THE BIZOP NEWS

Avid readers of this blog will recall that Mr. Wright is being sued by the SEC regarding matters both civil and criminal, while at the same time he and his numerous companies are in bankruptcy.

Mr. Wright allegedly swindled investors out of $180 million, and the facts are now beginning to seep up through the mud.

Civil Action by SEC

In August, 2006 Wright asked for a stay of the civil proceedings, which were being conducted as Wright's criminal action proceeded. In the criminal proceeding, Mr. Wright need not testify, while in the civil proceeding the discovery process may require Wright's attendance.

On October 27th, 2006, Judge Charles Pannell Jr. denied Wright's request for a stay. As a result, the SEC's motion for default judgment will proceed. The evidence that the SEC will rely upon for default judgment is contained in the the affidavit of the receiver.

According to the receiver, Wright converted approximately $17 million of the investors' money to his own use. The rest of money, approximately $150 million, is described as either returned to investors, lost through trades, or converted for Wright's and other principals for their personal use.

I suspect that this means that the receiver has no clear idea where the money is.

Criminal Action by SEC

Wright has withdrawn his motions for the suppression of evidence and the matter is now certified ready for trial, see the following order.

Bankruptcy of Wright and his Companies

The receiver and legal fees are approximately $1.8 million; while the recovery for the estate is $1.6 million, with possibly another $4 million to come from the sale of some of IMA's real estate in California.

The rest of any recovery will have to come from lawsuits against third parties, apparently. The transcript from the fees hearing doesn't make it entirely clear what these causes of action are. Perhaps the legal theories for recovery are clearer in the receiver's mind?

I would simply follow the money: find out where each investors's cheque was cashed. Go to that bank and ask where that money went - continue until all $150 million accounted for. But then again, I am not clever enough to be in a position to bill and collect from the bankrupt estates $1.6 million.

Posted by michael webster at 6:53 AM | Permalink | Comments (0) | TrackBacks (0)

According to documents filed by the Receiver in the Bankruptcy of Kirk Wright and his companies, the total bill to the bankrupt's estate, as of the end of July was $830,000 more or less. The dockets for the Kilapatrick Law Firm can be read here.

Now recall that a) Kirk Wright and his companies have no representation in the bankruptcy, b) the receiver had no role to play in securing Kirk Wright's physical custody, and c) the main assets of the estate are real estate located in Georgia and California. There has been an auction for the property in Georgia, which returned approximately $2 million to the estate, of which $1.7 remains for the investors, once the lawyers and receiver have been paid.

What concerns me, on behalf of the investors, is that there appears to be no effective mechanism for the creditors of the estate to challenge the value of what their $830,000 actually bought in legal services. It is of course the creditor's money that is paying for the receiver and the receiver's lawyers. How do they effectively challenge what they paid for?

What makes this a timely concern is the recent reports of law firms padding their legal bills. Of course, I am not saying that I have any knowledge of whether the receiver's interim demand for fees is reasonable or not. Nor do I have any knowledge about the dockets.

But, what I can say is, that the practice of law works only when the adversarial system is fully engaged. And I am concerned that the adversarial system is not engaged fully in the receiverships and bankruptcies.

Technorati Tags: bankruptcy, investors, georgia, physical custody, bankrupt, creditors, lawyers, auction

Posted by michael webster at 11:28 AM | Permalink | Comments (2) | TrackBacks (0)

Kirk Wright has asked the Court to order a change of venue for his fraud trial. According to documents filed with the Court, the public defender has argued that as a result of the pre-trial publicity surrounding Mr. Wright's incarceration it is impossible for him to obtain a fair trial in Atlanta. The public defender argued that since bankruptcy proceedings have been largely reported, primarily in Atlanta papers, Mr. Kirk is thought of as someone who has done something sufficiently bad to have had his assets taken away.

The Government's opposition to the motion emphasizes that the publicity surrounding the bankruptcy has very little to do with the allegations of fraud, that the stories have been even handed, and that the defendant has failed to discharge his burden of proof.

The best part of this motion is the list of articles written about Kirk Wright, which are available here. Happy reading!

Technorati Tags: pre trial publicity, fraud trial, bankruptcy proceedings, public defender, change of venue, atlanta, burden of proof, incarceration, defendant, allegations

Posted by michael webster at 7:56 AM | Permalink | Comments (0) | TrackBacks (0)

NFL Seeks Dismissal of Hedge Fund Suit, according to Forbes. According the the Forbes article, "The NFL and its union say a lawsuit filed by six current and former players seeking to recoup $20 million they lost in an alleged fraud scheme should be dismissed, arguing in part that league players are solely responsible for their own finances."

Actually, the main argument is more sophisticated and does not depend at all upon the interpretation of the clause in the collective bargaining agreement, quoted above.

The NFL's Player's Association's brief makes its clear that its main point is that a) whether the NFL and NFL Player's association owed the plaintiffs a duty can only be determined by interpreting the collective agreement, b) to determine the duties owed under the collective agreement requires the applicability of a Federal Law on Labour and not State Law on Negligence. Federal Law does not recognize a cause of action of mere negligence asserted against the Union for failing to ensure that screening program worked.

In essence, the NFL and NFL Player's association are saying that although the collective bargaining agreement established the existence of a screening program for financial advisors, nobody should have relied upon their screening duty as a matter of law because they could not have sued the NFL Player's association for negligence, only a failure of a duty of fair representation.

At the Daily Caveat Blog, they suggest a different issue "the NFL, for its part, is also in the crosshairs, but claims that the players bear sole responsibility for their finances. The League is asking for the suit to be dismissed and the NFL players' association is taking a similar tact. Both entities contend that they player contracts state that, in any case, arbitration - not litigation - is the remedy specified in player contracts. How the league will explain away the apparent total negligence of giving its endorsement to known fraudsters is a separate issue." The pleadings do not, however, claim that the NFL and NFL Player's association knew that Kirk Wright was a fraud. So I don't see that the Daily Caveat has accurately reported the legal issues.

None of this should obscure the fact that the NFL's screening program failed totally, and should be reviewed so that it can add to the SEC's compliance program and stand as a mere fig leaf.

Technorati Tags: nfl player, kirk wright, negligence, federal law, union, collective bargaining, hedge fund, fraud scheme, collective agreement

Posted by michael webster at 7:34 AM | Permalink | Comments (2) | TrackBacks (0)

Google sucks because it delivers up popular stories at the expense of content. I have written a number of short blawgs about Kirk Wright, the hedge fund manager who the SEC alleges was running a ponzi scheme. The SEC alleges that Kirk Wright had $180 million from investors, but apparently less than $6 million can be recovered.

Both Mike Tierny at the AJC and the Wall Street Journal have written long and comprehensive articles about Kirk Wright. But if you Google "Kirk Wright" the number one entry is from this blawg. What about the story on Kirk Wright is so deserving of of this number one rank?

Technorati Tags: ponzi scheme, google, wall street journal, ajc, hedge fund manager, professional journalists, sec, apparently, ex wife, owe money, investors

Continue reading "Why Google Sucks. Jimmy crack corn and I don't care." »

Posted by michael webster at 7:54 PM | Permalink | Comments (2) | TrackBacks (1)

Mike Tierney has a very nice article about the upcoming sale of some of Kirk Wright's assets here. The sale is anticipated to generate $2 million in sales for the estate. It will be interesting to read about how much of that will go to pay the receiver and lawyers.

Anyone care to comment on this tidbit, from Mike Tierney's article.

"The ultimate price for the 9,600-square-foot house may be capped by its location in a nice neighborhood of vastly lesser-valued dwellings. Wright is believed to have poured about $1 million into the house for enhancements."

Technorati Tags: mike tierney, square foot house, nice neighborhood, sale, tidbit, dwellings, anticipated, lawyers, ultimate

Posted by michael webster at 12:56 PM | Permalink | Comments (3) | TrackBacks (0)

Steve Atwater was one of the former NFL players who were defrauded by Kirk Wright and his hedge fund IMA. Interestingly, Atwater was also an intern at IMA. Steve Atwater and five other NFL players are now suing the NFL and the NFL Player's Association claiming that the NFL did not perform the due diligence on Kirk Wright that they contracted for. As a result, the plaintiffs claim they lost $20,000,000.00 collectively in this business opportunity.

How much did they spend collectively on their due diligence - $1500.00 per player or $9,000.00 collectively.

Was this too little money? Should they have spent more? Should they have looked at other due diligence programs? What do you think?

Technorati Tags: due diligence, nfl players, nfl player, steve atwater, ima, hedge fund, business opportunity, suing, irrelevant, invest, lost

Continue reading "What is the Price of Due Diligence? For Steve Atwater it was the .5 percent solution." »

Posted by michael webster at 10:13 PM | Permalink | Comments (0) | TrackBacks (0)

On July 13th, 2006 Kirk Wright's bail provisions, which had been stayed pending this hearing, were revoked as the Judge accepted the Government's submissions that Mr Wright was a "flight risk". Recall that, when arrested, he had several pieces of different identification and numerous cell phones. Yeah, that would do it for me.

The pithy order can be read here.

Technorati Tags: flight risk, cell phones, pithy, submissions, provisions

Posted by michael webster at 4:22 PM | Permalink | Comments (1) | TrackBacks (0)

According to documents filed in Kirk Wright's bankruptcy, Kirk Wright purchased a large $2 million dollar home in Los Angeles with money transferred directly from the accounts of IMA. The trustee alleges that Wright wrongfully converted the investors money and the estate has a constructive trust over the funds.

The remedy of a constructive trust is very valuable, if you can trace the proceeds. To see why this is true, consider what the trustee is also alleging. The purchase of the house was done with funds from IMA, but there was a lawsuit between Kirk Wright and the sellers. The result of the lawsuit was that sellers and builders paid Kirk Wright approximately $160,000. Wright gave that money to his wife Kilssis Delos Wright, who then purchased jewelry, a new car and paid her lawyers who apparently obtained the settlement.

Now how much money, do you think, that the trustee can recover from Kilssis Wright? The jewels? The car? Money paid to third parties for legitimate services?

The trustee is going after it all. Since IMA has a constructive trust on the funds wrongfully converted by Kirk Wright and can trace the proceeds of those funds to Kilsiss's jewelry and car, and the law firm, it can legally claim that these monies or goods were never Kirk Wright's to give to his wife: it was always IMA's money and they had no intention of gifting it to Kilssis. But, it would appear to be a bit of hard luck for the law firm if they have to give up their professional fees for handling a lawsuit which actually increased the value of the bankrupt estate.

Posted by michael webster at 9:08 AM | Permalink | Comments (2) | TrackBacks (0)

The auction of Kirk Wright's estate will take place on Saturday, July 29th, 2006. The sale of these assets is supposed to return $2 to $4 million to the estate.

For more details, see the auction house's website.

Posted by michael webster at 1:03 PM | Permalink | Comments (0) | TrackBacks (0)

The SEC's motion for review of Kirk Wright's pre-trial release will now be heard on July 13th, 2006 at 2:00 p.m.

The notice can be read here.

Posted by michael webster at 4:33 PM | Permalink | Comments (1) | TrackBacks (0)

A number of details have emerged from the amended indictment against Kirk Wright, which appear not to have been reported in the various news accounts, here and here. No one seems to have read in detail either the indictment or the FBI's news release. The news reports continue to talk about an $185 million ponzi scheme and the disappearance of most of that sum.

But, it is very unlikely that Kirk Wright ever had anything like $185 million under his control, or the control of his hedge funds. As the indictment makes clear, he is alleged to have lied about both where the money was being invested, and how much money the various funds had in their control.

To accomplish this, the indictment alleges that he simply put the investor's money in an account called, I suppose, creatively, the "IMA expense account" and used the proceeds of it to pay himself, and his partners. The indictment the alleges that he simply sent false statements by mail to his clients and counted on them being happy with what the statements reflected.

Charles Ponzi used a similar scheme in 1919. As Donald Dunn, writes "after receiving notification of their 50% return, Ponzi could imagine the activity". While some would rush to cash in on their good fortune, "others would take their time, convinced by the fact that they had a one cent post card, they also had a 50% return on their investment. They would read the card over, show it to their wives and relatives. ... Back at their jobs, at the restaurants, at the recreation halls, they would tell others of their stupendous good fortune -and the ones they told would come running. Each satisfied customer would become a salesman, self-appointed." (my emphasis)

As many of the ponzi scams have shown, the ability to manufacture false returns or statements of accounts in critical to the success of the scam, or fraud. And as one astute reader has already pointed out, "It seems that money deposited into a legitimate custodial account is then deposited into a "black hole" with no further accountability". Are the institutions who provide the custodial accounts innocently enabling fraud? Do they have any liability for this, if so? Interesting questions.

Technorati Tags: ponzi scheme, charles ponzi, indictment, news reports, news release, donald dunn, money, fbi, hedge funds, expense account, ima, proceeds, kirk wright

Posted by michael webster at 3:03 PM | Permalink | Comments (7) | TrackBacks (0)

The lawsuit against the NFL and the NFL's Players Association by Steve Atwater and others because the union recommended hedge fund manager Kirk Wright as a registrant in a union investment program.

The complaint can be read here. The complaint is fairly straightforward, but the link between Wright's improper registration by the defendants, as a registered financial advisor, and the losses suffered by the plaintiffs is not clear, in my opinion. Wright is alleged not to have certain tax debts outstanding, which should have precluded his being registered by the defendants.

Unfortunately, I don't see the link between the losses suffered because Kirk Wright allegedly stole money from the investors and his having tax debts. Yes, Kirk Wright should not have been approved as financial representative because of these tax debts - but his tax debts didn't cause the losses. (Unless, of course Kirk Wright paid his taxes with his investors money.)

There has to be link between the misrepresentations -ie that Kirk Wright was up to date with his taxes- and the losses suffered because Kirk Wright allegedly used the investors money inappropriately. It is simply too easy to say as the plaintiffs do, in paragraphs 67 and 68, that "had we known about this tax issue" we would not have invested our money with Kirk Wright.

But this will be an interesting lawsuit to follow.

Technorati Tags: tax debts, Kirk Wright, union investment, hedge fund manager, steve atwater, investors, nfl, money, financial representative, financial advisor, investment program, registrant

Posted by michael webster at 9:01 PM | Permalink | Comments (2) | TrackBacks (0)

The criminal trial of Kirk Wright, for one count of mail fraud -alleging mailing a false statement to investor Steve Atwater, continues on July 10th, 2006 with the hearing of the SEC's motion regarding varying the pretrial release order. Recall, that when Wright was arrested in a Miami, he did obtain bail conditional upon a payment of $1,000,000 and that the funds for bail come "from a legitimate source". The conditions for the surety bond have not been met, according to the SEC's submission.

Technorati Tags: mail fraud, surety bond, steve atwater, pretrial release, legitimate source, sec, submission, kirk wright

Posted by michael webster at 8:55 PM | Permalink | Comments (0) | TrackBacks (0)

The Law Firm of "Motley Rice LLC, one of the nation's largest all plaintiffs litigation firms, today announced that it has filed suit against the National Football League (NFL) and the NFL Players Association for its endorsement and recommendation of the financial advisory services of Kirk Wright and his firm, International Management Associates (IMA). The suit, filed in United States District Court, Northern District of Georgia, is on behalf of several current and former NFL football players, including NFL Pro-Bowl players Steve Atwater and Blaine Bishop, who utilized the NFL's security department services and the NFL Players Association's Registered Financial Advisor Program". Here is a current list of news stories about Kirk Wright, the Cleveland story is very interesting.

This lawsuit is an interesting development, and when both the complaint and answer are finalized I look forward to review them. Now what is the relevance of this lawsuit for purchasers of franchises or business opportunities?

Technorati Tags: nfl players association, motley rice, national football league, steve atwater, litigation firms, cleveland story, blaine bishop, kirk wright

Continue reading "New Defendants in Kirk Wright Lawsuit" »

Posted by michael webster at 9:45 PM | Permalink | Comments (3) | TrackBacks (0)

According to court documents in the bankrucpty of Kirk Wright's hedge funds, Mr. Wright invested approximately $6 million with GTO Development LLC, in three real estate projects.

GTO Development LLC is a Los Angeles based real estate development company, whose CEO is Mr. Fred S. Shaffer. They appear to be redeveloping the Old Spaghetti Factory restaurant on Sunset Blvd, in Hollywood, ArrowHead Canyon Eastes, and fighting a battle with residents who want their building declared an historical site, which would restrict or eliminate the redevelopment.

Very recently, June 15, 2006, GTO was one of the sponsors of a conference on the redevelopment of Vine Street in Hollywood. According to the California Corporate website, there is also a GTO Development II LLC.

Here is what is odd about all of this. Do you think that Kirk Wright could have legitimately convinced his investors to invest $6 million in somewhat illiquid real estate developments in Los Angeles?

Technorati Tags: development llc, gto, los angeles based, real estate development, old spaghetti factory, hollywood, sunset blvd, vine street, court documents, hedge funds, shaffer, arrowhead, bankrucpty, kirk wright

Continue reading "Kirk Wright's LA Connection - GTO Development LLC" »

Posted by michael webster at 10:19 AM | Permalink | Comments (2) | TrackBacks (0)

On June 5th, 2006 having satisfied the Court that he had no money for legal representation, Kirk Wright's criminal case is going to be defended by the public defender. The pre-trial is set for June 19th, 2006.

In the bankruptcy of IMA and the associated companies, the creditors meeting is at the end of month and almost 900 creditors have the ability to file a proof of claim. As far as I can tell, the receiver has not had his account passed or approved by the Court, yet. It will be interesting to review that account.

Technorati Tags: creditors, criminal matter, pre trial, public defender, money, criminal case, legal representation, kirk wright

Posted by michael webster at 4:39 PM | Permalink | Comments (1) | TrackBacks (0)

According to Court documents, the receiver for Kirk Wright's group of IMA companies obtained an order requiring production of documents regarding certain accounts held at Charles Schwab, production order. The documents are to be delivered by June 14th, 2006 to the receiver.

Technorati Tags: charles schwab, court documents, ima

Posted by michael webster at 4:44 PM | Permalink | Comments (0) | TrackBacks (0)

Was Steve Atwater a shill for Kirk S. Wright? I don't know the answer to this, but Mike Tierney's revealing article a few days ago would have me concerned for several reasons. As reported by Mike Tierney, Atwater received compensation of 1.5% per referral. Let us work some numbers here. If I gave Wright $1,000, expecting a the historical IMA return of 20%, then after Atwater took his take, Wright would have only had $985 to work with. If Wright could actually produce in one year a return of 20%, ie $1200, then Wright would have had to make $215, or roughly 43/197 or 22.3% return.

Is the difference between 20% and 22.3% significant enough to alert someone performing due diligence? Should have Steve Atwater known he was enabling, even innocently, scam?

Well, the master of this scam was Charles Ponzi., and he cut his sales force in for 10% - and with a 50% payout in 3 months. So Mr. Atwater's referral commission is not out of line, but was it disclosed to the investors? If so, did they realize the significance of how much more return and therefore risk IMA funds had?

Technorati Tags: steve atwater, charles ponzi, mike tierney, due diligence, received compensation, shill, ima, enabling, investors

Posted by michael webster at 10:44 PM | Permalink | Comments (2) | TrackBacks (0)

Some interesting details about Mr. Kirk Wright have emerged from the Court files in Miami, where Mr. Wright was arrested. As readers will recall, part of Mr. Wright's method was to give his investors phoney statements which showed large returns. Apparently as late as February 15, 2006 Mr. Wright was insisting that Ameritrade was holding the funds. Searches by the Ameritrade staff showed only funds of approximately $150,000, and not the $150 or $160 million Mr. Wright was claiming. It took the Director of Compliance for Ameritrade at little more than a week to confirm that Ameritrade only held $150,000 for Wright's companies. Amusingly enough, the 800 number of the Ameritrade statements used by Mr. Wright were also in error; no such number nor address is connected to Ameritrade. One other company was related to IMA, J&B Oxford & Company was also located by the Director of Compliance, but the account was closed.

How was Mr. Wright able to get away with not showing the investors what he invested in and where the money was? Was it a secret?

Technorati Tags: ameritrade, phoney, 800 number, ima, kirk wright

Continue reading "Kirk Wright - The Miami Stopover" »

Posted by michael webster at 8:41 AM | Permalink | Comments (3) | TrackBacks (0)

According to documents filed in the bankrucptcy of IMA and its affiliates, "Funds from IMA accounts totaling $6,050,000 were invested by Kirk Wright in these [real estate] projects[in Los Angeles]. Negotiations are near completion and due diligence activities are underway between a potential purchaser of this Debtor's interests, GTO and the Trustee. The Trustee's intent is to present the offer to the Court in a motion and hearing for a section 363 sale as soon as the "stalking horse" purchaser's due diligence is complete. The Trustee has been contacted by other entities who have expressed an interest in acquiring the Debtor's interests in these projects."

The Trustee is also the federal receiver for the assets of Mr. Kirk S. Wright and reports "Assets recovered in the Receivership estate as of April 30, 2006 include the following: House, Marietta, GA. Loft Condo, Atlanta, GA, Duplex house, Fairburn, Ga, 2005 Bentley Continental GT, 2000 Jaguar XK8, Aston Martin, 1967 BMW 2000CS,Furniture, fixtures, artwork.These assets and others are being marketed and sold in the Receivership estate. The estimated liquidation proceeds of these items may be in the range of $1.5 million to $2.2 million."

So for those who are counting, $7.5 to $8.2 million found, and only another mere $172 or 173 million to go.

Technorati Tags: due diligence, trustee, kirk wright

Posted by michael webster at 9:41 AM | Permalink | Comments (1) | TrackBacks (0)

The SEC offered the following evidence that there should be a finding of either danger to the community or risk of flight which would be sufficient to detain the defendant pending trial.

a. "By way of proffer at the Florida detention hearing, the Government established that although approximately $100 million was deposited with IMA and IMAAG over the past several years, IMA's client assets during the Fall of 2005 and Winter of 2006 totaled less than $500,000."

b. "It was undisputed at the hearing that the defendant was made aware of the existence of the federal warrant since March 2006, never surrendered or made his whereabouts known, and operated under false identities. He was also advised by his former counsel that the FBI was actively looking for him, and that he must turn himself in. Defendant never did so. Ultimately, he was arrested at the Ritz Carlton Hotel in Miami Beach, Florida, where he had been staying with his wife under a false name (Mark Lakean) since May 14, and where he had been paying cash."

c. "At arrest, the agents discovered the defendant had bank debit cards under the alias Lakean. The defendant also stated that he had altered his own Georgia driver'slicense to bear the name Lakean, and he possessed a false identification card under a different name, Bryce Buchman. The agents also found an "Exacto" knife and laminating materials, of a sort that could be used to manufacture identity cards."

d. "The Government proffered that bank records show the defendant made two cash withdrawals - preceded by transfers of funds from IMA/IMAAG accounts --in the amount of $500,000 total, in January 2006."

e. "Moreover, the Government proffered that the arresting agents discovered approximately $30,000 in cash in the defendant's belongings at the hotel. The defendant also admitted that he had purchased a 2004 Mercedes with cash, and had put $40,000 in cash down towards the purchase of a Miami condominium. The remainder of the $500,000 cash hoard secreted by the Defendant in January 2006 is unaccounted for. The agents also discovered real estate listings for a property in Puerto Rico. "

f. "The Government proffers that the defendant's wife was personally advised of the existence of the arrest warrant in March 2006. She told the FBI that she did not know of her husband's whereabouts, and had only one telephone number for him (which the FBI discovered was discontinued or inactive). She promised that she would contact the FBI if she heard from the defendant. She did not do so. Instead, she was found by the defendant's side at the pool of the Ritz Carlton, when he was arrested. In the hotel room, the defendant had seven cellular phones in his possession. His wife also had multiple cellular phones. The Government submits that this activity indicates an intent to conceal their communications and ultimately the defendant's location. It also suggests the defendant was receiving assistance from his wife and/or that his wife was not cooperating with the FBI to the extent she assured she would. "

What was Mr. Wright's response to all of this?

Mr. Wright "argued that he was not evading federal authorities but rather was avoiding 'threats' that he claims had been made to him and his family by some of the investors. He also pointed to the fact that his counsel initially discussed surrender, although with demands, as evidence that he was not a risk of flight. Defendant also produced family members, including his mother, who offered to put up property for bond. "

What a better place to avoid threats from unhappy clients than jail?

Posted by michael webster at 9:13 PM | Permalink | Comments (7) | TrackBacks (0)

A month ago, Amanda Cantrell, a CNNMoney.com staff writer, had a thoughtful piece on the difficulties in recovering assets from a fraud, in this case Kirk Wright's hedge fund fraud. She listed all of the standard difficulites, including trying to enforce a U.S. Judgment against offshore assets. Remember a judgment only allows the creditor to intercept funds owed to the debtor, if the jurisdiction which has the asset recognizes the underlying action as valid. Sometimes this can require a separate trial on the merits.

Business Opportunities frauds or scams are no different, but the recovery rate, at least from the FTC figures, is notably less. I estimate, using data that the FTC produced from 1993-2000, that the actual recovery to the public from Bizop scams is around 5 cents on the dollar. If the Bizop is a scam or fraud, then you are likely going to lose all your money. Think about that - Bizop frauds or scams are so bad that you might as well be throwing your money away -burn it, buy lottery tickets for non-existent lotteries, or buy swamp land. You are simply going to lose your money, if the scheme is a fraud or scam.

What is a even scarier number than 5 cents on dollar?

Technorati Tags: scams, fraud, cnnmoney, offshore assets, frauds, ftc, judgment, money, hedge fund, debtor, intercept, merits, enforce, business opportunities, jurisdiction

Continue reading "Recovery of Funds From a Fraud" »

Posted by michael webster at 4:31 PM | Permalink | Comments (0) | TrackBacks (0)

The Wall Street Journal is reporting that the FBI arrested Kirk S. Wright, the missing hedge fund manager who allegedly "misplaced" $100 million of his clients money. Very little of the money has been recovered, around $200,000. According the article, "Mr. Wright's arrest may offer some optimism to former clients. "The hope is that Mr. Wright will now lead us to the tens of millions of dollars that are still missing," said Timothy Mungovan, an attorney with Nixon Peabody LLP in Boston who represents former investors in Mr. Wright's funds."

Now perhaps we might see an fight between the state receiver and the private investors looking for the missing loot. This should prove to be interesting.

Technorati Tags: nixon peabody llp, wall street journal, private investors, hedge fund manager, money, fbi, loot, optimism

Posted by michael webster at 9:24 PM | Permalink | Comments (5) | TrackBacks (0)

The mail fraud allegation stems from Mr. Wright sending false asset statments to an investor Mr. Atwater. Mr. Atwater and other have sued Mr. Wright civilly.

Several other investors had previously asked to replace the state's receiver with Kroll Associates. Judge Charles A. Pannell has yet to rule on this request, but has allowed challenges to the receiver's expenses to be made by other parties.

Technorati Tags: mail fraud, arrest warrant, fbi, kroll associates, atwater, united states attorney, sec action, allegation, ima, stems, allegations, counsel, investors

Technorati Tags: mail fraud, sec action, united states attorney, arrest warrant, technorati, kroll associates, atwater, fbi, allegation, ima, stems, allegations, counsel, investors

Continue reading "Kirk Sean Wright Declared Fugitive" »

Posted by michael webster at 3:27 PM | Permalink | Comments (0) | TrackBacks (0)

Posted by michael webster at 9:16 AM | Permalink | Comments (0) | TrackBacks (0)

On February 27th, the SEC brought their own action against Kirk S Wright but did not include all the defendants in the two civil cases. William Perkins was again appointed the receiver for the Federal case.

Why are Laird and Baker complaining? Surely the SEC and the Receiver are up to recovering the missing funds?

Continue reading "Public and Private Batlle for the remains of IMA" »

Posted by michael webster at 7:52 AM | Permalink | Comments (0) | TrackBacks (0)

Exhibit 1: The pages from 2001 through to early 2005. I guess I would have wondered why the website was not updated past March 7, 2005?

Exhibit 2: Two medical doctors were the CFO and COO of IMA. Doctors and high finance, hmm. What qualifications do these two have, other than knowing a lot of other individuals with money?

Exhibit 3: A bar graph showing the alleged profits. Now why does the chart refer to "reinvestment of interest earned"? Interest earned?

Posted by michael webster at 9:10 PM | Permalink | Comments (2) | TrackBacks (0)

One of the best and worst features of the Net is the ability to do "instant" research. Could the investors in Kirk Wright's hedge fund done sufficient due diligence to avoid his alleged scam or fraud? A search on "hedge fund due diligence" revealed this checklist from a website called "credit market risk advisors":

The following are good general risk questions for beginning a dialogue:

* How do you insure the separation of front and back office?
* Who marks the book to market? Who reviews? Who has market authority and override? Who receives report overrides?
* Do you have written policies and procedures? May I please see them?
* How do you manage risk?
* Do you have a designated risk manager?
* Do you include risk limits in your guidelines?
* If someone breaches his or her limits, what happens?
* What are your backup and recovery plans? Have they ever been tested? Where are copies of the plans maintained?
* How do you define leverage? What is the max leverage you are allowed? How often are you at or near the max? If you were max leveraged and your prime broker doubled your haircuts, how much would that cost to fund?
* How much of your borrowing is O/N? Short term? Long term? How has that changed over the past 12 months?
* What is risk? Do you have a risk conscious culture? What defines your culture?
* What is your attitude towards transparency?
* Since you trade in multiple time zones, how do you calculate your NAV?
* Evaluate ongoing appropriateness of strategy versus initial premise.

What good is this list, if you are unsophisticated investor?

Continue reading "Due Diligence on Kirk Wright" »

Posted by michael webster at 6:44 PM | Permalink | Comments (1) | TrackBacks (0)

Apparently, Mr. Wright while not hiding, is available by cell phone, giving instructions to his lawyer and conducting interviews with the Wall Street Journal. The article claims:

Some of Atlanta's African-American business leaders express anger that the city's biggest black-owned hedge fund may have taken advantage of the city's black professionals to gain legitimacy early on, letting the fund build a broad client base later. "In all candor, what he did was say, 'I can wine and dine African-Americans who are not sophisticated in the investment field and get their money,' " says Reuben R. McDaniel III, the African-American co-chairman and president of Jackson Securities Inc., an investment bank founded by former Atlanta Mayor Maynard H. Jackson, who died in 2003. (my emphasis)

Although the WSJ lists the usual red flag suspects available in hindsight, "unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager", these red flags could describe any successful hedge fund. Why are these red flags available only the fund has collapsed?

There is an accompanying video which is well worth watching. One of the new anchor suggests to the Wall Street Journal reporter that of course 27% returns in the last couple of year is a huge red flag. Implying only fools could believe in such increases. Really? Do you think that news anchor knew what Berkshire B's return from 2003 to 2005? Care to guess?

Continue reading "Social Proof and Kirk S Wright" »

Posted by michael webster at 8:09 AM | Permalink | Comments (1) | TrackBacks (0)

In a similar action against three unregulated hedge funds, the SEC alleged:

that from approximately 1999 to the present, the Defendants have raised at least $81 million from investors nationwide by boasting annualized returns of 125 to 150% over the last several years and by sending false account statements to investors showing similar gains. According to the complaint, the hedge funds were suffering tremendous trading losses and only about $11 million remains of the more than $81 million that investors put into the hedge funds. (my emphasis)

One of the defendants in the above case agreed to a permanent injunction and a disgorgement penalty should soon be decided upon.

What is striking in this: how can false account statements be detected?

Continue reading "The SEC and False Reporting" »

Posted by michael webster at 5:13 PM | Permalink | Comments (0) | TrackBacks (0)

Kirk Wright apparently has more than unhappy investors: he is alleged to have also not paid his ex-wife the million dollars he owes her.

Lars Toomre when commenting on this scandal suggests that:

"Sadly, in this case, approximately 500 investors are finding out the hard way that due diligence needs to be performed before investing and at least every year thereafter, not after the cow has left the proverbial barn" (my emphasis)

Which year did they miss? Only the year that they were robbed? (For updated news on Kirk Wright, please click here.)

Posted by michael webster at 11:26 PM | Permalink | Comments (0) | TrackBacks (0)

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"it filed a complaint and an emergency application for a temporary restraining order and other relief in the Northern District of Georgia to halt an ongoing offering fraud involving the sale of investments in seven hedge funds by an Atlanta-based promoter and investment advisers controlled by him. The defendants are Kirk S. Wright (Wright); International Management Associates, LLC (IMA) and International Management Associates Advisory Group, LLC (IMA Advisory) and seven hedge funds; International Management Associates Platinum Group, LLC (Platinum