Hunt for Hedge Fund Manager Continues

Date: Wednesday, January 21, 2009
Author: New York Times

Around the same time he mysteriously vanished, hedge fund manager Arthur G. Nadel owed a $50 million payout to some of the investors who had entrusted their life savings to him, an accountant told The Associated Press.

Instead, they learned their money was gone — and now they’re left asking if it was all a bad investment, or if they were scammed.

The search for Mr. Nadel entered its sixth day Monday as more investors contacted authorities with concerns their savings, and Mr. Nadel, were gone forever. Mr. Nadel’s green Subaru was found in a Sarasota airport parking lot on Jan. 15, and he left his family a note in which he appeared to be ”very distraught,” Lt. Chuck Lesaltato of the Sarasota County Sheriff’s office told The Associated Press.

Mr. Nadel, 75, was expected to deliver a $50 million redemption that day to investors in the six hedge funds he managed, Michael Zucker, an internal accountant for Scoop Management Inc., where Mr. Nadel traded, told The Associated Press. Nothing in documents indicated the funds weren’t turning a profit, he said.

”Mind you, this was a lot, but it was still, we thought, very easily done,” Mr. Zucker told the news service.

The payment was set to be made after the funds, which had about 600 investors from across the country, suffered losses in October, Mr. Zucker said. But if Mr. Nadel was nervous, he didn’t show it: He often was seen around the office smiling and seemed on top of things.

”He felt that he was turning the whole thing around,” Mr. Zucker said.

Investors and police said that Mr. Nadel or Neil Moody, who was a general partner in some of Scoop’s funds, would often meet potential clients in person, and would promise big returns. Karin Gustafson, the YMCA Foundation of Sarasota head, told The Associated Press that Mr. Moody promised them a 10 percent return each year — and vowed to make up the difference himself if the fund didn’t deliver. It always did, until now.

”All we know is someone has said that the money is gone,” said Ms. Gufstason.

Ms. Gustafson said the YMCA had invested a $1.1 million endowment given to them by Mr. Moody.

Mr. Nadel had what some have characterized as a mathematical formula to his investments, which even investors failed to fully comprehend. According to Mr. Zucker, Mr. Nadel traded through Goldman Sachs and primarily in the Nasdaq 100.

”Sometimes he’d be trading while we were talking,” said Gordon Garrett, president of Sarasota’s Jazz Club, which received donations from Mr. Nadel to put on nine jazz events in the community this year. ”He had a formula that he followed, when a stock got too high would short, and when too low, would go in and buy. He was always looking for very small margins and traded very frequently.”

Dave Couvertier, a special agent with the F.B.I. in Tampa, confirmed that investigators are reviewing the case, but told The Associated Press that the investigation is still in its preliminary stages. The Securities and Exchange Commission declined comment, and Mr. Nadel has not been charged with any wrongdoing.

”What we’re really trying to do is get to know a little bit about the victims and their scenario,” Sarasota County Police Department Capt. William Spitler told the news service. ”None of us have any idea what the magnitude is.”

The investigation comes on the heels of two other high-profile financial fraud cases. Investigators say Wall Street’s Bernard L. Madoff devastated investors of some $50 billion late last year in what may be the largest Ponzi scheme in history. And last week, Indiana money manager Marcus Schrenker was apprehended in Florida after allegedly trying to stage his death in a plane crash as investigators probed his businesses.

But those who know Mr. Nadel say he was nothing like the accounts of those sensational cases. He was known around Sarasota as a trusted philanthropist who lived a low-key life. He didn’t drive fancy cars, lived in a middle-class, white, ranch-style home, and gave generously to Habitat for Humanity and the Jazz Club of Sarasota, among other causes. Though he went to black-tie events, he preferred a sports jacket and shirt over a tuxedo or a tie.

”It’s a huge shock for most of us in our community,” Zeb Portanova, board chair of Habitat for Humanity in Sarasota, told The Associated Press. ”I don’t think anybody really saw this coming.”