Gersten Savage Announces Specialized Practice to Advise Hedge Funds on Madoff Impact

Date: Friday, February 20, 2009
Author: Gersten Savage LLP

The law firm of Gersten Savage, LLP has formed an interdisciplinary practice to advise hedge funds, investment funds and institutional investors on potential consequences arising from the Bernard Madoff fraud and other aspects of the current financial crisis, the firm announced.

The practice brings together areas of expertise from throughout the firm. Leading the effort are partners David Danovitch, head of the firm's corporate and regulatory practice; Eric Roper, head of Gersten Savage's hedge funds and financial services practice; and Robert Wolf, head of the firm's litigation practice. Gersten Savage specializes in securities regulation, corporate law and finance.

"This is a critical period. Fund managers and investors should be taking immediate steps now to deal with the current situation in the post-Madoff environment," Danovitch said. "For example, funds should conduct an assessment to identify problematic areas where they could be vulnerable in the future. A sense of urgency is paramount. Managers of funds of funds must be certain their current and past diligence practices can withstand 20-20 scrutiny."

Gersten Savage has tailored a program specifically designed to assist smaller hedge funds, those with assets ranging from $25 million to $2 billion. The firm also can handle smaller fund assignments, he said.

Institutional investors should examine and analyze all the entities and service providers, such as prime brokers, administrators, custodians and auditors, that play a part in investment decisions and/or overall operations, Roper said.

"Investors should take a look at all those who are involved in the investment process and to whom they have entrusted funds," he said. "They should ensure that the promised level of due diligence, corresponding disclosures on actions and sufficient levels of transparency are being provided."

From a litigation perspective, the consequences of the fraud have the potential to expand "like a tsunami," Wolf said.

"There will be pressure on the courts as the developments in the Madoff case unfold. The ends justify the means here and all bets are off," he said.

"Potential litigants, both as plaintiffs and defendants, need to be carefully advised of their rights or they could find themselves being victimized yet again," Wolf said. "More broadly, funds and institutional investors need help focusing on acting preemptively, to avoid or resolve litigation problems before they grow out of control and swallow up valuable resources. In addition, victims will need to reevaluate all separate transactions and prior agreements they entered into where they have attributed value for their investment which is now worthless."

About Gersten Savage LLP

Gersten Savage LLP, founded in 1977, is considered one of New York City's top five independent law firms. A full-service firm, Gersten Savage's practice groups cover corporate, finance, tax, litigation, bankruptcy, real estate, and intellectual property in the United States and throughout the world.

Gersten Savage represents issuers and broker dealers on matters ranging from private placements, public underwritings, regulatory compliance, and merger and acquisitions. The firm also represents hedge funds and off-shore financing entities. In addition, the firm represents start-up companies, established public and private enterprises, domestic and offshore investment partnerships, and registered investment advisors. Its international and tax planning division provides a full range of legal services to its clients, and is enhanced by intellectual property, bankruptcy and real estate expertise. The firm's clients span a broad range of industries, including investment banking, e-commerce, consumer products, insurance, healthcare, manufacturing, importing, mining, oil and gas, distribution, and retailing.