Posts Tagged ‘hedge fund’

Gordon Gekko Changes His Mind, Says Greed Is Bad

Tuesday, March 6th, 2012

Actor Michael Douglas is playing a new and rather surprising role as spokesman for the FBI to fight corruption on Wall Street.  The actor – famous for his line “greed is good” in the 1987 film “Wall Street” – is sending a new message in a public service announcement, explaining that insider trading is a serious crime.  “The movie was fiction, but the problem is real. To report insider trading, contact your local FBI office,” Douglas says in the spot.

“In the movie ‘Wall Street,’ I played Gordon Gekko, a greedy corporate executive who cheated to profit while innocent investors lost their savings,” according to Douglas.  “The movie was fiction, but the problem is real.  Our economy is increasingly dependent on the success and integrity of the financial markets.  If a deal looks too good to be true, it probably is,” he concludes.  The one-minute commercial opens with Douglas as he looked in 1987 and in the Gekko character famously addressing a fictional shareholders meeting in the movie, before the clip cuts to the grey and older actor who is now working for federal law enforcement.

Douglas’ new role is part of the FBI’s “Perfect Hedge” operation, which has successfully prosecuted 57 individuals in the last five years for insider trading, and is targeting 120 more suspects.  The commercial is part of the ongoing effort, and will feature segments of actual FBI wiretaps from successful prosecutions.

So far, the new video — which is being shown on CNBC and Bloomberg Television — is part of the government’s broader initiative aimed at drawing cooperating witnesses and tipsters from Wall Street.  Previously, insider trading was not one of the FBI’s areas of focus, so potential informants might not have known where to turn, according to the accepted wisdom.  Now that the crime is a top priority for securities investigators, the video is part reminder, part plea for those who have seen something illegal to come forward and provide information.  Additionally, the video is an effort to raise the FBI’s public profile.  As David A. Chaves, a supervisor and special agent, said, “It’s important for us to have the FBI brand out on Wall Street.  He’s talking about himself as Gordon Gekko and the role that he played and how that was fiction and this is not but about real crime on Wall Street.”

Several government agencies are investigating illegal behavior on Wall Street, from the FBI to the Securities and Exchange Commission and other regulators.  To build their cases, investigators use uncompromising tactics once reserved for organized crime and terrorism cases, such as wiretaps and well-placed cooperators.  The FBI’s attitude is who could be a better spokesman against insider trading than the man who played Gordon Gekko, who came to personify Wall Street crime in both the 1980s and in the recent financial crisis with the 2010 sequel, “Wall Street: Money Never Sleeps.”  “The more people out there aware of the problem, the more opportunities we have to get tips,” said Richard T. Jacobs, a FBI supervisory special agent, who helped bring a major insider trading case which resulted in the conviction of a billionaire hedge fund manager.

The campaign also is targeting embezzlements by stockbrokers and Ponzi schemes — which have surged since the financial collapse of 2008.  Since then, securities and commodities fraud investigations have risen 52 percent, from 1,210 inquiries to 1,846 last year, the FBI said.

According to FBI spokesman Bill Carter, the spot will be distributed to 15 cities — Atlanta, Boston, Charlotte, Chicago, Dallas, Denver, Los Angeles, Miami, New York, Newark, Philadelphia, San Francisco, Seattle, Washington and New Haven, CT – all of which have seen an increase of fraud cases or evidence of potential trouble.

Surprisingly, Douglas was “startled over the positive response he received as Gordon Gekko,” Chaves said.  “I don’t know what’s wrong with Wall Street but I would be approached all the time, people would ‘high-five’ me or shake my hand for being this terrible man who stole people’s money.  Where are the values?  What are people thinking when I’m held like a hero in that role?  The culture has to change.”

Attorney General Eric Holder affirmed that the Justice Department is committed to rooting out corporate crime.  “From securities, bank and investment, to mortgage, consumer and health-care fraud, we’ve found that these schemes are as diverse as the imaginations of those who perpetrate them, and as sophisticated as modern technology will permit,” Holder said.

Warren Buffett Chooses His Likely Successor

Wednesday, November 10th, 2010

Warren Buffett taps hedge fund manager Todd Combs to take over Berkshire Hathaway.  At age 75, mega-billionaire and Chairman of Omaha-based Berkshire Hathaway, Inc., Warren Biffett has likely selected the person who will succeed him when he eventually retires.  The chosen one – who will head a holding company that owns such diverse businesses as Geico and Dairy Queen — is said to be 39-year-old Todd Combs, currently a hedge fund manager with Castle Point Capital in Greenwich, CT.

According to Carol Loomis, a writer for Fortune magazine and a friend of Buffett, “The word ‘investment’ is key to that last sentence.  As chairman of Berkshire, Buffett has two jobs: He runs the business as CEO, and he manages Berkshire’s huge investments in securities.  It is the investment job for which Combs is the leading contender.  Buffett’s hiring of Combs at least partially satisfies a commitment Buffett made to Berkshire’s shareholders more than three years ago in his 2007 annual letter.  Buffett said were he to die ‘tonight,’ the company would have three outstanding candidates for the CEO half of his job.  On the investment side, however, he conceded that good candidates were not lined up in the wings.”

Berkshire Hathaway recently said its net worth grew by $5.6 billion in 2005, a 6.4 percent rise in book value. That compares with a 4.9 percent growth projection in the Standard & Poor’s 500-stock index, marking the first year since 2002 that Berkshire beat the S&P.  Since 1965, Berkshire’ average yearly gain has been 21.5 percent, more than twice that of the S&P.

In his letter to shareholders, Buffett wryly noted that death wasn’t the only circumstance in which he would have to be replaced.  He said he is relying on his board to show him the door if his cognitive abilities ebb as he ages, “particularly if this decay is accompanied by my delusionally thinking that I am reaching new peaks of managerial brilliance.”

Hedge Fund Honcho’s Bet Pays Off Big

Monday, February 1st, 2010

David Tepper’s shopping trip for cheap Bank of America and Citigroup stocks a $7 billion windfall.  David Tepper’s shrewd bet that the nation would avoid a second Great Depression inspired him to buy bank shares at rock-bottom rates, a move that has earned his Appaloosa Management hedge fund an estimated $7 billion worth of profit during 2009.  Last winter, Tepper invested heavily in Bank of America stocks selling for $3 a share, as well as Citigroup, Inc. preferred stock, then priced at a bargain-basement $1 per share.

Tepper, a philanthropist who funded the Tepper School of Business at Carnegie Mellon University, made a gamble that is paying off in a big way – surprising skeptics who insisted that he was making a costly error.  “I felt like I was alone,” Tepper said.  There were days when “no one was even bidding.”  An improving market has seen Appaloosa Management earn a 120 percent return.  As a result of those gains, Tepper now manages approximately $12 billion, making his company one of the world’s largest hedge funds.

In general, hedge funds had a bad year in 2008, when they experienced a 19 percent decline.  Approximately 1,500 funds – 16 percent of the total – went out of business in 2008.  The funds had a far better year in 2009.  According to Hedge Fund Research, Inc., they are seeing a 19 percent return, the best annual gains in 10 years.

Alan Shealy, a long-time Tepper client, says “Investing with David is like flying, with hours of boredom followed by bouts of sheer terror.  He’s the quintessential opportunist, investing in any asset class, but you have to have a cast-iron stomach.”