Alleged Private Equity Ponzi Targets Florida Teachers and the Elderly

The correct mental approach to a due diligence investigation makes all the difference.

People often ask me how many of the people eventually exposed as Ponzi scamsters are career criminals and how many started out legitimate and morphed into a Ponzi operator because they did not want to admit losses.  My guess is that more than half of the violators started out with the best of intentions and fell victim to the same temptation that grips any 6th grader who faces the prospect of handing in a disappointing report card.  They fudge the numbers, lead people to believe that they’ve earned a profit when they’ve really suffered a loss, and hope that things will turn around eventually.  They rarely do. (more…)

SEC Charges Hedge Fund Managers with Overvaluing Assets

Investigate before you invest and get professional help in assessing the evidence. Facts that might seem innocuous to you will be large red flags to someone experienced in investigating cleverly-disguised scams.

Hedge fund managers earn their income two ways.  They get a management fee calculated on the total assets of the fund, and they get a percentage of profits above a certain level.  They therefore have a personal financial interest in maximizing the assets and the profits.  In most cases, that interest works for the benefit of investors in the fund.  They want what the managers want: profits.  Problems arise when the fund does not prosper, but the manager is willing to take the fees anyway.  The U.S. Securities and Exchange Commission (SEC) believes it has found such a case in suburban Atlanta.  Specifically, the SEC has charged “portfolio managers Paul T. Mannion, Jr., of Norcross, Georgia, and Andrews S. Reckles, of Milton, Georgia, and investment adviser entities they control with defrauding Palisades Master Fund, L.P. investors by overvaluing illiquid fund assets they placed in a so-called “side pocket” and by misappropriating other fund assets.”  The SEC’s press release reads, in part: (more…)

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