Financial Fraud Handbook: How to Lose $100 Million

Sep 20, 2010 | Alpha Adviser | 5 comments

Step One: Don't ask questions.

Step Two: Wire $100 million to outside bank account.

Step Three: Repeat as necessary.

Sixty Minutes ran a terrific segment about Marc Dreier yesterday. He masterminded a Ponzi Scheme that totaled $400 million and funded his once powerful law firm on Park Avenue (now defunct). If you haven't seen the report, take a look. It's worth watching.

A few of Dreier's charades fall into that hallmark category of financial scandals—you can't make this stuff up. He describes one hedge fund that invested $100 million, even though it performed virtually no due diligence. His explanation:

The more money you look for, the fewer questions people ask sometimes.

Elliott Associates, the fund that invested $100 million, was not alone. Here is a list of the other gods of Greenwich, hat tip to Wall Street Folly, that took financial hits. Among them is Paulson & Co., which almost seems like poetic justice in the wake of the Abacus CDOs.

 

  • Paulson & Co
  • Elliott Associates
  • Davidson, Kempner
  • Baupost
  • DellaCamera
  • Sandell Asset Management
  • Fortress Capital or Fortress Investment Group
  • Perella Weinberg
  • Eton Park
  • GSO
  • Meyer Venture Partners
  • Concordia Partners
  • Enterprise Fund Ltd
  • Archery
  • MEA Properties
  • Four Winds
  • Bennington
  • Novatar
  • Verition
  • Berdon LLP
  • Whippoorwill
  • Bell Canada
  • Ontario Teachers Pension fund

5 Comments

  1. Renata Barber
    Renata Barber on 20 September, 2010 at 11:57 am

    Unbelievable. I especially love Mr. Dreier's quote. Classic fodder.

  2. Norb Vonnegut
    Norb Vonnegut on 20 September, 2010 at 12:28 pm

    What gets me are all the hedge funds that invested. This is what a 20 percent performance fee buys?

  3. Renata Barber
    Renata Barber on 20 September, 2010 at 12:39 pm

    I had no idea, Norb:( They make it sounds so simple. But, the results are devastating…I mean, does anyone really enjoy losing money?

  4. andrew mahon
    andrew mahon on 26 September, 2010 at 9:37 am

    Hi Norb,
    I missed this item on 60 minutes so thanks for the post and the commentary. I love the question 'Do you have any friends?'.  It's what reporters call an 'open-ended' question and often reveals much more than specific questions about particular financial transactions etc .  Would like to see you blog about the movie 'Wall Street – Money Never Sleeps'. I'm sure you would have an interesting take…
    All the best,
    Andrew

  5. Norb Vonnegut
    Norb Vonnegut on 26 September, 2010 at 8:10 pm

    Thanks, Andrew. And will do. I plan to blog about Money Never Sleeps. It's only a matter of time.
    I'm also looking forward to the release of Greg Farrell's new book, Crash of the Titans. It's about the collapse of Merrill Lynch. Interesting stuff.