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'Fund Boss' was Really a Driver: Prosecutors

Date: Monday, May 4, 2009
Author: Grant McCool. Reuters.com

A New York man who told investors he was president of a hedge fund called AR Capital Group Inc. (ARC) was really a hired driver, according to court documents filed on Friday [May 1] charging him and two others with fraud.

The self-described president of ARC, Alan Fishman, and Daniel Ledven, a purported manager at the fund from 2002 until it closed in February 2006, were arrested on Thursday night [April 30]. The third accused man, Fishman's nephew Gary Gelman, is at large.

All three were charged with securities fraud and wire fraud, according to criminal complaints filed in Manhattan federal court. Their lawyers could not immediately be reached. Mr. Fishman was released on $700,000 bond after an initial appearance on Friday.

"The primary occupation of the president of ARC, was as a livery driver, and the president had very little investment experience prior to starting ARC," according to one court document citing Mr. Ledven's testimony to the U.S. Securities and Exchange Commission in November 2006.

Mr. Fishman, who told investigators he once ran a successful transportation business, testified to the SEC in October 2006 that the fund never focused on real estate or leveraged trading as had been spelled out in a publicity brochure.

A special agent of the FBI said in the complaint that ARC, which allegedly sent out phony statements, actually raised $14.9 million from individual investors in the fund. About $12 million was wired to various bank accounts in Ukraine, prosecutors said in the complaint.

They said that when the fund was purportedly sold to a new owner in February 2006, the sale price was given as only $150,000. Messrs. Fishman, Gelman and Ledven each received $40,000, according to the court papers.

They said the fund solicited $5 million more after the firm's closing and bank records showed $6 million was wired to bank accounts in Lithuania, including one held by a company in St. Kitts and Nevis in the Caribbean.

The fund's bank account in New York had less than $700,000 in September 2006 when its owner disappeared and it ceased operating, according to the complaint.

The cases are USA v Alan Fishman and Gary Gelman, case No. 09-mag-1089, and USA v Daniel Ledven, case No. 09-mag-1088, in U.S. District Court for the Southern District of New York (Manhattan).

By Grant McCool