Wednesday, December 17, 2008

Criminal charges for Nicola Horlick now?

Note:  I have edited this post.  I put a question mark in the title.  Nicola almost certainly has the reports into Madoff that her due diligence process claims she has.  In which case the due diligene was grotesquely sloppy - but at least done - and she has therefore not misled the market as to the nature of her due diligence process.

I think - for the removal of any doubt - she should release them publicly.  

If she does not have them she leaves herself vulnerable to a fraud charge.  It should be a simple thing to release them.  I urge release of these reports.  


Nicola Horlick has decided that due diligence is passé.  The website of Bramdean Asset Management used to contain the following paragraph.

Robust and thorough due diligence is at the heart of our firm's investment process. Our detailed manager monitoring programme ensures that our clients' investments are subject to on-going and effective governance.

That paragraph has now been removed as detailed here – and on Naked Shorts.

But is worse.  Bramdean Alternatives is a listed company – and its annual reports are statements to the stock exchange.

Bramdean Alternatives annual report contains the following statement about how investments are chosen.

The investment process is systematic and disciplined.  Due diligence is at its heart and around 3-4 months are typically spent analysing a potential manager, a process which includes a number of on-site visits with that manager. The process culminates in the provision of a detailed report that is then presented to and discussed at Bramdean’s Investment Committee, where a selection decision will be made on all private equity funds, specialty funds, and transitional investments. That Committee has to approve an investment unanimously before it can proceed. Where required, Bramdean will also conduct legal diligence.

Ongoing monitoring is similarly robust and includes regular reviews of market conditions and their potential effect on the underlying funds and any direct private equity investments. In response to the conclusions drawn from this process, the Investment Committee will decide whether or not to retain an investment.

Ok – it is time for Nicola to come clean.  According to Nicola 3-4 months was spent analysing the Madoff investment and a number of on-site visits were made.  There was a detailed report presented at the Investment Committee.  

Release that report now.  Go on.

Otherwise we have to conclude that such a report does not exist and Nicola is the CEO of a company making false statements.

If the UK regulators are as diligent as Nicola demands US regulators be, and that report does not exist, then it is prison time for Nicola.

But Nicola is an honourable girl.  Go on - release the report.


6 comments:

burnt quant said...

Great post!

Chances of seeing report - slim to none.

David Galbraith said...

"There's no Duke Endowment [among the list of Madoff investors]," Hedges says. "There's no Harvard management, there's no Yale, there's no Penn, there's no Weyerhauser, no State of Texas or Virginia Retirement system."

The reason is simple, in Hedges' view. Letting Madoff manage your money "wouldn't pass an institutional-quality due diligence process,"

from:

http://money.cnn.com/2008/12/16/news/madoff.hedges.fortune/index.htm?postversion=2008121619

Keith - Hermosa said...

You are rapidly becoming one of my favorite bloggers. There is nothing more noble than skewering a whiner who claims some sort of discrimination to hide immoral acts. I love it!

p.s. I found you when another blog, I don't remember which but maybe NakedCapitalism, lauded your uncovering the Citi bailout before it happened. Nice work. People who actually think and write are rare.

John Haskell said...

John- this may be the best post anywhere generated by the Made-Off fiasco. And I don't anticipate anyone topping it soon either.

Lukas Plattner said...

Take a look to this article of Robert Peston

http://www.bbc.co.uk/blogs/thereporters/robertpeston/2008/12/made_off_with_all_our_money.html

Anonymous said...

http://online.wsj.com/documents/Madoff_SECdocs_20081217.pdf

The above report, sent to the SEC in November 2005 suggests that Nicola Horlick's due diligence might not have been as diligent as it could have been.

Also interesting that Madoff acted as an agent for funds, rather than as a fund himself, and on condition that the funds maintained strict confidentiality as to who was actually managing investors' money.

Am I correct in assuming that this would make funds, such as Nicola Horlick's Bramdean, principals?

What then would be the legal position re failure to exercise due care?

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