One of the biggest losers in Bernard Madoff‘s alleged Ponzi scheme is a Connecticut-based investment firm started in the early 1980s by a well-connected Greenwich banker.
Fairfield Greenwich Group says it invested $7.5 billion with Madoff, who prosecutors say concocted a $50 billion scheme to defraud investors, including the world’s big banks and the rich and the famous. Madoff worked with Walter Noel Jr., who heads Fairfield Greenwich and invested his own money with Madoff.
“He believed he was a very bright, very talented investor,” said George L. Ball, a family friend of Noel. “He may very well have been almost the original victim.”
Fairfield Greenwich Group was founded in 1983 and now has more than 140 employees and offices around the world. But Noel’s connection with Madoff has immersed him in a global financial scandal.
The 70-year-old Madoff, well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested last week.
Alleged victims in the scheme include the family charitable foundation for Sen. Frank Lautenberg, D-N.J.; a trust tied to real estate magnate Mortimer Zuckerman; and a charity of movie director Steven Spielberg.
Noel and his spokesmen did not return repeated telephone messages left at his office and home. Fairfield Greenwich said it was trying to determine the extent of potential losses.
The company issued a statement Tuesday night pledging to cooperate with federal authorities. It asked investors for patience and said it will attempt to recover their assets.
“We understand that many investors, along with the many other investment firms and private investors, share our shock and dismay at the Dec. 11 news of the arrest and charging of Bernard L. Madoff with federal securities laws violations,” the company said. “It appears to be a highly sophisticated and massive fraud — perhaps the largest in history.”
As of Nov. 1, Fairfield Greenwich had $14.1 billion in assets under management, of which about $7.5 billion was invested in vehicles connected to Bernard L. Madoff Investment Securities. Fairfield Greenwich Group said it would aggressively pursue the recovery of assets related to Madoff.
Critics say Fairfield Greenwich and other so-called feeder funds who invested their clients’ money in Madoff’s firm failed to make sure the investments were proper.
“Their due diligence must have been lacking,” said Brad Alford, who runs Alpha Capital Management in Atlanta.
Suzanne Murphy, managing director of hedge fund consultant Tri-Artisan, said her firm looked into Madoff’s operation six years ago and concluded it was fraud. She said Madoff was so well-regarded many did not want to hear her findings.
“It was such a cult thing,” Murphy said. “People would literally yell at me at the dinner table.”
Madoff would often tell investors his fund was closed, but feeder funds like Fairfield Greenwich would provide access to the fund, Murphy said.
The real victims are the clients of the feeder funds, Murphy said. She said investigators should look at the feeder funds, which made lucrative fees for funneling money to Madoff.
“Whether or not they knew what was going on, they certainly never asked the right questions,” Murphy said.
Ball, chairman of an investment banking firm in Houston, called Noel “very professional, very thorough,” and saw the firm do due diligence on one hedge fund. He said that despite Noel’s wealth and prominence, he and his wife are dedicated parents.
“They were less concerned about where people were on the social ladder than were they good company and good people,” Ball said. (AP)
