Tuesday, May 5, 2009

In an odd coincidence

Francesco Rusciano is out on bail – released to the custody of his parents who have put up their house to stop him fleeing.

This is a guy – who according to SEC filings – has been able to raise $30 million from 15 high net worth customers.  [Maybe raising hedge fund money is easier than it appears to this start-up… however if any rich folk from jurisdictions we can accept money from want to stump up we are keen to talk…  good terms for early customers...]

Anyway – the picture of Mr Rusciano with an unidentified female.


The report comes from a Connecticut paper.  Rob Varnon (the journalist) also notes (without credit) the detail first observed on this blog: 

In an odd coincidence, Rusciano was a sub-tenant of New York City investment adviser Paradigm Global, a subsidiary of a holding company owned by members of Vice President Joe Biden's family. Marc LoPresti, Paradigm's general counsel, said Monday Paradigm was subleasing space and Ponta Negra was referred to it by one of Paradigm's third-party marketers. LoPresti said "Paradigm is not under investigation."

 The Journalist thinks that the link between Paradigm and Rusciano is an odd coincidence. 

 In full treatment of the link we should also remind the journalist about a few more odd coincidences

(a)    That Paradigm and Rusciano shared more than an office - they shared marketing arrangements and a phone number,

(b)   the third party marketer in question (or at least its corporate office) was not licensed

(c)    the third party marketer in question (or the individual in charge) had previously been a full time employee of Paradigm

(d)   that this individual had caused their previous employer to settle claims for abuse of client funds in six figure amounts (whilst the marketer in question denied guilt)

(e)    that the individual had also been suspended from the securities industry and sacked for allegedly fraudulently abusing the bonus system of a previous employer (and in this case accepted a fine but neither accepted nor denied guilt)

(f)     that the third party marketer in question (company or individual uncertain) also introduced Paradigm to Alan Stanford’s organisation and that

(g)    Paradigm thought sufficiently highly of the Stanford organisation that they had a cobranded product


To this we can add the following odd coincidences:


(h)    that Paradigm had lent its name and reputation to another alleged fraudulent hedge fund – this one being Paradigm Global (Canada) renamed as Portus Asset Management and that fraud had been more than CDN700 million

(i)      that Paradigm claimed that it had 28 full time staff when very soon after it probably had less than ten

(j)     that Paradigm similarly had offices in Monte Carlo and Tokyo whereas the only places I can find sales staff from the period are in Orlando Florida and similar and the Tokyo and Monte Carlo offices were rapidly closed

(k)   that Paradigm until only a few days ago claimed on their website that they had never had a down year and they had decreasing volatility (a claim that disappeared only when pointed out on this blog)

(l)      that Paradigm claimed in public documents to have over $1.5 billion under management when it (at least very soon after) had less than one fifth that amount, and that the decline happened despite the positive returns better than indices and with decreasing volatility

(m)  that Hunter Biden and James Biden in sworn affidavits alleged that James Park (then the manager of Paradigm) was mostly absent and had a substance abuse problem but that all is well with James Park now as he is back at Paradigm

(n)    that Hunter and James Biden in the same affidavits alleged that Paradigm had misrepresented their returns

(o)   that Paradigm claimed its domestic outsource arrangements were with Global Fund Services LLC – a company supposedly in Atlanta but which is no longer in Georgia at Whitepages.com, (they do have some relationships with BISYS – now Citigroup)

(p)   that Paradigm’s offshore fund administration is supposed to be at Folio Administrators and they claim in marketing documents that they have had that arrangement since 2002 whereas Folio Administrators in an email to me claim it only since 2004

(q)   that on the SEC database exists an audit statement qualified as to the security of asset custody, and

(r)     that Paradigm hired at least one other marketing staff member with long histories of alleged violations of broker conduct rules.


These odd coincidences were made clear on this blog.  Full documentary backing for these coincidences is provided in this post – a post which almost nobody linked to or commented on – but which took a considerable time to write and which I largely researched before Ponta Negra was prosecuted by the SEC.

In an odd coincidence I am frustrated.  Partly because it is all odd coincidences.

Mr LoPresti says that “Paradigm is not under investigation”.

In an odd coincidence I believe him.  He is a lawyer and there is no reason why I should not believe him.


Terry Ivanauskas said...

Don't be frustrated. As me, many other "invisible" readers know and appreciate your work. Blogs like you are becoming the few sources of trustful information and opinion. Thank you.

Andrew said...

Keep it up John. If only we had more of you out there working like this. I only wish I had the mental ability to dig into things so deeply. It's a shame that you're getting no love from the other main blogs, even though they link to you on other stuff. Starting to believe in a MSM conspiracy yet?

bmkj said...

Thanks, John. There will be investigations and prosecutions. This is not the Bush administration.

Anonymous said...

John, many thanks for the good work, but these honestly seem like they are supposed to be prosecuted under the rule of law. However, we can see how much that matters nowadays. We aren't too far from a big public crisis that overwhelms some parts of the status quo.

Then the fourth estate may serve in the interests of the masses once again.

Ah, platitudes.


Phorgy Phynance said...

I've just written the newspaper demanding a public apology for the slight. I won't hold my breath.

Phorgy Phynance said...

For what it is worth, here is my letter:

It is shameful that your article:

Stamford man arraigned on mail fraud charge
Stamford man released on $500,000 bond
By Rob Varnon

does not give proper credit to John Hempton at Bronte Capital


He is responsible for breaking this story, as is well known, and your staff writer did not even give him a nod.

See this story on Reuters:

April 30th, 2009
When bloggers uncover Ponzis
Posted by: Felix Salmon
Tags: fraud, hedge funds

I think you owe John Hempton an apology.

The Epicurean Dealmaker said...

Sadly, John, I am reminded of a familiar saying:

"No good deed goes unpunished."

Nevertheless, nice work. Good on ya.

Anonymous said...

Some time ago I gave up on the MSM for knowledgable economic and financial commentary - you are well aware of the reasons for their shortcomings. After culling through many on-line sources, your site is now one of the small handfull that I check regularly for informed content. It is a small disappointment when there is not a new posting on your site, but that is precisely because they are "hard to write". Thanks for your work, and thanks for being the nail that sticks up.

Cornelius said...

Agree with ED - unfortunately, very few want to link their names to this.

It will be interesting to see who, if anyone, picks this up.

Unknown said...

One possibility is that the corruption and graft is so ingrained and endemic and the personalities involved are so powerful that reporters are simply too frightened to follow-up your honest analyses.

I believe and hope that at some stage there will be a massive public outrage. Then, after the storming of the Bastille will come le deluge.

Pieces like yours will be brought to the full attention of the prosecutors and paraded for public consumption.

Sadly,I'm not fully in agreement with bmjk that this administration will prove (or has shown any signs of improvement) any better the Bush administration : all are in the hands of the moneymen.

Only a real public outrage will force the necessary changes. But this will come. So please keep all of your documentation and sources intact.

General disclaimer

The content contained in this blog represents the opinions of Mr. Hempton. You should assume Mr. Hempton and his affiliates have positions in the securities discussed in this blog, and such beneficial ownership can create a conflict of interest regarding the objectivity of this blog. Statements in the blog are not guarantees of future performance and are subject to certain risks, uncertainties and other factors. Certain information in this blog concerning economic trends and performance is based on or derived from information provided by third-party sources. Mr. Hempton does not guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. Such information may change after it is posted and Mr. Hempton is not obligated to, and may not, update it. The commentary in this blog in no way constitutes a solicitation of business, an offer of a security or a solicitation to purchase a security, or investment advice. In fact, it should not be relied upon in making investment decisions, ever. It is intended solely for the entertainment of the reader, and the author. In particular this blog is not directed for investment purposes at US Persons.