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U.S. judge orders Nadel to pay up

Date: Wednesday, August 25, 2010
Author: John Hielscher, Herald Tribune

A federal judge has issued a permanent injunction against Arthur Nadel, ordering him to surrender the money he made from his Sarasota-based Ponzi scheme.

Former Sarasota money manager Arthur Nadel is to be sentenced Oct. 8. He has been jailed since his arrest. A U.S. district judge has approved the examination of a bank account belonging to Nadel's wife Peg Nadel.

The action, coming in the U.S. Securities and Exchange Commission's civil case against Nadel, also permanently orders him not to break federal securities laws.

Such violations seem unlikely, since the 77-year-old former Sarasota money manager is in jail facing a lengthy prison term after pleading guilty to 15 criminal fraud charges.

Nadel, without admitting or denying the SEC's fraud allegations, consented to the judgment last month.

He has admitted in criminal court to running a $397 million hedge-fund scheme and will be sentenced Oct. 8 in New York City.

U.S. District Judge Richard Lazzara issued the order last week, 19 months after the SEC obtained a preliminary injunction and a temporary restraining order against Nadel.

Nadel, a disbarred attorney, had initially represented himself in the SEC's lawsuit, but lately he had not contested the agency's case.

He signed a five-page consent document stating he would accept the order to give up all "ill-gotten" gains from his Ponzi scheme and to pay a civil penalty of an amount the judge will set later. He cannot deny that he violated federal securities laws.

"He can argue about the amount, but he has agreed we are entitled to it," said Scott Masel, senior trial counsel with the SEC.

The SEC had earlier settled civil securities fraud charges with Neil and Christopher Moody, the father-and-son partners in Nadel's hedge funds. The SEC and receiver Burton Wiand are pressing the Moodys to turn over what is left of the $42 million in fees and profits they pocketed from the funds.

On a separate matter, Judge Lazzara denied a motion by IberiaBank to quash a subpoena by Wiand to examine a bank account of Nadel's wife, Peg.

The bank had argued it could not release the information without Peg Nadel's consent, which she had not given.

Wiand is gathering assets that Nadel acquired from his scheme. Wiand will use the money to generate funds that will go to investors who lost money.

The judge this week also is scheduled to hear arguments on whether Sarasota attorney E. John Lopez must turn over a "communication" he recently received. Wiand and the SEC have been unable to learn the nature of the communication or its source.

Lopez, who has done estate planning for the Nadels, believes the communication is protected by attorney-client privilege. He wants the judge to review it in chambers, out of the public eye, to decide if it should be released to Wiand.

Last month the judge admonished Lopez for failing to alert Wiand that Peg Nadel had received two Internal Revenue Service refund checks totaling nearly $1.3 million. She later turned over the checks.