Hedge Funds May Be Hunted by Peers as SEC Poaches From Industry (Bloomberg)
Attention anyone looking to rat out your peers: “Bruce Karpati and Robert Kaplan, co-chiefs of a Securities and Exchange Commission task force targeting hedge funds, buyout firms and mutual funds, are seeking five fund managers, chief operating officers or people with “direct exposure to trading and operations” at investment firms. The SEC placed its help- wanted ad last month. ”

`Jerk’ Insurance Soothes Reluctant Sellers Amid Signs of Property Recovery (Bloomberg)
Sweeteners to protect one side in a transaction from looking like a loser have been used by hedge-fund managers William Ackman and Carl Icahn and the Federal Deposit Insurance Corp. They’re helping seal deals amid signs that the worst real estate crisis in 80 years may be easing, said Woody Heller, an executive managing director at Studley, a New York-based commercial broker. Avila, Trump, Ackman and Icahn call the practice “schmuck insurance,” derived from a vulgar Yiddish word that has come to mean “jerk,” “fool,” or “easy mark.”

H-P Executives Are Investigated For Bribery (WSJ)
German prosecutors are looking into the possibility that H-P executives paid about €8 million ($10.9 million) in bribes to win a €35 million contract under which the U.S. company sold computer gear, through a German subsidiary, to the office of the prosecutor general of the Russian Federation.

Soros Risk to Euro Without German Concessions Report (Reuters)
“The Germans have always made the concessions needed to advance the European Union, when people were looking for a deal. Not any more,” Soros told Corriere della Sera in an interview. “That’s why the European project is stalled. And if it can’t go ahead from here, it will go backwards. It’s important to understand that if you don’t make the next steps forward for the euro, the euro will go to pieces and the European Union too,” he said.

Denny’s Slams Investors Leading Proxy Fight (AP)
”The dissident group is just plain wrong on the facts,” the restaurant chain told shareholders in a letter. ”Not surprisingly, this group has chosen to play fast and loose with the truth.”

Sam Zell Sees Political Risks To Investing In US (Reuters)
Appearing on a panel at the Urban Land Institute’s real estate summit in Boston, Zell said “what’s going on now is frightening” and working to undermine confidence, although he allowed that an economic recovery is under way. “I continue to be an optimist about the United States, if for no other reason than I think we are going to alter the current political situation,” said Zell, who has been a critic of President Barack Obama’s policies for some time and was a major donor to John McCain’s 2008 presidential campaign. “If the current situation is indicative of the next half century, I think we’re screwed.”

Federal Reserve Sees End Of Recession In New York (NYT)
Congrats all! Unless you live elsewhere in which case, tough break.

Sen. Corker Expects Deal on Financial Reform in 1 Week (CNBC)
“I will be stunned if we do not reach a bipartisan agreement [within a week],” Corker said in an interview with ABC’s “Good Morning America” quoted by Reuters.

The Day Lehman Got A Love Note From A Hegdie (Reuters via Heidi Moore)
“Over close to 30 years in the business (and) I have never witnessed more disruptive behavior than that displayed over the past year by David Einhorn,” wrote Adam Starr, the manager of Gulfside Partners. “I think you are right to stop responding to every allegation. These people deserve no more attention than honest and quiet investors.”

AG Shuts Out Greeberg (NYP)
New York Attorney General Andrew Cuomo has so far rejected attempts to negotiate a settlement in the civil lawsuit against former American International Group Chief Executive Officer Maurice “Hank” Greenberg, said his lawyer David Boies. Do it for Snowflake, Andy.

Wall Street Is Hiring Again (The Deal)

Article courtesy of Dealbreaker

It’s not just chinos and pieces on the side. Another thing that made the Gorilla table flippingly mad was uppity pipsqueaks who dared to mention concerns about the firm committing fraud. Via the WSJ, here’s the letter that got whistle-blower Matthew Lee fired. He won’t make that mistake again!

MATTHEW LEE

May 18, 2008

PERSONAL AND CONFIDENTIAL

BY HAND

Mr. Martin Kelly, Controller

Mr. Gerard Reilly, Head of Capital Markets Product Control

Ms. Erin Callan, Chief Financial Officer

Mr. Christopher O’Meara, Chief Risk Officer

Lehman Brothers Holdings, Inc. and subsidiaries

745 7th Avenue

New York, N.Y. 10019

Gentlemen and Madam:

I have been employed by Lehman Brothers Holdings, Inc. and subsidiaries (the “Firm”) since May 1994, currently in the position of Senior Vice President in charge of the Firm’s consolidated and unconsolidated balance sheets of over one thousand legal entities worldwide. During my tenure with the Firm I have been a loyal and dedicated employee and always have acted in the Firm’s best interests.

I have become aware of certain conduct and practices, however, that I feel compelled to bring to your attention, as required by the Firm’s Code of Ethics, as Amended February 17, 2004 (the “Code”) and which requires me, as a Firm employee, to bring to the attention of management conduct and actions on the part of the Firm that I consider to possibly constitute unethical or unlawful conduct. I therefore bring the following to your attention, as required by the Code, “to help maintain a culture of honesty and accountability”. (Code, first paragraph).

The second to last section of the Code is captioned “FULL, FAIR, ACCURATE, TIMELY AND UNDERSTANDABLE DISCLOSURE”. That section provides, in relevant part, as follows:

“It is crucial that all books of account, financial statements and records of the Firm reflect the underlying transactions and any disposition of assets in a full, fair, accurate and timely manner. All employees…must endeavor to ensure that information in documents that Lehman Brothers files with or submits to the SEC, or otherwise disclosed to the public, is presented in a full, fair, accurate, timely and understandable manner. Additionally, each individual involved in the preparation of the Firm’s financial statements must prepare those statements in accordance with Generally Accepted Accounting Principles, consistently applied, and any other applicable accounting standards and rules so that the financial statements present fairly, in all material respects, the financial position, results of operations and cash flows of the Firm.

Furthermore, it is critically important that financial statements and related disclosures be free of material errors. Employees and directors are prohibited from knowingly making or causing others to make a materially misleading, incomplete or false statement to an accountant or an attorney in connection with an audit or any filing with any governmental or regulatory entity. In that connection, no individual, or any person acting under his or her direction, shall directly or indirectly take any action to coerce, manipulate, mislead or fraudulently influence any of the Firm’s internal auditors or independent auditors if he or she knows (or should know) that his or her actions, if successful, could result in rendering the Firm’s financial statements materially misleading”

In the course of performing my duties for the Firm, I have reason to believe that certain conduct on the part of senior management of the Firm may be in violation of the Code. The following is a summary of the conduct I believe may violate the Code and which I feel compelled, by the terms of the Code, to bring to your attention.

1. Senior Firm management manages its balance sheet assets on a daily basis. On the last day of each month, the books and records of the Firm contain approximately five (5) billion dollars of net assets in excess of what is managed on the last day of the month. I believe this pattern indicates that the Firm’s senior management is not in sufficient control of its assets to be able to establish that its financial statements are presented to the public and governmental agencies in a “full, fair accurate and timely manner”. In my opinion, respectfully submitted, I believe the result is that at the end of each month, there could be approximately five (5) billion dollars of assets subject to a potential write-off. I believe it will take a significant investment of personnel and better control systems to adequately identify and quantify these discrepancies but, at the minimum, I believe the manner in which the Firm is reporting these assets is potentially misleading to the public and various governmental agencies. If so, I believe the Firm may be in violation of the Code.

2. The Firm has an established practice of substantiating each balance sheet account for each of its worldwide legal entities on a quarterly basis. While substantiation is somewhat subjective, it appears to me that the Code as well as Generally Accepted Accounting Principles require the Firm to support the net dollar amount in an account balance in a meaningful way supporting the Firm’s stated policy of “full, fair, accurate and timely manner” valuation. The Firm has tens of billions of dollars of unsubstantiated balances, which may or may not be “bad” or non-performing assets or real liabilities. In any event, the Firm’s senior management may not be in a position to know whether all of these accounts are, in fact, described in a “full, fair, accurate and timely” manner, as required by the Code. I believe the Firm needs to make an additional investment in personnel and systems to adequately address this fundamental flaw.

3. The Firm has tens of billions of dollar of inventory that it probably cannot buy or sell in any recognized market, at the currently recorded current market values, particularly when dealing in assets of this nature in the volume and size as the positions the Firm holds. I do not believe the manner in which the Firm values that inventory is fully realistic or reasonable, and ignores the concentration in these assets and their volume size given the current state of the market’s overall liquidity.

4. I do not believe the Firm has invested sufficiently in the required and reasonably necessary financial systems and personnel to cope with this increased balance sheet, specifically in light of the increased number of accounts, dollar equivalent balances and global entities, which have been created by or absorbed within the Firm as a result of the Firm’s rapid growth since the Firm became a publicly traded company in 1994.

5. Based upon my experience and the years I have worked for the Firm, I do not believe there is sufficient knowledgeable management in place in the Mumbai, India Finance functions and department. There is a very real possibility of a potential misstatement of material facts being efficiently distributed by that office.

6. Finally, based upon my personal observations over the past years, certain senior level internal audit personnel do not have the professional expertise to properly exercise the audit functions they are entrusted to manage, all of which have become increasingly complex as the Firm has undergone rapid growth in the international marketplace.

I provide these observations to you with the knowledge that all of us at the Firm are entrusted to observe and respect the Code. I would be happy to discuss any details regarding the foregoing with senior management but I felt compelled, both morally and legally, to bring these issues to your attention. These are, indeed, turbulent times in the economic world and demand, more than ever, our adherence and respect of the Code so that the Firm may continue to enjoy the investing public’s trust and confidence in us.

Very truly yours,

MATTHEW LEE

cc: Erwin J. Shustak, Esq.

Article courtesy of Dealbreaker

Alan Fishman, the limo driver-cum-hedge fund manager president who admitted last year to screwing AR Capital investors just a little bit, has pleaded guilty to fraud (Fishman had caught the investing bug while driving around a bunch of investment bankers and lawyers, and decided one day to “take a crack at his customers’ game”).

A gentleman named Gary Gelman, who is Mr. Fishman’s nephew, was trying to launch a hedge fund. Although Mr. Fishman had no prior experience managing money, in 2003 he became president of the A.R. Capital Global Fund, which operated from a small office on 39 Broadway in lower Manhattan. Using cold calls, the fund lured in 70 clients who invested about $20 million.

The fund managers told investors they would buy shares in overseas real estate companies and trade currencies, oil, gas and other commodities while using “active, leveraged trading” and “fundamental and technical analysis” to make money. None of this was true, according to prosecutors. Instead, client money was invested in three Ukrainian stocks or parked in a Ukrainian money market fund. Millions more were wired to bank accounts in Lithuania, including one held by a company located in St. Kitts and Nevis.

Everything was going pretty okay until one rat-bastard of a client had to come to New York and request a meeting, which was held in a deli. That’s when things started to go downhill. Now, Crain’s reports, Fishman has pleaded guilty to conspiracy to commit securities fraud (and is scheduled to be sentenced on June 18), and has ruined it for all the legit cabbie turned hedge fund managers out there. One bad seed– all it takes.

Limo driver-turned-hedge fund fraudster admits guilt [Crain's via BI]

Article courtesy of Dealbreaker

Alan Fishman, the limo driver-cum-hedge fund manager president who admitted last year to screwing AR Capital investors just a little bit, has pleaded guilty to fraud (Fishman had caught the investing bug while driving around a bunch of investment bankers and lawyers, and decided one day to “take a crack at his customers’ game”).

A gentleman named Gary Gelman, who is Mr. Fishman’s nephew, was trying to launch a hedge fund. Although Mr. Fishman had no prior experience managing money, in 2003 he became president of the A.R. Capital Global Fund, which operated from a small office on 39 Broadway in lower Manhattan. Using cold calls, the fund lured in 70 clients who invested about $20 million.

The fund managers told investors they would buy shares in overseas real estate companies and trade currencies, oil, gas and other commodities while using “active, leveraged trading” and “fundamental and technical analysis” to make money. None of this was true, according to prosecutors. Instead, client money was invested in three Ukrainian stocks or parked in a Ukrainian money market fund. Millions more were wired to bank accounts in Lithuania, including one held by a company located in St. Kitts and Nevis.

Everything was going pretty okay until one rat-bastard of a client had to come to New York and request a meeting, which was held in a deli. That’s when things started to go downhill. Now, Crain’s reports, Fishman has pleaded guilty to conspiracy to commit securities fraud (and is scheduled to be sentenced on June 18), and has ruined it for all the legit cabbie turned hedge fund managers out there. One bad seed– all it takes.

Limo driver-turned-hedge fund fraudster admits guilt [Crain's via BI]

Article courtesy of Dealbreaker