: "This is a very puzzled community. We're very anxious to get some answers."

She said her organisation faced the loss of 13% of its total endowment: "We're assessing the situation. We're sitting back here: we're not rushing to judgment, we're waiting for the facts to unfold."

Run out of a store front with a green awning on Sarasota's high street, Scoop Management's six funds have grown from $10m to what clients were told was $350m over the course of a decade, according to the Sarasota Herald-Tribune newspaper.

A former New York jazz pianist, Nadel and his wife, Peg, have been fixtures on Sarasota local social scene and prominent supporters of arts causes including the city's ballet. Scoop began as a club for day traders called "the inside Scoop" before evolving into a hedge fund.

In claims which echo the much larger Madoff scandal, Nadel reportedly provided statements to customers showing typical returns of 8% to 12% annually. He claimed to be achieving such success through a complex technique of hedging purchases of stock with "short" positions to minimize the risk of falls in price.

In a statement over the weekend, Nadel's family acknowledged all was not as it seemed: "The employees of Scoop Management, which include Peg Nadel, the wife of Arthur Nadel, have just learned that they, along with many others who have invested money with Art, have been victimized by his unauthorized actions."

Upheaval in the financial markets has sparked a series of scandals concerning renegade financiers. An Indiana investment adviser, Marcus Schrenker, was arrested last week after faking his own suicide by parachuting out of a private plane. He faced legal claims over millions of dollar of allegedly misappropriated funds.

The once buoyant hedge fund industry has been left in tatters by unprecedented volatility. According to Chicago-based Hedge Fund Research, 693 funds were liquidated in the first nine months of 2008, a 70% increase on the previous year.

In Sarasota, the authorities said at least five people had filed complaints against Nadel over missing funds. Police lieutenant Stanley Beishline told Bloomberg News he believed Nadel was alive: "I think he is, at least until a couple of investors find him."

http://www.buzzle.com/articles/246514.html

[Magda Hassan]

Another owner of the flight school in Venice Florida that trained Mohamed Atta and Marwan Al-Shehhi to fly is in trouble with the law; current owner Arthur G. Nadel, 75, was arrested recently for running a Ponzi scheme which methodically looted investors in his Sarasota-based hedge funds of more than $300 million. Nadel's arrest marks the second time in recent years that the owner of Huffman Aviation, the FBO (fixed base of operations) at the Venice Airport has been involved in crimes traditionally associated with the Mob.
Ponzi schemes, of course, are a trademark Mafia specialty. So, too, is the crime of heroin trafficking in which previous owner Wally Hilliard was implicated.
Nadel may have stolen as much as $350 million from his hedge fund investors, many of them middle-class retirees who do not fit the typical hedge fund investor profile of wealthy people willing to risk their entire investment.
New York tabloids, already in overdrive on the story of Bernard Madoff, instantly dubbed Nadel Mini-M, for Mini-Madoff.
Before turning himself in late January, Nadel spent several weeks on the lam. Rumors spread that Nadel was already dead.
He wasn't... Instead he was flying above the clouds on a sleek luxury jet, from Sarasota to San Antonio to Los Angeles, San Francisco, and New Orleans. His high-end Learjet 31-A offers performance matched by few other civilian airplanes; it cruises comfortably at 500 miles an hour, and at an altitude of 51,000 feet,

A few questions no one is asking

Nadel was worried, he wrote, about being murdered. But not, we suspect, by one of the blue-haired widows from whom he stole millions.
For most of his life, Art Nadel was a "jazz pianist," meaning he played the piano in hotel lounges, not seen as a springboard to careers of looting at will.
Take a closer look at the Learjet he was flying before his arrest. Does that look like the ride of a piano player?
While previous owner Wallace J. Hilliard owned Huffman Aviation, and Mohamed Atta was taking flying lessons, DEA agents busted Hilliard’s Learjet carrying 43 lbs. of heroin. It was July 25, 2000, at the Orlando Executive Airport.
43 lbs of heroin is known in the trade, we have been told, as " heavy weight."
How did city officials in Venice allow the airport's mission-critical FBO to fall into the hands--not once but twice--of people otherwise engaged in organized crime?
How many small towns with barely ten thousand people “boast” a tiny local airport which play host to terrorist hijackers? Or been run by a heroin trafficker disguised as a flight school owner, or a man accused of stealing $300 million in a huge financial fraud?
Why do shadowy underworld figures have the permanent run of the airport in Venice, Florida?

It Happened in Venice

Before each man had purchased the major business at the tiny Venice Airport, neither Art Nadel nor Wally Hilliard’s background offered much in the way of clues indicating involvement with organized crime.
After Nadel went on the lam reporters discovered he had been a lawyer in New York who was disbarred in 1982 by the New York Supreme Court. Nadel 'kept' a client's $50,000 escrow check, and neglected to return it.
He was worried, at that time, according to Sarasota Private investigator Bill Warner (whose reporting on Nadel has outpaced the entire staff of the local Sarasota Herald-Tribune) over an unpaid $50,000 loan to a loan shark.
If Nadel was able to borrow $50,000 from a loan shark in New York in 1980, he already had connections with the Mob. Loan sharks are not listed in the New York City phone book.
For his part, Hilliard, who owned Huffman Aviation between 1999 and 2003, was an insurance executive who supposedly ‘retired’ to Florida in 1996 from Green Bay, Wisconsin, not a known hot-bed of Mafia activity.
Hilliard did have connections, however. Not with the Mob, perhaps, but with the CIA, through Myron DuBain, a World War II OSS/CIA operative who became the chairman of Fireman's Fund Insurance, which announced plans to acquire the insurance company founded by Hilliard back in 1982.
DuBain later founded a San Francisco supper club with oilman Gordon Getty and Reagan Secretary of State George Shultz; his "Pacific Institute" kept former Bush Secretary of Defense Donald Rumsfeld busy in the 1990s.

"He needed a little alone time."

Nadel’s fraud began to unravel soon after he left his four-bedroom home for work on the morning of Jan. 14 and didn’t return. By that weekend the Federal Bureau of Investigation had joined local police to search for him.
Nadel's attorneys initially denied he was trying to run away. One of them told reporters, “He went away for a while just to be alone.”
But it was soon clear to all that Nadel was on the run.
Panicked and desperate investors began beseeching Sarasota police and the FBI to find and apprehend him.
Like Madoff, but in a smaller social arena, Art Nadel was considered a trusted and generous philanthropist in Sarasota. But unlike Madoff, many more "ordinary" and perhaps slightly less-sophisticated investors were devastated by Nadel’s Ponzi scheme.
The big question which people in this dire circumstance are understandably concerned with is simple:
"What happened to the money?"

"Fast planes, yep, and lots of hangars too!"

One answer has already become obvious. Nadel spent an enormous amount of money on airplanes and aviation facilities.

Nadel used proceeds from the fraud to purchase what he re-named the Venice Jet Center at the Venice Airport, the same building whose blue awning became well-known internationally after the 9/11 attack as the home of dozens of young Arab men suspected of being terrorists learned to fly.
His "passion for aviation" led him to illegally divert $4 million to the Venice Jet Center and Tradewind LLC, an aviation company he owns which has aircraft and hangars in Georgia and North Carolina.
Managers of Nadel’s hedge funds told clients that their money was gone; that the man behind it had vanished; and that they were frankly not real hopeful any of it would ever be recovered.
Strangely, however, there were two Florida law enforcement agencies which were seemingly unconcerned by Nadel’s disappearance.
The Sarasota County Sheriff's Office even announced it was ending its search for Nadel on the dubious ground that since the Florida financier's car had been found at a Sarasota airport, he wasn’t really missing.
According to a January 21 Associated Press story headlined “Authorities think money manager planned to vanish,” the Sarasota Sheriff’s Department reasoning was that Nadel, who had not yet been charged with any crime, had planned his own disappearance, and left on his own volition.
"He doesn't want to be found," shrugged a Sheriff’s Dept. spokesman.
Perhaps the Sheriff's Department didn't want him to be found. The man picked by Art Nadel to look after his interests at the Venice Airport, Roger Jernigan, worked for the Sarasota Sheriff’s Dept as a helicopter pilot until forced to resign under a cloud.
The second Florida law enforcement agency exhibiting strange behavior during the search for Art Nadel is the Florida Department of Law Enforcement, or FDLE.
And what they did deserves its own story.
NEXT: The War for Control of the Venice FL "Plaza"


http://www.madcowprod.com/03202009.html

[Magda Hassan]

Accused Ponzi Fraudster investor linked to

Texas "investment bank" behind DC9 5-ton coke bust
Art Nadel 'Ponzi Pal' Link to 5.5-tom Coke Bust

April 2 2009
by Daniel Hopsicker

[EMAIL="madcownews@gmail.com"]
[/EMAIL]

"The history of men is reflected in the history of sewers. Crime, intelligence, social protest, freedom of conscience, thought, theft, all that human laws have prosecuted was hidden in this pit."

Victor Hugo, Les Miserables

An investor claiming a nearly six million dollar loss in hedge funds of the accused Sarasota Florida Ponzi artist who is also the current owner of flight school Huffman Aviation figured in the story of the St. Petersburg DC9 busted in Mexico's Yucatan with 5.5 tons of cocaine aboard.
Louis D. Paolino, once known as the “Garbage King of New Jersey,” was one of only a handful of entities ever funded by Texas "investment bank" Argyll Equity LLC, the major investor in the company whose DC9 was busted on April 11, 2006 in Mexico’s Yucatan, carrying 5.5 tons of cocaine.
Terrorist ringleader Mohamed Atta probably never met anyone named “Fat Pete” or “Joey Cakes” while learning to fly at Huffman Aviation at the Venice Airport.
But ever-mounting evidence points to the conclusion that the men who owned the flight school—both then and now—have more than a passing acquaintance with organized crime.

Troubling questions about yet another "lone gunman"

Nadel’s decade-long fraud was discovered at almost the same time as Bernie Madoff’s orders-of-magnitude-larger Ponzi scheme. A half-dozen others have since followed.
There appears to be a sudden epidemic of multi-million (and billion) dollar Ponzi fraud. Did someone yell "Olly olly oxen free!" in a voice that can only be heard by 'elite deviant'members of America's new "Masters of the Universe' class?
While Federal investigators pore over the self-proclaimed "Mini-Madoff's books, there are troubling questions emerging over Federal prosecutors "lone gunman" theory about how the dorky Sarasota socialite managed to steal $350 million from investors.
Art Nadel, an unprepossessing piano player in hotel lounges, was somehow able to maneuver himself into a position where he could reach into other people’s pockets—deeply and at will—and relieve them of what was, in too many cases, their life's savings.
Did Art Nadel do it all on his own? Indications so far point in another direction.
“Local philanthropist” was the label often applied to Nadel by the local Sarasota Herald-Tribune.
“Mobbed-up Sarasota businessman" might be a more accurate description.

Hopes for ash dashed.

We learned of Louis Paolino's involvement in Art Nadel's hedge funds in a Sarasota Herald-Tribune story announcing that Paolino has filed suit against two of Nadel fund managers. Paolino, said the Herald-Tribune, (allegedly) lost his entire investment of (allegedly) $5.6 million.
Only the Herald-Tribune didn't put allegedly in front of Paolino's claims, although given the information about his history of lawsuits, which we will take up shortly, they undoubtedly should have.
Nor did the Sarasota Herald-Tribune story bother to trouble their readers with any information, all easily available, about Paolino's highly-colorful background.
A brief description of what the Herald-Tribune omitted:
Without a doubt the one event in Lou Paolino's checkered career for which he will be remembered for his entire life was the infamous Khian Sea garbage barge, which spent almost two years in the news as it sailed around the world looking for someone to take its load of toxic waste.
The man who owned the barge was Louis D. Paolino. He received funding from Argyll Equities LLC, which also invested in the Kovar Crime family of business fraudsters at St. Petersburg FL's SkyWay Aircraft, owners of a DC9 they kept at the Clearwater-St. Pete Airport which would be busted carrying 5.5 tons of cocaine.
"The cursed cargo of the Khian Sea," as it became known, was so toxic that even New Jersey refused to accept it.

Garbage King can't shake 'stench of dead fish'

Paolino's huge freighter was packed to the gills with 14,000 tons of waste from a Philadelphia dump site.
The ship left the territorial waters of the United States, went to the Bahamas, to the Dominican Republic, Honduras, Bermuda, Guinea Bissau, the Netherlands Antilles...
Some ports even turned the ship away at gunpoint.
Eventually the crew mutinied, and two executives of the shipping company went to prison for ordering the crew to dump the ash over the side in the middle of the ocean.
No one would take it...that is, until it got to Haiti.
There, U.S.-backed dictator "Baby Doc" Duvalier issued a permit for the "fertilizer," and 4,000 tons was dumped onto the beach in the town of Gonalves, where it rotted for 12 years.
Baby Doc today lives in the South of France.

"Billionaire Trashman Cant Shake Stench of Garbage"

When Paolino tired of all the fun to be had in the garbage business, he sold his company to billionaire trashman Wayne Huizenga—himself no stranger to accusations of Mob influence—for more than $1 billion.
Waste Management runs, news accounts have demurely reported, “much of New York's extremely lucrative garbage industry.”
When the Huizenga-owned Miami Dolphins played an NFL exhibition game in London several years ago, British tabloids had a vicious field day. "Is Mafia Boss Sitting Next to You On the Bus?" asked one headline.
"Former Garbage King Wayne Can't Shake Stench of Dead Fish,” sang another.
Curiously the other recent owner of Huffman Aviation who has known criminal associates, Wallace J Hilliard, is also in tight with Wayne Huizenga.
Hilliard’s chief aviation mechanic (while Mohamed Atta was attending his flight school) was Dave Montgomery, who told us of witnessing a meeting Hilliard had with Huizenga on the Dolphins owner’s helicopter, which bore the Dolphins logo.
“Hilliard came out and got into the helicopter, and the two men held a meeting that lasted almost an hour, right on the apron,” Montgomery stated, “before Hilliard exited the helicopter and Huizenga took off.”

Garbage King of Jersey? Fuggedaboutit!

As we began to examine Nadel’s business associates, we immediately came upon a name we knew from what we had thought was another story altogether...
We first heard the name Louis Paolino in connection with the American-registered DC9 from St. Petersburg FL busted in Mexico’s Yucatan while carrying 5.5 tons of cocaine, on April 11, 2006.
Several years ago Louis Paolino became the grateful recipient of a $6 million loan from a mysterious private equity firm called Argyll Equities LLC, in Boerne, TX, and La Jolla, CA.
It was one of only three loans the secretive company is known to have made. Another was infamous SkyWay Aircraft.
SkyWay Aircraft was a complete fraud which existed primarily to facilitate a pump & dump stock play. SkyWay had no product, no market, and no prospects.
But that didn't stop the avalanche of self-congratulatory press releases touting deals that never happened with companies and individuals who did not, in fact, exist.
Eventually SkyWay was “busted out”—had its assets looted—in 2003 and 2004.
Although Argyll’s investment in SkyWay diminished daily, the company still might have proved attractive in other ways.

"Homeland Security been berry berry good to me!"

Skyway owned several DC9 airliners, ostensibly for demonstrations of technology that the company would never possess. Observers at Clearwater-St. Pete International Airport speculated that there had to have been another reason.
There was.
The firm provided an excuse for keeping several intercontinental aircraft handy.

One of SkyWay's two DC9's had been painted to impersonate—complete with phony Government Seal on the door—an official aircraft from the Dept. of Homeland Security.
Although this DC9 sat on the tarmac at Clearwater-St Pete International Airport for over a year, just one hundred yards from the major U.S. Coast Guard Gulf Coast interdiction facility, no one at the Coast Guard facility apparently noticed the ruse.
Then while flying back from a rendezvous in either Columbia or Venezuela—accounts vary—the DC9 had been caught carrying 5.5 tons of cocaine, at an out-of-the-way rural airport on Mexico’s Yucatan Peninsula.

The third time's the charm. What? Another drug smuggler!?

Argyll Equities' only funded three deals. Their third plunge into the world of investment banking-- after SkyWay Aircraft and Louis Paulino--was arranging a $17 million loan for a Mexican businessman, who then provided "significant capital," according to Chilean news accounts, to “Chilean narcotics trafficker Manuel Vicente Losada."
This news came out after Losada was arrested in the Chilean capital of Santiago. He had been “linked to a shipment of five tons of cocaine which U.S. drug enforcement officials in Miami intercepted over six years ago on the MV Harbour as it headed toward Guantanamo Bay.”
(The italics are ours. We were stunned.)
Why were Caribbean dopers steering a course for a highly-secure U.S. military facility?
Perhaps someday we will know. Then, too, perhaps someday pigs will fly.

Sue me Sue You Sue Sue Sue

It seemed unlikely that Louis Paolino, a highly-intelligent and well-connected Philadelphia native, would have been unaware, before filing suit against Nadel's fund managers, of the elementary fact that Art Nadel had stripped out all the money in his hedge funds.
However, a glance at Paolino's past performance leads to the suspicion that the lawsuit might be strictly pro forma...
Paolino files lawsuits against almost everyone he is in business, or does business, with. It seems to be some kind of protective device.
Assembling a full description of Paolino's lawsuits might strain the resources of America's criminal records system...Several examples will have to suffice. Among the more interesting: Paolino sued Argyll (in a RICO civil claim, no less.)
He also sued Argyll attorney John Francyzk (who we will return to in upcoming stories) who has an interesting connection with the notorious Teamster Central State's Pension Fund.

"Philanthropic" maybe. But not a nice man.

As first revealed by Sarasota Private Investigator Bill Warner, Nadel was already in business with associates of organized crime by the early 1970’s.
Nadel was a principal in a company called Florida Nursing Corp. His partner, Howard Sturman, was at the center of a corporate takeover that led to racketeering charges against members of the Genovese Crime Family.
With an assist from one of the invaluable citizen-researchers who will someday make newspapers like the Sarasota Herald-Tribune obsolete, we discovered that newspaper descriptions of Nadel's "charitable feelings" may have been overdone.
In 1971, Nadel was acting as attorney for a New York company seeking to evict several hundred residents of a company town alongside a lime calcification plant previously owned by U.S. Gypsum in Cheshire, Massachusetts.

The plant, which had been in continuous operation for over 100 years, was purchased by Nadel’s client, North Brewster Inc.
The eviction was highly controversial.
“Twenty-one families, many of them poor, with large numbers of small children, have been living in company housing on the site, renting 5 rooms for $25 a month, or 10 rooms without heat for $50,” reported the local North Adams Transcript.
“Do you care about these people facing eviction?” one of the family’s representatives asked Nadel, during a meeting called to ask the new owners for more time.
“Why should I?” replied Arthur Nadel.
What a sweetheart. We bet he fit right in in Sarasota.

NEXT: The War for Control of the Venice FL "Plaza"