In what has come to be pretty much the standard deal in hedge fund fraud cases, UT Medical Group Basic Pension Plan agreed to repay $432,847 in what it thought was profits, but gets to keep its original $2 million investment. Bayou’s bankruptcy trustee has sued investors for more than $121.7 million in principal and almost $16 million in fictional profits. UTMG was one of several investors put into the various Bayou entities by Memphis-based Consulting Services Group.
Boyou Hedge Fund Redeemers Get a Benchmark
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According to court papers, UTMG made its first investment, of $1.6 million, in Nov. 2002 but filed its redemption notice in Apr. 2004 on the advice of UTMG’s auditors and ERISA counsel because a six-month lag between Dec. 31 audit and the Jun. 30 pension plan year-end meant they could not readily ascertain the value of UTMG’s investment. UTMG contemporaneously sought redemptions of other other investments that posed similar valuation problems.
(The Bayou audit was, of course, prepared by the entirely faux Richmond-Fairfield Associates, meaning the six-month lag was, in fact, the least of issues at hand).
Meanwhile, back in the court papers, UTMG said that its redemption was not precipitated by any kind of hedzzup from any investment advisor...including, without limitation, Consulting Services Group LLC, that called into question the solvency, probity, regularity, or propriety of the [Bayou] No Leverage Fund, Samuel Israel, Daniel Marino, or any of the debtors or any affiliate thereof, or Richmond-Fairfield Associates CPA, PLLC; or that advised or suggested liquidation or redemption of the investment for any reason.
The settlement, first reported on Friday by Bloomberg, is subject to Bankruptcy Court approval. Several other settlements will be announced soon, according to a statement released by trustee Jeff Marwil.
In other recent Bayou-related developments:
- Paperwork relating to litigation brought against The Hennessee Group by investors who found themselves holding the Bayou baby is piling up in the US District Court in White Plains NY. Much of the action so far revolves around Hennessee’s attempts to enforce the arbitration clause of its investment advisory agreement.
- Arizona’s attorney general has turned over to the trustee more than $100 million of Bayou assets recovered last year after a rapid world-tour-by-wire.
- In an interesting but otherwise unrelated development, a pair of hands through which Bayou’s $100 million traveled is now being inspected for signs of a smaller amount; attorneys investigating a Ponzi scheme in Georgia believe that $1 million was transferred to Karl Johnson, principal of Raritan, NJ-based Majestic Capital Mgt, investigated, but never charged, in relation to the Bayou Funds World Tour.
In re: Bayou Group LLC et al
Motion of debtors...for an order authorizing and approving settlement agreement
Bayou Hedge Fund Settles First Suit Against Former Investors
by Bob Van Voris
Bloomberg Nov. 10 2006
Raritan firm tied to second fraud case
by Greg Saitz
Newark Star-Ledger Nov. 8 2006
SEC v. Geoffrey A. Gish et al
US Securities and Exchange Commission