Madoff Victim Widow Speaks Out

Claudine De La Villehuchet, widow of Rene‐Thierry Magon who commtited suicide on December 23 after losing everything in the Madoff scheme (over $1.4 billion in personal and client capital), has spoken out for the first time. In an interview with Fox Business Network's Adam Shapiro, Claudine calls Madoff "a murderer" and for the first time comes clean with her own personal tragedy.

A sad story of a billionaire who has lost her husband, her net worth, and has recently had to apply for Social Security, ironically a much bigger Ponzi scheme than Bernie could ever create. Hopefully she can collect on that for at least a few years before Social Security is revealed for the hollow pyramid scam it is. However, unlike with Bernie, finding and holding the guilty parties in the Social Security debacle responsible, will require the arrest of virtually all political leaders for the past 30 or so years.



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Is Joe Biden Associated With A Fund Of Funds Feeder Scam?

Zero Hedge is always happy to discover something rotten in the state of capital markets. We are even happier when others dig independently and come up with their own startling conclusions. Tonight - we are very happy. John Hempton, who writes the insightful blog Bronte Capital, has done some amazing dot connecting in what, if true, and not swept promptly under the carpet by the powers that be, could expose a hedge fund scandal that could rival the Madoff fiasco, for the simple reason that it implicates none other than Barack Obama's right hand man: Joe Biden. The fund in question is Paradigm Capital, a fund of funds, that is controlled by Hunter and James Biden, the VP's son and brother, respectively.

The full story is quite intricate but very much worth it. In putting the facts together, Hempton had a temporary brush in with "the adversary's" legal counsel, only the be vindicated when his initial subject, Ponte Negra Capital, ended up having its assets formally frozen by the SEC. But it does not end there. As Hempton lays it out best:

Firstly the [Paradigm] business was not started by the Bidens – it was purchased by them. It was started by Dr James Park. When the Bidens purchased the business they believed it to have 1.5 billion of funds under management. This little section from an affidavit signed by James Biden (the VP’s brother) is revealing. The affidavit is here.

(a). The Paradigm Hedge Funds had only between two and three hundred million dollars under management, which were leveraged to over five hundred million, not the more than $1.5 billion under management represented to us by Lotito and Fasciana.

(b) The returns on the Paradigm Hedge Funds were not as represented to us by Lotito and Fasciana; and (with editing)

(d). The primary manager of the funds, Dr. James Park, had an apparent substance abuse problem and had been an absentee manager for several years...

Now please put this in perspective. The Bidens – mostly through failure to do proper due diligence – seem to have wound up in control of a fund of hedge funds which they claim (in sworn affidavit) that

• Had less than a fifth the funds under management that they represented to their customers,

• Had misrepresented their returns and

• Had a primary manager who had “an apparent substance abuse problem”.

Now if you were told a fund manager only had a fifth the funds that he represented to the world, had misrepresented his returns and had a primary manager with a substance abuse problem what you say it is?

Whatever – it quacks.

Now this affidavit was signed 13 April 2007. I presume it is the truth otherwise James Biden is guilty of perjury.

The affidavit is signed a few months after Hunter Biden resigned as the CEO of Paradigm Global – a position he took up in late 2006.

Now I am going to give you one more detail. In 2006 Paradigm represented that they had 28 staff. They represented that they had offices in multiple cities including a largish office in New York on Fifth Avenue. I have uploaded a few of their marketing documents here and here and here.

Two hundred to three hundred million in funds under management would represent less than 5 million in revenue and probably less than 3 million after any third party costs. Most funds of funds of that period took a percentage of the performance fees – and given the performance of the funds the revenue would have been less than 1% of net funds under management however Paradigm's fee structure was somewhat higher suggesting revenue about 5 million per annum.

With 28 staff mostly in New York and (according to this marketing document) with representative offices in Los Angeles, Monte Carlo and Tokyo you can’t make this business work very well.

Of course you could make it work if all the staff members were paid well under $70 thousand dollars (which does not seem likely in finance in New York, Los Angeles, Tokyo and Monte Carlo). You could also make it work if you subsidized it.

None of this would allow the senior manager to fail to show at the office and indulge a drug habit (as sworn by James Biden).

Now go back and look at this marketing document. It contains a few staff members on the marketing side. Alla Babikova is still given as an email contact on the Paradigm website. She is also listed on this document as working for Onyx Capital. Onyx was the marketer of the allegedly fraudulent Ponta Negra hedge fund. Onyx – or at least staff that worked for Onyx – were also marketers of Stanford.

Jeffrey Schneider is the contact on this document from the allegedly fraudulent Ponta Negra fund. He was the founder of Onyx.

I see lots of possibilities: all of them reflect very poorly on the Bidens.

• They were and remain controllers of a fund of funds which they allege misrepresented its returns and yet which they kept operational.

• They were and remain controllers of a fund of funds which houses an alleged fraud in its offices (Ponta Negra).

• They were and remain controllers of a fund of funds which employed a marketing organisation (Onyx) which was associated with distributing alleged frauds (Ponta Negra and Stanford).

• They were and remain controllers of a fund that claimed to have 28 staff many of whom are difficult to trace and where the revenue to fund those staff did not obviously exist. This suggests that either the staff were not paid, did not exist or (more sinisterly) they were paid by stealing from the small amount of funds under management. You could only steal the client money if the asset custody safeguards were not robust. There is an audit statement on the SEC files qualified as to the robustness of these protections – however there is no evidence that the lack of robustness was exploited.
  

All of this was done from the 17th Floor of 650 Fifth Avenue New York. There are a few other things housed on that floor and you need to walk past Paradigm’s desk to get to them.

There is much more to this story, and for the whole sequence please go here, here, here, here and here, in that order. Makes for one hell of a late night thriller, and if the author is correct, Vice President Biden, by implication, could soon find himself in the shoes of Walter Noel of Fairfield Greenwich.

Regardless, it is only a matter of time before Joe Biden ends up on the list of people in which the president has 100% confidence. Sphere: Related Content

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The Madoff Rolex Connection

Zero Hedge is happy to introduce its newest contributor, Travis, whose extensive background in the intricacies of the ultraluxury world will provide a welcome perspective on the mysterious world of goods that usually show up in the pages of the Robb Report, on the walls of Stevie Cohen's uber-plumbed mansions and on the wrists of momentum chasing day traders (one has to give it to them: they have made a mint over the past month; their mutual fund brethren who are only now getting involved will be stuck wearing a '98 Ironman). We hope, as the government expands the PPIP and TALF to include such asset classes as BBB tranches on Patek Philippe and Monet-securitized asset pools, to present the information needed to make informed decisions on whether 6x leverage is sufficient to purchase that Murcielago whole loan trading at 22 cents on the dollar which as Kudlow says, is absolutely money good.

The Rolex is Real; But Are the Stories True?

By Travis

Amid BASELWORLD 2009 drawing to a close, “The World Watch and Jewellery Show” (their funny spelling, not ours), rumors abound for perhaps its biggest showcase, the self-crowned “800-lb. Gorilla” Rolex. It seems not only did the fallen financier Bernard Madoff have a penchant for ripping-off golf buddies, club cohorts- the rich, the famous, the charitable and anonymous alike; he also cheated their wrists.

Uncle Bernie didn’t shuck his victims of their shiny bejeweled Rolex Oysters (that would have been seemingly straightforward, almost harmless in perspective) he supposedly Ponzified Rolex, SA- the ultra private, secretly veiled, principally owned charitable trust that manufactures and markets an estimated 1,000,000 wristwatches a year, out of some $900 million dollars. (Like anything and everything else Rolex, this is all heresy, speculation at best.)

Rumors began to swirl, or in Rolex’s solid case of 904L Stainless Steel, Perpetual-ate, when the past CEO Patrick Heiniger abruptly stepped-down due to “personal interests,” only to be replaced by former banker and CFO Bruno Meier in December 2008. Meier is just the fourth CEO in Rolex’s 104-year history. The Heinigers both Patrick and father Andre, having taken-over Rolex’s affairs since the passing of its founder, Hans Wilsdorf in 1960. Was Heiniger responsible for losing the better of a Billion to Madoff? Wouldn’t be the first charity to be shaken down by the Ponzimeister.

Rolex, notoriously quiet and secretive among the hallowed Swiss wristwatch industry (in itself infamously shrouded in a bit of legend and mystique) is controlled by the Hans Wilsdorf Foundation, a charitable trust that supposedly donates a lion’s share of Rolex profits to hundreds, thousands, millions (pick a number, any number) of charities and causes worldwide.

Again, any and all figures, facts and stories confirmed or denied by the company are estimates, with much if not all truth coming from dealers and industry insiders; most of whom are bitter and disgruntled, not only at Rolex, but at the downturn of the luxury goods market whose business has plummeted with the recession by about 40%.

Yet despite a global meltdown of historic proportions, Rolex (as it continually reports every year) set record profits in 2008; forever and always raising the upward bar, along with the watch MSRPs which continue to rise every year, sometimes even a few times a year. Enthusiasts will cheer- “Rolex makes a million watches a year… And they sell everyone of them…” How jaded are the people “watching” really? (Take it from a collector, pretty jaded…)

Though most loosely associated with Rolex are smitten and arrogantly aware of the only wristwatch that really matters, both in value and brand-recognition; the truth is- their dealer networks have been cut short by the company, pulling and controlling franchises of rights, forcing products, controlling prices and dumping inventories on retailers struggling to stay open in the malls across the world, no to mention boutiques on 5th Avenue, Worth Avenue, Rodeo Drive, Bond Street, maybe even shady 47th Street too.

So are the stories true? Ask if the Rolex is a fake? Even if it were, the asshole wearing it wouldn’t tell you anyway. Why should the company? Like anything Rolex, if it’s not purported, it most certainly is perpetual and water-resistant in a perfect storm, a flood, of bad news. Sphere: Related Content

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UBS Accused Of "Grave Breach" Of Oversight On Madoff-Related Funds

Swiss regulator Commission de Surveillance du Secteur Financier ordered UBS to review internal controls at its Luxembourg unit and report within three months, criticizing the bank of a "grave breach" of oversight as custodian bank for Luxembourg based funds linked to Bernard Madoff. The CSSF issued a statement that is even more applicable to every fund of funds in the U.S. which invested with Bernie "A custodian bank’s failure to correctly fulfill its duty of due diligence is a grave breach of its oversight responsibilities” the CSSF said.

UBS was the custodian of Access International Advisors' LuxAlpha Sicav-American Selection fund, which was shuttered by regulators because of investments related to Madoff. As the fund once held total assets of $1.4 billion, there are many angry investors, and all of them apparently are planning on suing UBS in Luxembourg courts. The CSSF's statement will only make it that more difficult for UBS to defend itself. In typical Ken Lewisian response, UBS claims that everything is wonderful:

"UBS does not have responsibility to these shareholders for the unfortunate results of the Madoff scandal. The CSSF comments will have no impact on UBS’s Wealth Management clients in Luxembourg or on UBS’s Luxembourg funds."

UBS has lately been bombarded by legal developments left and right, with a $780 million settlement last week the US last week and an subsequent lawsuit to disclose the identities of 52,000 tax evaders, who, as we wrote yesterday, should be very nervous. Sphere: Related Content

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Bernie Forced To Find More Creative Ways to Launder Assets

BN 12:09 *BERNARD MADOFF STAYS FREE, MAGISTRATE JUDGE RULES
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*MADOFF IS CHARGED WITH SECURITIES FRAUD IN $50 BLN PONZI SCHEME
*MADOFF HAS BEEN UNDER HOUSE ARREST, GUARD, ELECTRONIC MONITOR
*MADOFF'S ATTORNEY SAID TRANSFER WAS AN `INNOCENT' MISTAKE'
*FEDERAL PROSECUTORS SAID BERNARD MADOFF IGNORED COURT RULING Sphere: Related Content

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