Arthur Nadel
Encyclopedia
On April 28, 2009, Arthur Geoffrey Nadel (born January 1, 1933) was indicted on 15 counts including six counts of securities fraud
, eight counts of wire fraud
and one count of mail fraud in a federal court in Manhattan. If found guilty, Nadel could be sentenced to 280 years in prison and would be required to forfeit all assets connected to the fraud.
Nadel was a Sarasota, Florida
based manager of the hedge fund
Scoop Management Co., which has reportedly lost $350 million. He was arrested on January 27, 2009 after surrendering at the Tampa
Federal Bureau of Investigation
(FBI) office.
.
Nadel, who had been reported missing by his fifth wife since January 14, was accompanied by two attorneys, Todd Foster and Barry Cohen.
His wife, Marguerite "Peg" J. (Quisenberry) Nadel had contacted authorities after he left a note telling her how to survive financially without him. “The avenues to money for you will likely be blocked soon,” Nadel wrote to his wife in a note that employees found January 15 in a shredding machine. “Withdraw as much cash as you can,” he said, adding that he would send further instructions. “Sell the Subaru if you need money.” He left a package for his wife. “Look at all the recently paid bills in the ‘package’ to see where they stand,” he wrote. “Also in the package are enough documents that I think will do the trick to give you complete control and ownership of what is left, and even documentation for divorce.”
She said he was distraught over the losses, according to Bloomberg News. According to the Sarasota County
Sheriff's Office, Nadel felt guilty and threatened to kill himself. As of January 20, 2009, Federal law enforcement authorities had tracked Nadel to Slidell, Louisiana
. The Nadel case has been compared to the recent alleged frauds of Bernard Madoff and Marcus Schrenker
. Nadel is currently housed in the Metropolitan Correctional Center in Manhattan, the same facility where Madoff was sent to on March 12, 2009.
, and in 1957, graduated from New York University Law School, playing piano in Manhattan. He never actively practiced law, but was disbarred in 1982, citing "dishonesty, fraud, deceit and misrepresentation".
In 1978, having recently moved to Sarasota, he allegedly took $50,000 from an escrow account to help a friend and real estate company president who was deeply in debt. Different versions of who received the money have been reported. He had already repaid the money with interest by 1981.
He had already been married and divorced twice, and had several children. He was a CEO in the 1970s of a public company that built health care facilities. In 1978, he and others tried to convert the rundown, historic Mira Mar Hotel to condominiums. The plan fell apart. He subsequently played in piano bars, befriending local artists and musicians.
In 1987, he married his third wife, Virginia "Jennifer" Hoffman, an artist 22 years his junior. Her friends began complaining that he had sold their works but never paid them. They divorced in 1991. He attempted to expand an interior decorating business—the Sarasota Design Gallery, which sold unusual furnishings and original art—by attracting investors, claiming in a "confidential" prospectus that the gallery was profitable, although court records showed several judgments against him for unpaid bills. He married a fourth wife, Emelie Painter Zack, and she divorced him in 1999. He claimed destitution.
He became a real estate developer and securities investor in Sarasota during the 1960s, according to marketing documents for the Valhalla fund.
From 1994 through 1997, Nadel was employed as a piano player at Homestyle Harmony restaurant, a family-style dining establishment in Sarasota where waitstaff sang "sing-a-long" songs to customers during dinner, as well as performing for guests in a "parlor" show down the hall in the restaurant. The restaurant closed in 1997.
In 1997, he and Peg started a day-trading club and developed a computer-based investment and trading system. They teamed up with Neil V. Moody, a Sarasota entrepreneur, and began managing money for clients in Moody's Valhalla, Victor, and Viking funds. The companies attracted scores of investors, promising high returns. In 2005, the Nadels bought 430 acres (1.7 km²) near Asheville, North Carolina
, intending to sell lots for up to $525,000 in a proposed development called Laurel Mountain Preserve. The project turned when prices collapsed. Four lots were donated to their foundation as tax write off.
The Sarasota Herald-Tribune
reported "The Nadels were known for their civic activities, serving on boards and donating money to charity: Habitat for Humanity, Jewish Family & Children’s Services, and Girls Inc. which received $100,000. All received cash gifts and pledges from the couple in recent years. None had any money invested in the hedge funds." Their Guy-Nadel Foundation made more than $1-million in donations, including $200,000 to Catholic churches, $100,000 to the Sarasota Opera
and $75,000 to a local theater group.
Judge Mark Pizzo denied Nadel’s request to be released on his own recognizance, and on January 30, 2009 ordered him held without bail at the Pinellas County jail.
On February 2, 2009, Judge Pizzo issued a warrant of removal, removing the case from the jurisdiction of the Middle District of Florida to the Southern District of New York.
The SEC says Nadel had transferred at least $1.25 million from two of the hedge funds to secret bank accounts that he controlled.
On April 28, 2009, in the Southern District of New York, federal regulators handed down a 15-count indictment against Nadel, which carries maximum prison sentences of 280 years.
On February 25, U.S. District Judge Denise Cote
had ruled he could be released after posting a $5 million bond, including $1 million in cash, and four people to whom he has a “close relationship” to guarantee his bond and be subject to electronic monitoring. She required Nadel to cooperate with the receiver of his funds and to identify the location of$ 30 million he allegedly withdrew since October, 2008.
The criminal case is U.S.A. v. Nadel, 09-mj-00169, U.S. District Court, Southern District of New York (Manhattan
).
Six hedge funds and two investment management companies are named as relief defendants
. They are: Scoop Real Estate L.P., Valhalla Investment Partners L.P., Victory IRA Fund Ltd., Victory Fund Ltd., Viking IRA Fund LLC, Viking Fund LLC, Valhalla Management Inc. and Viking Management Inc. in the case. The SEC case is Securities and Exchange Commission v. Nadel, 09-cv-00087, U.S. District Court, Middle District of Florida (Tampa).
At the end of 2007, all six funds contained contained $18 million. Wiand identified $397 million taken in from investors. Approximately $350 million was paid in distributions to investors and fees. He has recovered $120,000 in investor funds improperly transferred to two individuals, and received nearly $261,000 in business income from ongoing operations through Feb. 28, 2009. Wiand estimated the fraud began possibly earlier than 2003, and intends to recover additional funds from the Moodys' fees collected from Scoop.
Robert O. Chambers Trust, received $301,614 in false profits. Blake L. Chambers, trustee of the trust, agreed within 14 days to pay $271,453, or 90 percent of the total.
Gary Musser 70, of Las Vegas agreed to pay $192,571.43, which includes a 10 percent discount offered for settling out of court. He has already paid income taxes on the money, yet the Internal Revenue Service
only allows him to go back three years in amending his returns to get a refund.
Neil and Chris Moody, father and son partners of Nadel's served as general partners on Viking, Viking IRA and Valhalla, which at one point accounted for half of the actual brokerage firm value, estimated to be $97 million in asset management fees of 2 percent per year, plus a much larger 25 percent incentive fee for running what was portrayed as highly profitable hedge fund
s. The funds held $72 million at their peak in 2004. By 2007, the actual value of those same three funds was $7 million.
Burton Wiand has confirmed he will take legal action against the Moodys to gain control of assets tied to Nadel’s failed hedge funds. It was Neil Moody who informed his 600 investors that the money they invested in Scoop’s hedge funds had disappeared. The Moodys have denied knowing anything about the Ponzi scheme, but many of Nadel’s investors claim that they were their primary contact. According to Wiand, Nadel and the Moodys both represented that the hedge funds’ trading activity generated more than $272 million in gains when” they actually lost $18.4 million. The three Viking funds the Moody’s managed with Nadel had results ranging from a 4 percent annualized gain to a 24.5 percent per year loss. But the Moody’s told their investors that returns for the funds were much higher.
A civil fraud case against them has been filed on behalf of Louis Paolino, Jr. who lost more than $5.8 million, and a lis pendens
has been placed on the Sarasota waterfront residences owned by both men.
Since 1990, Nadel's accountant, Michael D. Zucker has not been not licensed as a Certified Public Accountant
in the state of Florida.
Despite the statistical improbability of the stated returns, Rowe's article offers a glowing recommendation and includes contact information for the funds. Fine print disclosures in the article reveal that "Carnegie Asset Management is affiliated with The Wall Street Digest, Inc., as is The Wall Street Trader, Inc. Carnegie Asset Management, from time to time, makes referrals to MRM Asset Allocation Group, Inc. ,and/or The Nadel Moody Group, registered investment advisors not affiliated with each other nor with Carnegie Asset Management, for which Carnegie Asset Management receives monetary compensation."
Burton Wiand’s April, 2009 interim receiver's report, submitted as part of the Securities and Exchange Commission’s civil suit against Nadel, says Nadel paid out some $53 million in “fictitious profits” as part of his Ponzi scheme.
According to the SEC:
The total value of the hedge fund securities on January 14 — the date of Nadel’s disappearance — was thus $15,214.92, and the cash on hand was $491,625.87.
Neil V. Moody, 70 told the Associated Press
that his immediate family has lost $12 million due to Nadel. Moody, one of Nadel's business partners, suggests the $350 million figure may be inflated due to Nadel's own overstating of his fund's success.
Dennis Raefield, president and chief executive of Mace Security International Inc., based in Horsham, Pennsylvania
, claims that Nadel's Victory Fund failed to pay $2.2 million as promised, the day after Nadel vanished on January 15, 2009. Raefield said he asked Nadel in June 2008 to redeem Mace's entire $3.2 million investment in the short-term hedge fund, Victory. The money was to be paid by October 10, 2008, or 10 business days after the close of the third quarter. On October 15, fund managers asserted their right to withhold the payout "due to extraordinary market circumstances". After negotiations, the fund agreed to pay the money in two installments. Mace received only one payment of $1 million on November 5.
Louis Paolino, Jr., former executive officer of Mace Security lost more than $5.8 million of personal funds in the Viking Fund LLC. His lawsuit claims that the Moodys took fraudulently obtained money from investors in Scoop’s funds and bought homes with part of the proceeds.
David Walters of Ocala, Florida
lost most of his pension from Bethlehem Steel
, more than $670,000.
Michael Sullivan, a neighbor of Nadel's, an 80-year-old attorney, invested $15 million.
Sullivan, an Illinois entrepreneur recommended by his neighbor, put $250,000 into Nadel's Scoop Management three years ago, and an additional $1.4 million shortly before Nadel vanished.
Dr. Brad Lerner, Sarasota, invested $500,000.
Drew Clayton, Sarasota
in suburban Atlanta, Georgia
. The Venice Jet Center trained some of the 9/11
hijackers under different ownership. Tradewind Aviation was run by his son Chris, who has an airline pilot's license. Federal records show Tradewind owns two Cessna
Citation jets, a Lear Jet
, a helicopter, and several smaller aircraft.
Public records show Nadel was an officer of Summer Place Development Corp., a 6.5 acres (26,304.6 m²) undeveloped parcel in Manatee County, Florida
. He is listed as director, secretary, and treasurer.
Securities fraud
Securities fraud, also known as stock fraud and investment fraud, is a practice that induces investors to make purchase or sale decisions on the basis of false information, frequently resulting in losses, in violation of the securities laws....
, eight counts of wire fraud
Wire fraud
Mail and wire fraud is a federal crime in the United States. Together, 18 U.S.C. §§ 1341, 1343, and 1346 reach any fraudulent scheme or artifice to intentionally deprive another of property or honest services with a nexus to mail or wire communication....
and one count of mail fraud in a federal court in Manhattan. If found guilty, Nadel could be sentenced to 280 years in prison and would be required to forfeit all assets connected to the fraud.
Nadel was a Sarasota, Florida
Sarasota, Florida
Sarasota is a city located in Sarasota County on the southwestern coast of the U.S. state of Florida. It is south of the Tampa Bay Area and north of Fort Myers...
based manager of the hedge fund
Hedge fund
A 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...
Scoop Management Co., which has reportedly lost $350 million. He was arrested on January 27, 2009 after surrendering at the Tampa
Tâmpa
Tâmpa may refer to several villages in Romania:* Tâmpa, a village in Băcia Commune, Hunedoara County* Tâmpa, a village in Miercurea Nirajului, Mureş County* Tâmpa, a mountain in Braşov city...
Federal Bureau of Investigation
Federal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
(FBI) office.
.
Nadel, who had been reported missing by his fifth wife since January 14, was accompanied by two attorneys, Todd Foster and Barry Cohen.
His wife, Marguerite "Peg" J. (Quisenberry) Nadel had contacted authorities after he left a note telling her how to survive financially without him. “The avenues to money for you will likely be blocked soon,” Nadel wrote to his wife in a note that employees found January 15 in a shredding machine. “Withdraw as much cash as you can,” he said, adding that he would send further instructions. “Sell the Subaru if you need money.” He left a package for his wife. “Look at all the recently paid bills in the ‘package’ to see where they stand,” he wrote. “Also in the package are enough documents that I think will do the trick to give you complete control and ownership of what is left, and even documentation for divorce.”
She said he was distraught over the losses, according to Bloomberg News. According to the Sarasota County
Sarasota County, Florida
Sarasota County is a county located in the U.S. state of Florida. The U.S. Census Bureau 2008 estimate for the county was 372,057. Its county seat is Sarasota, Florida....
Sheriff's Office, Nadel felt guilty and threatened to kill himself. As of January 20, 2009, Federal law enforcement authorities had tracked Nadel to Slidell, Louisiana
Slidell, Louisiana
Slidell is a city situated on the northeast shore of Lake Pontchartrain in St. Tammany Parish, Louisiana, United States. The population was 25,695 at the 2000 census. The Greater Slidell Community has a population of about 90,000...
. The Nadel case has been compared to the recent alleged frauds of Bernard Madoff and Marcus Schrenker
Marcus Schrenker
Marcus Schrenker is a financial manager known for attempting to fake his own death and the multi-state, three-day manhunt that followed. Schrenker lived and worked in Fishers, Indiana.-Background:...
. Nadel is currently housed in the Metropolitan Correctional Center in Manhattan, the same facility where Madoff was sent to on March 12, 2009.
Personal life and previous occupations
Nadel, a Jewish tailor's son, worked his way through New York UniversityNew York University
New York University is a private, nonsectarian research university based in New York City. NYU's main campus is situated in the Greenwich Village section of Manhattan...
, and in 1957, graduated from New York University Law School, playing piano in Manhattan. He never actively practiced law, but was disbarred in 1982, citing "dishonesty, fraud, deceit and misrepresentation".
In 1978, having recently moved to Sarasota, he allegedly took $50,000 from an escrow account to help a friend and real estate company president who was deeply in debt. Different versions of who received the money have been reported. He had already repaid the money with interest by 1981.
He had already been married and divorced twice, and had several children. He was a CEO in the 1970s of a public company that built health care facilities. In 1978, he and others tried to convert the rundown, historic Mira Mar Hotel to condominiums. The plan fell apart. He subsequently played in piano bars, befriending local artists and musicians.
In 1987, he married his third wife, Virginia "Jennifer" Hoffman, an artist 22 years his junior. Her friends began complaining that he had sold their works but never paid them. They divorced in 1991. He attempted to expand an interior decorating business—the Sarasota Design Gallery, which sold unusual furnishings and original art—by attracting investors, claiming in a "confidential" prospectus that the gallery was profitable, although court records showed several judgments against him for unpaid bills. He married a fourth wife, Emelie Painter Zack, and she divorced him in 1999. He claimed destitution.
He became a real estate developer and securities investor in Sarasota during the 1960s, according to marketing documents for the Valhalla fund.
From 1994 through 1997, Nadel was employed as a piano player at Homestyle Harmony restaurant, a family-style dining establishment in Sarasota where waitstaff sang "sing-a-long" songs to customers during dinner, as well as performing for guests in a "parlor" show down the hall in the restaurant. The restaurant closed in 1997.
In 1997, he and Peg started a day-trading club and developed a computer-based investment and trading system. They teamed up with Neil V. Moody, a Sarasota entrepreneur, and began managing money for clients in Moody's Valhalla, Victor, and Viking funds. The companies attracted scores of investors, promising high returns. In 2005, the Nadels bought 430 acres (1.7 km²) near Asheville, North Carolina
Asheville, North Carolina
Asheville is a city in and the county seat of Buncombe County, North Carolina, United States. It is the largest city in Western North Carolina, and the 11th largest city in North Carolina. The City is home to the United States National Climatic Data Center , which is the world's largest active...
, intending to sell lots for up to $525,000 in a proposed development called Laurel Mountain Preserve. The project turned when prices collapsed. Four lots were donated to their foundation as tax write off.
The Sarasota Herald-Tribune
Sarasota Herald-Tribune
The Sarasota Herald-Tribune is a daily newspaper located in Sarasota, Florida.It is owned by The New York Times Company, who purchased it in 1982, and part of its regional news group. Along with Comcast, the newspaper operates a local 24-hour...
reported "The Nadels were known for their civic activities, serving on boards and donating money to charity: Habitat for Humanity, Jewish Family & Children’s Services, and Girls Inc. which received $100,000. All received cash gifts and pledges from the couple in recent years. None had any money invested in the hedge funds." Their Guy-Nadel Foundation made more than $1-million in donations, including $200,000 to Catholic churches, $100,000 to the Sarasota Opera
Sarasota Opera
Sarasota Opera is a professional opera company in Sarasota, Florida, USA, which owns and performs in the now-renovated 1,119-seat Sarasota Opera House. The 2011-2012 season is currently featuring Puccini’s Madama Butterfly in the fall...
and $75,000 to a local theater group.
SEC charges and criminal charges
Tampa U.S. MagistrateMagistrate
A magistrate is an officer of the state; in modern usage the term usually refers to a judge or prosecutor. This was not always the case; in ancient Rome, a magistratus was one of the highest government officers and possessed both judicial and executive powers. Today, in common law systems, a...
Judge Mark Pizzo denied Nadel’s request to be released on his own recognizance, and on January 30, 2009 ordered him held without bail at the Pinellas County jail.
On February 2, 2009, Judge Pizzo issued a warrant of removal, removing the case from the jurisdiction of the Middle District of Florida to the Southern District of New York.
The SEC says Nadel had transferred at least $1.25 million from two of the hedge funds to secret bank accounts that he controlled.
16-Count indictment
On April 15, 2009, U.S. Magistrate Judge Kevin N. Fox in Manhattan appointed Mark Gombiner, an attorney from the Federal Defenders of New York, Inc., to represent Nadel.On April 28, 2009, in the Southern District of New York, federal regulators handed down a 15-count indictment against Nadel, which carries maximum prison sentences of 280 years.
“Nadel solicited prospective clients to invest in the funds by making various misrepresentations about the performance and value of the funds, including that the net asset value of each of the funds was tens of millions of dollars. the U.S. Attorney’s Office in New York said in a statement. Nadel also claimed to investors that his purchases and sales of securities in the Funds had generated cumulatively more than $271 million in gains. In truth, Nadel’s trading resulted in an overall net loss in the funds,” the U.S. Attorney’s Office in New York said in a statement.
On February 25, U.S. District Judge Denise Cote
Denise Cote
Denise Cote is a United States federal judge on the United States District Court for the Southern District of New York.-Personal and Education:...
had ruled he could be released after posting a $5 million bond, including $1 million in cash, and four people to whom he has a “close relationship” to guarantee his bond and be subject to electronic monitoring. She required Nadel to cooperate with the receiver of his funds and to identify the location of$ 30 million he allegedly withdrew since October, 2008.
The criminal case is U.S.A. v. Nadel, 09-mj-00169, U.S. District Court, Southern District of New York (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...
).
Bankruptcy trustee
The Securities and Exchange Commission (SEC) won a court order on January 21, 2009 freezing Nadel's assets. On February 11, 2009, the receiver, Burton Wiand moved to freeze the $650,000 Marguerite J. Nadel Revocable Trust, and Nadel's property in Asheville, North Carolina.Six hedge funds and two investment management companies are named as relief defendants
Relief Defendant
In the US, and possibly other Common Law countries, a "relief defendant" or "nominal defendant" is a person named in civil litigation who is not accused of wrong-doing. However, it is alleged that the relief defendant has received property originally obtained illegally, and to which the relief...
. They are: Scoop Real Estate L.P., Valhalla Investment Partners L.P., Victory IRA Fund Ltd., Victory Fund Ltd., Viking IRA Fund LLC, Viking Fund LLC, Valhalla Management Inc. and Viking Management Inc. in the case. The SEC case is Securities and Exchange Commission v. Nadel, 09-cv-00087, U.S. District Court, Middle District of Florida (Tampa).
At the end of 2007, all six funds contained contained $18 million. Wiand identified $397 million taken in from investors. Approximately $350 million was paid in distributions to investors and fees. He has recovered $120,000 in investor funds improperly transferred to two individuals, and received nearly $261,000 in business income from ongoing operations through Feb. 28, 2009. Wiand estimated the fraud began possibly earlier than 2003, and intends to recover additional funds from the Moodys' fees collected from Scoop.
Clawbacks
Wiand has identified more than 80 investors who made "false profits" in Nadel's hedge fund and has asked them to return the money. Any unreturned funds will be pursued in court.Robert O. Chambers Trust, received $301,614 in false profits. Blake L. Chambers, trustee of the trust, agreed within 14 days to pay $271,453, or 90 percent of the total.
Gary Musser 70, of Las Vegas agreed to pay $192,571.43, which includes a 10 percent discount offered for settling out of court. He has already paid income taxes on the money, yet the Internal Revenue Service
Internal Revenue Service
The Internal Revenue Service is the revenue service of the United States federal government. The agency is a bureau of the Department of the Treasury, and is under the immediate direction of the Commissioner of Internal Revenue...
only allows him to go back three years in amending his returns to get a refund.
Others involved
The Moodys have already given statements to the U.S. Attorney.Neil and Chris Moody, father and son partners of Nadel's served as general partners on Viking, Viking IRA and Valhalla, which at one point accounted for half of the actual brokerage firm value, estimated to be $97 million in asset management fees of 2 percent per year, plus a much larger 25 percent incentive fee for running what was portrayed as highly profitable hedge fund
Hedge fund
A 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...
s. The funds held $72 million at their peak in 2004. By 2007, the actual value of those same three funds was $7 million.
Burton Wiand has confirmed he will take legal action against the Moodys to gain control of assets tied to Nadel’s failed hedge funds. It was Neil Moody who informed his 600 investors that the money they invested in Scoop’s hedge funds had disappeared. The Moodys have denied knowing anything about the Ponzi scheme, but many of Nadel’s investors claim that they were their primary contact. According to Wiand, Nadel and the Moodys both represented that the hedge funds’ trading activity generated more than $272 million in gains when” they actually lost $18.4 million. The three Viking funds the Moody’s managed with Nadel had results ranging from a 4 percent annualized gain to a 24.5 percent per year loss. But the Moody’s told their investors that returns for the funds were much higher.
A civil fraud case against them has been filed on behalf of Louis Paolino, Jr. who lost more than $5.8 million, and a lis pendens
Lis pendens
Lis pendens is Latin for "suit pending." This may refer to any pending lawsuit or to a specific situation with a public notice of litigation that has been recorded in the same location where the title of real property has been recorded...
has been placed on the Sarasota waterfront residences owned by both men.
Since 1990, Nadel's accountant, Michael D. Zucker has not been not licensed as a Certified Public Accountant
Certified Public Accountant
Certified Public Accountant is the statutory title of qualified accountants in the United States who have passed the Uniform Certified Public Accountant Examination and have met additional state education and experience requirements for certification as a CPA...
in the state of Florida.
"The most consistent returns I have ever seen"
Nadel's funds purportedly returned 21.6% in 2002 and 19.8% in 2001, years when the S&P 500 index returned -23.3% and -13.0% respectively. An article in The Wall Street Digest by Donald H. Rowe, Chairman of Carnegie Asset Management, cited the superior returns of Nadel's funds as "the best track record and most consistent returns I have ever seen." Rowe apparently ignored initial misgivings about the source of Nadel's returns, writing: "My curiosity about Nadel's computerized trading program eventually led to a due diligence visit to the offices of Nadel & Moody. Understandably, I did not learn the various mathematical formulas in Nadel's "black box" computer program."Despite the statistical improbability of the stated returns, Rowe's article offers a glowing recommendation and includes contact information for the funds. Fine print disclosures in the article reveal that "Carnegie Asset Management is affiliated with The Wall Street Digest, Inc., as is The Wall Street Trader, Inc. Carnegie Asset Management, from time to time, makes referrals to MRM Asset Allocation Group, Inc. ,and/or The Nadel Moody Group, registered investment advisors not affiliated with each other nor with Carnegie Asset Management, for which Carnegie Asset Management receives monetary compensation."
Burton Wiand’s April, 2009 interim receiver's report, submitted as part of the Securities and Exchange Commission’s civil suit against Nadel, says Nadel paid out some $53 million in “fictitious profits” as part of his Ponzi scheme.
Total value of hedge funds
Nadel traded for three funds established by partnerships Valhalla Management and Viking Management and three funds established by Scoop Management and Scoop Capital LLC. Scoop was created by Nadel himself. Viking and Valhalla were created by unnamed partners.According to the SEC:
- Victory Fund: securities, $1,901.31, and cash, $78,764.37
- Scoop Real Estate: securities, $2,119.81, and cash, $122,830.40
- Viking IRA Fund: securities, $2,923.58, and cash, $77,025.20
- Viking Fund: securities, $917.70, and cash, $65,708.33
- Valhalla Investment Partners: securities, $4,413.66, and cash, $16,158.05
- Victory IRA Fund: securities, $2,938.86, and cash, $131,139.52
The total value of the hedge fund securities on January 14 — the date of Nadel’s disappearance — was thus $15,214.92, and the cash on hand was $491,625.87.
Investor losses
More than 371 investors invested $397 million. Investors' out-of-pocket losses are estimated at $168.7 million.Neil V. Moody, 70 told the Associated Press
Associated Press
The Associated Press is an American news agency. The AP is a cooperative owned by its contributing newspapers, radio and television stations in the United States, which both contribute stories to the AP and use material written by its staff journalists...
that his immediate family has lost $12 million due to Nadel. Moody, one of Nadel's business partners, suggests the $350 million figure may be inflated due to Nadel's own overstating of his fund's success.
Dennis Raefield, president and chief executive of Mace Security International Inc., based in Horsham, Pennsylvania
Horsham, Pennsylvania
Horsham is a census-designated place in Montgomery County, Pennsylvania, United States. The population was 14,842 at the 2010 census. Horsham is located entirely within Horsham Township, and it is home to Naval Air Station Joint Reserve Base Willow Grove.In 2007, Horsham was named the 15th best...
, claims that Nadel's Victory Fund failed to pay $2.2 million as promised, the day after Nadel vanished on January 15, 2009. Raefield said he asked Nadel in June 2008 to redeem Mace's entire $3.2 million investment in the short-term hedge fund, Victory. The money was to be paid by October 10, 2008, or 10 business days after the close of the third quarter. On October 15, fund managers asserted their right to withhold the payout "due to extraordinary market circumstances". After negotiations, the fund agreed to pay the money in two installments. Mace received only one payment of $1 million on November 5.
Louis Paolino, Jr., former executive officer of Mace Security lost more than $5.8 million of personal funds in the Viking Fund LLC. His lawsuit claims that the Moodys took fraudulently obtained money from investors in Scoop’s funds and bought homes with part of the proceeds.
David Walters of Ocala, Florida
Ocala, Florida
Ocala is a city in Marion County, Florida. As of 2007, the population recorded by the U.S. Census Bureau was 53,491. It is the county seat of Marion County, and the principal city of the Ocala, Florida Metropolitan Statistical Area, which had an estimated 2007 population of 324,857.-History:Ocala...
lost most of his pension from Bethlehem Steel
Bethlehem Steel
The Bethlehem Steel Corporation , based in Bethlehem, Pennsylvania, was once the second-largest steel producer in the United States, after Pittsburgh, Pennsylvania-based U.S. Steel. After a decline in the U.S...
, more than $670,000.
Michael Sullivan, a neighbor of Nadel's, an 80-year-old attorney, invested $15 million.
Sullivan, an Illinois entrepreneur recommended by his neighbor, put $250,000 into Nadel's Scoop Management three years ago, and an additional $1.4 million shortly before Nadel vanished.
Dr. Brad Lerner, Sarasota, invested $500,000.
Drew Clayton, Sarasota
Other business interests
On January 27, 2009, Venice Jet Center LLC and Tradewind LLC, two of Nadel's businesses, were ordered into receivership by Tampa U.S. District Judge Richard Lazzara. The judge appointed attorney Burton Wiand as receiver for Nadel’s funds, said in a court filing that the businesses were bought with fraudulently obtained money. Venice Jet Center provides charter services and a flight school, and “is a viable business with potential to generate assets for the receivership”. Tradewind owns and controls at least five aircraft and owns airport hangars at the Newnan-Coweta County AirportNewnan-Coweta County Airport
Newnan Coweta County Airport is a public airport in Coweta County, Georgia, United States. Located five miles south of the central business district of Newnan, it is surrounded by US 29 and I-85 and owned by the county....
in suburban Atlanta, Georgia
Atlanta, Georgia
Atlanta is the capital and most populous city in the U.S. state of Georgia. According to the 2010 census, Atlanta's population is 420,003. Atlanta is the cultural and economic center of the Atlanta metropolitan area, which is home to 5,268,860 people and is the ninth largest metropolitan area in...
. The Venice Jet Center trained some of the 9/11
September 11, 2001 attacks
The September 11 attacks The September 11 attacks The September 11 attacks (also referred to as September 11, September 11th or 9/119/11 is pronounced "nine eleven". The slash is not part of the pronunciation...
hijackers under different ownership. Tradewind Aviation was run by his son Chris, who has an airline pilot's license. Federal records show Tradewind owns two Cessna
Cessna
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...
Citation jets, a Lear Jet
Lear Jet
Learjet is a manufacturer of business jets for civilian and military use. It was founded in the late 1950s by William Powell Lear as Swiss American Aviation Corporation. Learjet is now a subsidiary of Bombardier and marketed as the "Bombardier Learjet Family".-History:The Learjet started life as an...
, a helicopter, and several smaller aircraft.
Public records show Nadel was an officer of Summer Place Development Corp., a 6.5 acres (26,304.6 m²) undeveloped parcel in Manatee County, Florida
Manatee County, Florida
Manatee County is a county in the state of Florida. According to the 2010 census by the U.S. Census Bureau there are 322,833 people living in Manatee Country.Manatee County is part of the North Port-Bradenton-Sarasota Metropolitan Statistical Area...
. He is listed as director, secretary, and treasurer.
See also
- Bernard MadoffBernard MadoffBernard 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...
- Nicholas CosmoNicholas CosmoNicholas Cosmo was arrested January 26, 2009 on charges of an estimated $370–413 million Ponzi scheme. Cosmo is alleged to have conducted the scheme using his company Agape World Inc. in Hauppauge, New York, which claimed to make its profits via commercial bridge lending...
- Joseph S. ForteJoseph S. ForteJoseph S. Forte of Broomall, Pennsylvania operated a Ponzi scheme that cost investors $50 million. He reportedly signed a confession with the United States Postal Inspection Service.-Biography:...
- Marcus SchrenkerMarcus SchrenkerMarcus Schrenker is a financial manager known for attempting to fake his own death and the multi-state, three-day manhunt that followed. Schrenker lived and worked in Fishers, Indiana.-Background:...
- Raoul WeilRaoul WeilRaoul Weil is a Swiss businessman who became Chairman and CEO Global Wealth Management & Business Banking at UBS AG on 6 July 2007.He graduated with a degree in Economics from the University of Basel and moved on to work with Swiss Bank Corporation , in the Private Banking Division in Basel,...
- Marc Dreier
External links
- "Police Probe Fla. Fraud Claim, Fund Manager Missing", AP Via Yahoo News (January 17, 2009)
- "Fund Manager Reported Missing", Bloomberg News (January 17, 2009)
- "America's Top Ranked Money Manager", The Wall Street Digest (January 19, 2009)
- "FBI and SEC Investigate Nadel Fund", The New York Times (January 19, 2009)
- "SEC Sues Missing Money Manager Arthur Nadel", Chicago Tribune (January 22, 2009)
- "Troubled Times Bring Mini-Madoffs to Light", The New York Times (January 28, 2009)
- 16-Count Indictment, United States of America v. Arthur G. Nadel Case No. 09-mj-00169, (April 28, 2009).
- Nadel Receivership Website
- SEC Appointed Receiver Burton W. Wiand