Showing posts sorted by relevance for query trio. Sort by date Show all posts
Showing posts sorted by relevance for query trio. Sort by date Show all posts

Saturday, January 2, 2010

A dark privatised social security story: Astarra, the missing money and how examining a fund manager owned by Joe Biden’s family led to substantial regulatory action in Australia

In Mid September I wrote a letter to Australian regulators which detailed my concerns about a fund manager in Australia known as the Astarra Strategic Fund – formerly known as Absolute Alpha.  This letter resulted in regulatory action against a cluster of related funds (almost twenty), however my letter was almost entirely about only one fund in the group.  I did not make any major suggestions in the letter about other funds in the Astarra complex.  My involvement was detailed today in the Sydney Morning Herald (see stories here, here and here, with the first story on the front page below the fold).  There was no genius in my letter – everything could be found (fairly easily) on the internet – and the original tip-off came from a reader of my blog – who noticed links with a story I wrote up in March 2009.

For reasons I will explain below this fund collapse is qualitatively different and more serious than any previous fund collapse in Australia and that the Australian press have not yet detailed why this one is important.

The letter argued that it was possible that the Alpha Strategic fund was a fraud.  I did not have the ultimate proof of that so I did not make my letter public and will not do so yet.  However there is a way of proving that a fund is not a Ponzi – and that is to “show us the money”.  If the assets are really there then it should be possible to convince regulators of that fact by showing them the assets.  If Bernie Madoff had been asked to prove the existence of all the money he supposedly managed then he would have been caught because he could not comply.  An honest fund should be able to comply fairly quickly – sometimes within 20 minutes – but almost certainly within a week.

The Australian regulator asked Astarra to show them the money – and to date that has not happened.  That does not mean that the money is not there.  It is however suggestive, especially as approximately three months have elapsed whilst regulators and fund administrators have tried to “value” the fund assets.  Indeed the difficulty of valuing assets was sufficient for the regulator to cancel licenses and to place the funds in the hands of administrators. 

At a meeting last week the (regulator appointed) administrator Neil Singleton said that with respect to one fund the only proof of assets they have is a letter from a Virgin Islands company stating that the fund (presumably the Strategic Fund) held 118 million in interests in other hedge funds.  This letter did not detail any interests held and gave no mechanism for confirming that statement.  However the administrator has not stated that the assets are not there – so – like the regulator and the administrator I too will leave that question open.  The press simply says the details as to the  $118 million are “sketchy”.

Background to the Australian privatised social security system and where various Astarra entities fit in to that system

Australia has a privatised social security system.  Much of the money is with large honest players run in a nearly index manner and which have cut fees to relatively low amounts.  Those funds are run by Australia’s otherwise dying trade unions.  Privatised social security (which Australians call “superannuation”) has been the saviour of the union movement in Australia – and – through their control of funds the unions now are within a breath of control (though generally do not vote their control) of a large proportion of Australia’s industry.  

The money that is not with the union funds is in a rag-tag of funds run by large banks (for example Colonial’s wraps owned by Commonwealth Bank) or with independents and/or self-managed funds.  The money in those funds (wraps) is let to a large number of sub-funds – sometimes large, sometimes boutique funds managers who live off the large and mandated fund flows from our “superannuation system”. 

The boutique funds range from very good to awful and shonky.  Indeed I think the best no load mutual available anywhere in the world is in Australia (I used to work for the manager).  But there have been some flea-bitten dogs sold to Australians.  One thing is for sure – you cannot do privatised social security without very good fraud protection because that amount of money from unsophisticated investors is a truly massive honey-pot for scammers and flim-flam artists.  As an aside, possibly the worst thing about George W’s privatised social security proposals was that they would be supervised by Cox’s toothless and supine Securities and Exchange Commission.

Trio Capital (the “mother-ship” of the Astarra entities) is a “wrap provider” – meaning a  financial planner might use Trio to invest all their client’s retirement money.  The Astarra Strategic Fund is an individual fund under that wrap.  My letter was about the Strategic Fund – and the collapse of the Strategic Fund would not be qualitatively different from the collapse of any of about six funds that collapsed during the financial crisis.  The financial planner might have put her clients in six (or more) funds – and the loss of one of them is a blow – but in no way imperils the system. 

But (somewhat surprisingly) the entire Trio edifice has been placed with administrators – which means that the end-beneficiary has had their entire retirement savings blocked.  In some funds there is not even enough cash to pay pensions to retired people for the month of January.  Some pensioners are not having their current payments blocked but there are doubts about future payments.  [Details as to who will receive pensions for the month of January can be found on Trio’s website.]  This is qualitatively different from earlier fund failures because it is a failure of every fund that a person might have invested – a failure of the core asset protection mechanism in the Australian system.  [I cannot work out why the otherwise sensationalist Murdoch press has not written a single story on this yet.  All they need to do is find a cluster of pensioners who will not receive their pension this month and who will have no idea as to why.]

How I came to write my letter to regulators

Six months ago a reader pointed me to a fund of hedge funds (called Absolute Alpha) based in Australia. 

I looked – and within forty minutes I became very concerned – but could not prove harm to the fund’s investors.  I tipped off the Sydney Morning Herald.

The journalists at the Herald worked hard at the story but alas they too could not prove harm.  Indeed a major bank misled them as to whether the assets were in (their) safe custody.  The bank confirmed the assets were in custody – a statement they have now withdrawn.  Obviously with a reputable third party vouching for the assets any hypothesis of harm was going to be hard to sustain.  The Herald published nothing. 

I however remained suspicious – but could not easily do anything.  For there to be something desperately wrong either the bank had to be a party or grossly negligent as to their custody of the assets. 

Absolute Alpha was a boutique fund manager loosely associated with – and partly owned – by a superannuation wrap provider called Astarra.  Astarra is now called Trio.  The wrap provider did all the superannuation compliance and in turn (claimed to) invest funds with other fund managers – mostly reputable managers.   The relationship between Trio and some of the funds in which they were supposed to invest is complex

The amount of money in Absolute Alpha was probably under 100 million.  There were plenty of things that did not look right – but I did not think there was much I could do about it.

So I let it go – though I did not forget about it.

Later I tried to log into Absolute Alpha’s website and it was dead.*  This (falsely) indicated my worst fear. 

Again I alerted the Herald. 

Alas it was not so simple.  Absolute Alpha it seems had taken over the funds management of all the money in the Astarra wrap.  They had renamed themselves Astarra.  Astarra later renamed itself Trio.  Astarra’s website boasted of a billion dollars in funds under management. 

This was potentially very bad news.  Australia is about a twentieth the size economically of the United States – so $1 billion in funds under management was the equivalent economically of $20 billion in the US.  If my bad-case was true we had a Madoff (at least proportionately) in the making.  [Now the funds have been taken into administration the official numbers are about 40 percent of the numbers boasted on the website.  The danger was not quite as big as I thought it was.]

Anyway I wrote a letter to the Australian Securities regulator (ASIC)  laying out all my concerns and (implicitly) the method for testing my concerns were false.  [I sincerely hoped I was wrong – and hoped the regulator would prove me incorrect by identifying and valuing the assets.  I still sincerely hope all the money turns up in the British Virgin Islands.]

I have heard lots of criticism of the Australian Securities regulator.  However on this important matter their actions were exemplary.  They did what the SEC could not do and act on a “Markopolos letter” within weeks.  They did what the SEC should have done when they investigated Madoff – and attempted to confirm the existence and value of the assets. 

Three weeks later ASIC put a stop on all Astarra funds – prohibiting new money going in or any moneys going out.  They acted to protect investors.  This showed responsiveness that Mary Schapiro and American regulators can only aspire too.  The Sydney Morning Herald finally published a cryptic story on the front page.  The Sydney Morning Herald article did not suggest – and I did not reasonably think – that the problems extended further in the Trio edifice.

A few months have passed and eventually all major Trio entities were placed in administration by the superannuation regulator.  They will probably be liquidated.  The funds have been passed to (reputable) private sector “forensic accountants” – the choice of accountants being made by the securities and superannuation regulators.  They are the sort of liquidators you use when (as stated by the regulator in their press release) you are not “able to satisfy concerns regarding the valuation of superannuation assets”.

The whole mess will be explored by the accountants -  and if the assets are not there then the matter will played in court – at which point I will publish my “Markopolos letter” analysing what I got right and wrong. 

But for the moment I will leave you with what attracted me to Absolute Alpha in the first case.  It was the CV’s of the principal players.  Here they are:

Shawn Richard - Chief Executive Officer

Shawn is the founder of Absolute Alpha and a key member of the investment team.   Prior to founding Absolute Alpha, Shawn has held and continues to hold, various senior positions, including directorships of companies both in Australia and overseas.

Shawn has been involved in financial markets since 1996 and had been specialising in alternative investments for more than 8 years, both offshore and in Australia. Over this time, Shawn has established relationships with some of the most exclusive hedge fund managers around the globe.

Shawn’s offshore experience in alternative investments includes among others, structuring and analysis of derivative instruments with some of the largest private hedge funds in the United States. Shawn was also part of a small team of professionals providing risk management services to Asian institutions and regional banks in relations to their exposure in equities.

Shawn holds a bachelors degree in Finance from the University of Moncton.

Eugene Liu -Chief Investment Strategist

Eugene is the Chief Investment Strategist of Absolute Alpha. As Chief Investment Strategist, Eugene is involved in the development and evaluation of asset strategic plans, development and modelling of analytic tools, reviewing and analysing investment data to formulate investment strategies, and the investment risk management process. Prior to joining Absolute Alpha, Eugene worked with the Asset Management team of Pacific Continental Securities and World Financial Capital Markets in the US and Asia. In these roles, Eugene performed extensive financial modelling and valuation analyses of various hedge fund strategies. Eugene also led a team of arbitrage specialists who provided structured product deal flow to many of the largest hedge funds in the industry.

Eugene holds a degree in economics from Trenton State College in New Jersey.

Charles Provini (US) - Asset Consultant

Charles has been involved in hedge funds for more than 20 years and is a senior asset consultant and member of Absolute Alpha’s investment committee. Currently, he is the President of Paradigm Global Advisors, a well established hedge fund manager based in NY and he is also the Chairman of C.R. Provini & Co., Inc., a financial services firm, founded in 1991. Prior to this, Charles held various senior positions, including, President of Ladenburg Thalmann Asset Management, Director at Ladenburg Thalmann, Inc., one of the oldest members of the New York Stock Exchange, President of Laidlaw Asset Management, Chairman and Chief Investment Officer of Howe & Rusling, Laidlaw’s Management Advisory Group, President of Rodman and Renshaw’s Advisory Services, and President of LaSalle Street Corporation, a wholly-owned subsidiary of Donaldson, Lufkin & Jenrette.

Charles has been a leadership instructor at the U.S. Naval Academy, Chairman of the U.S. Naval Academy’s Honour Board and is a former Marine Corp. officer. He is frequent speaker at financial seminars and has appeared on “The Today Show” and “Good Morning America” discussing financial markets.

Charles is a graduate of the U.S. Naval Academy and has an MBA from the University of Oklahoma.

Now the first CV – Shawn Richard – is notable only for what it does not say.  It does not mention a single firm that Shawn ever worked for – and hence reduces the possibility of doing due-diligence. 

Eugene Liu’s CV is not so careful mentioning two firms, Pacific Continental Securities and World Financial Capital Markets.  Pacific Continental is easy to find – it was a bucket shop of enormous proportions in the UK.  Essentially the firm found hapless victims and steadily moved their life savings into soon-to-be worthless scam stocks for huge commissions.  This was explored widely in the UK press including beautiful articles about a salesman’s time as scam artists.  World Financial Capital Markets is a little harder to trace as a firm.  Several firms have had that name – but one firm by that name met an unfortunate end involving fraud and the principals reappeared at Pacific Continental. 

It turns out that Shawn Richard was a manager with Pacific Continental in Taiwan.

The third CV is of Charles Provini who used to be the CEO of Paradigm Global and who was (falsely) claimed to remain in that position.  When I copied these CVs off the Absolute Alpha website Provini had not worked for Paradigm for about two years.  Some of the rest of Mr Provini’s CV is raised my eyebrows too – for instance he worked as the President of Laidlaw Asset Management.  A firm of that name was cited by the UK securities regulator (the FSA) for cold-calling and selling scam funds to UK investors. 

The link to Paradigm Global was what raised my eyebrows.  Paradigm is an asset manager (for funds of hedge funds) owned by Hunter Biden and James Biden.  These are the Vice President’s son and brother respectively.  I have written about Paradigm extensively before as it has an unfortunate habit of being associated with scams.  Absolute Alpha was not difficult to do due diligence on.  It took me only 40 minutes to work out that they were needing very close scrutiny.  It does not speak well to the due-diligence of a fund of hedge funds (which is what Paradigm claims to be) that they keep being associated with cases like this.

The Biden connection was what prompted me to look at Absolute Alpha and hence what led me to write my “Markopolos letter” to ASIC and hence what rapidly led to the closure of Astarra and Trio.  It is worth asking how deep that connection is.

Are Absolute Alpha/Astarra really associated with the Biden’s firm?

At first glance the links between Astarra and the Bidens’ firm are weak.  Provini could have been marketing “vapourware” with no real association.

All that is certain is that Provini was cited on the Absolute Alpha website as an asset consultant and President of Paradigm for at least two years after he was sacked from Paradigm.  Provini is now running inconsequential penny stock companies

But the links run deeper than that.  Absolute Alpha also used to cite other staff members who worked at Paradigm – indeed the original “managing partner” was also a staff member at Paradigm.

Absolute Alpha used to publish a process diagram as to how they identified funds to invest in.  I have reproduced that diagram below:



It mentions two things which link Absolute Alpha (now called Astarra) to Paradigm global.  These are the use of the Park Score (named after James Park – the founder of Paradigm) and the PASS database – the core database of hedge funds from which Paradigm claims to make its investment decisions. 

Still, this could all have been ripped off Paradigm without Paradigm knowing. 

Alas Paradigm does not get off so lightly.  The boys from Absolute Alpha went to New York and co-marketed with people from Paradigm.  Indeed I know someone who thought that Absolute Alpha were OK because staff at Paradigm had vouched for them.  Whether Paradigm knew that Shawn and Eugene in Australia were using “Paradigm inspired” marketing material however is unknown. 

Paradigm – the Biden’s firm – had unwittingly got involved in another funds management firm which has been closed by regulators or been exposed as Ponzis.  That is four I know of now – and I have yet another one that I suspect of being unsound. 

A plea to Michelle Malkin

So much of what is published by the conservative blogosphere is non-fact based muckraking.  And yet – sitting here has been my observation that the fund of hedge funds associated with the Vice President’s family has an unnerving habit of association with scams and other funds closed by regulators.  Surely a competent muckraking conservative blogger can actually do some digging rather than pontificating from the sidelines. 

It makes me think of conspiracy theories.  Maybe conservatives in the US do not want to do this sort of financial digging because most the fraudsters and scamsters are part of the Republican movement and do not like regulators because – well – they might catch them.

But there must be honest Republicans out there.  It is time for Michelle Malkin to do some honest work.  So I will plead with her – can you please do some digging into Paradigm or find some other muck-raking conservative to do it for me. 

I for one want to get back to making money honestly.






*Incidentally – I was attempting to log into the Absolute Alpha website because I was discussing the whole matter with a reader from Talking Points Memo.  You know you you are.  Thank you.

Saturday, February 18, 2012

Titanium Asset Management - notes on paper trading and murder

There is a story in the Sydney Morning Herald today about Titanium Asset Management - a funds manager in Western Sydney that operates as part of the Titanium Financial Group.

Titanium has been on my must-look-at list for some time. I found them when researching Astarra/Trio - a funds management fraud shown to me by one of my readers which I reported to the regulatory authorities. Titaninum had agreed a white-label deal distribution deal with Astarra, a deal which to the best of my knowledge was never consumated with real money. Titanium said that there was no relationship with Astarra but one Titanium entity wound up in the hands of the Astarra/Trio liquidators. [Someone has suggested in the comments that the Titanium entity in the hands of the Astarra/Trio liquidators is not related to the Titanium financial planners and that no money ever changed hands with the agreed white-label deal linked above. I see no reason to disbelieve that - especially as the article is dated within a month of the demise of Astarra/Trio.]

What amazed me though was the returns of Titanium Asset Management. It was limited according to its documents to being long-short the stocks in the ASX200 (an index of the top 200 companies in Australia). These were the monthly returns as reported:

These returns are astounding. 40 percent in October 2008, 20 percent in February 2009. Magic numbers really.

So I rang the fund manager - Peter Rice - to try and work out how he did it. I did not understand - at least it did not make sense to me so I reported my concerns to ASIC.

I did make an effort though. I found an interview with Peter Rice on Sky News (repeated below). That made no sense either.

Anyway I put it out of my mind.

A couple of weeks ago I looked again. Here are later returns.

The early months had all gone. (No more 40 percent months!)

The return in February 2009 had gone from plus 20 percent to minus 7 percent.

I was puzzled.

I rang the auditor as listed in the original product disclosure status. He sounded sorry for me - wondering if I was an investor in the fund. He told me he had never been the auditor and had gone to some lengths to let the regulator know that he was falsely listed as the auditor.

I rang Peter Rice and he told me the original returns came from "paper trading". I wondered why he did not tell me that the first time I rang and he said that he did not believe he was under an obligation to disclose that. (Indeed when I rang him the first time he told me that he had an independent back office and used Citigroup as his prime broker - both things that would not occur if the profits were from paper trading.)

I sent it all to the Sydney Morning Herald. (My job is to manage money - not explore these things...)

I think Michael West did a great job of the story.

He also pointed out something that truly surprised me. Andrew Blanchette who controls Titanium (at least is listed on the license and is the owner of the domain names) was once the boyfriend of Sydney model Caroline Byrne. She was found dead at the bottom of Sydney suicide spot The Gap. Maybe suicide. Maybe murder.

Caroline's death was the subject of much gossip in Sydney - the prime suspect was Gordon Wood. Wood was Caroline's boyfriend at the time of her death and was also the chauffeur to Rene Rivkin a colourful Sydney stockbroker. Rivkin has since committed suicide.

Wood was convicted but since then Australia's highest profile current affairs program has thrown that conviction into doubt.

This mostly proves that Sydney is sometimes a very small town. No more.


Friday, April 30, 2021

The tough task facing the Australian securities regulator

Australia has several jurisdictional issues that make it a haven for corporate criminals. These features are sometimes for better, sometimes for worse, but they leave the securities regulator with a task considerably harder than any similar sized country.

Feature one: compulsory privatised pensions (called superannuation)

Australians are forced to save almost ten percent of their salary into lock-box savings accounts that they cannot touch until retirement. 

Twenty year olds are locking up tens of thousands of dollars that they cannot see, cannot touch and cannot benefit from for decades. They naturally enough become disengaged from this money.

This is real money though - and collectively it adds up to over a trillion dollars.

Bluntly - this is the biggest pool of disengaged money on the planet - with large amounts of financial assets held by people of middling to no financial sophistication.

Financial institutions in Australia have been fattened on fees from these collected savings. I personally have been a beneficiary.

That said these savings have attracted fraudsters, sometimes on a grand scale. I was quite publicly the person who reported one of the biggest frauds - when organised crime looted hundreds of millions of dollars raised by a fund manager called Astarra/Trio. Privately I have reported other frauds some of which ASIC (our securities regulator) has acted on.

Feature two: very plaintiff friendly defamation laws

Australia has some of the most plaintiff friendly defamation laws on the planet. There is a reason why I will not tell you which other frauds I reported to ASIC. The perpetrators would sue me (and may succeed even though the client money is mostly gone).

So far the most prominent people who have successfully blown the whistle on Australian frauds publicly are American short-sellers who write a reports and then hide in America - safe behind the American First Amendment and their freedom of speech. 

Major frauds in Australia have been well known for years by market participants who simply could not say anything because of the enormous power of Australian defamation laws. For example Dominic McCormick knew about Astarra Trio for years before he tipped me off. And he said nothing in part because he was scared of being sued.

Feature three: a historically weak securities regulator (ASIC) and low sentences

You would be blind if you did not notice that ASIC has a poor record of prosecuting securities fraud. So few people have been to prison for what is straight theft it is laughable. When they do get a prosecution sentences are sometimes ludicrously low. Shawn Richard from Astarra/Trio for instance ran an entirely fake funds management company for many years which simply took client money and wired it overseas. He got some of it diverted to a Lichtenstein bank account. He got two and a half years. In the US he would have got over twenty.

The Newly appointed Securities Regulator chair

The Australian Government has just appointed a new chair of ASIC and I am scared.

The appointment is Joe Longo who actually worked when (much) younger at the regulator he now leads. 

Much more controversially he was a senior corporate lawyer at Deutsche Bank for seventeen years when Deutsche Bank was the most scandal ridden and blatantly criminal investment bank on the planet.

I am not saying anything particularly controversial about Deutsche Bank. They have paid over USD15 billion in fines

Joe Longo was a lawyer there through most of that.

I know nothing about him. For all I know he may have been trying to reform the bank from within. 

Or he may not have. I genuinely do not know and the case has not been made.

But Deutsche was so bad that a senior corporate lawyer would have spent years gasping for breath has he was immersed in one pool of pus after another. It was not pretty.

Appointing a Deutsche Bank in-house lawyer to run your securities regulator is - politely - a brave political appointment. Heroically brave. Far braver than I expected from Josh Frydenberg - the relevant Australian Minister.

Poacher turned gamekeeper

I am not totally without hope though. Many a poacher has become an effective gamekeeper.

The US has more of a tradition of noblesse oblige than Australia and sometimes US government appointments come from skimming the top of the barrel. The average Goldman partner for instance would have the skills to be a very good securities regulator and some former Goldman staff have become very fine public servants.

I genuinely hope Joe Longo, with his long history of swimming through Deutsche Bank's pools of pus, lives up to his promise. Because the costs of failure are high. 


PS. To illustrate the costs of failure - about 300 million dollars were stolen in the Astarra/Trio debacle. $200 million of that was compensated by government - the money effectively taken from other pensions/superannuation accounts. There is no reason why this cannot be ten times or a hundred times larger, and if the regulator fails it will be a hundred times larger. Refunding money stolen by organised crime is not where I want my taxes to go.

Wednesday, January 22, 2014

So many scams, so little time

Some hat-tips.

Roddy Boyd has been chasing a dodgy fund manager. Today he got his man: Bryan Caisse was arrested in Bogota Colombia. A lot of work went into that.

There is some satisfaction, albeit fleeting, in seeing fraudsters lose their liberty... 

Today Shawn Richard - the Astarra/Trio fraudster was released from prison. Shawn was the second person imprisoned following tip-offs from your correspondent. [Both original tips came from readers...] 

There is fine story - maybe too generous to the malefactors - on the Astarra/Trio scandal here

I pity the regulators. There are so many scams. So little time. And the satisfaction is so short-lived. The sadness of the people who have lost their life savings (as many Astarra/Trio victims did) is however long-lasting...


Monday, May 21, 2012

Astarra Trio: report of the Parliamentary Inquiry

This post is a victory lap on Astarra-Trio. If you are not interested in fraud in the Australian superannuation industry you might skip it.

Long-time readers of the blog will know that I am responsible for reporting to authorities the largest fraud ever conducted in the Australian Superannuation system.

For non-Australians I should note this is important. Australia has a privatised compulsory social security system where individuals are compelled to invest money in funds to fund their own retirement. Choice of fund is important (because returns are dependent on choice) but the investing population is usually unsophisticated in finance and often uninterested. Large pools of unsophisticated investors are - in my experience - always a magnet for scammers.

The fraud I reported was in a fund called Absolute Alpha - but it was only part of a larger network of fraudulent funds.

Spotting it required no genius on my part: I was tipped by a blog reader.

The regulators acted very promptly (within weeks) to my tip and closed the fund. I have described their behaviour as exemplary.

Several prominent people in the funds management market denied fraud - and one publicly argued that I was motivated by (a) greed* and (b) publicity for my fund.

Later one of the main perpetrators admitted guilt and is serving what I thought was as surprisingly short prison sentence.

Eventually there was a Parliamentary inquiry by the Joint Committee** on Corporations and Financial Services. The inquiry reported last week.

It is amusing to find this blog post written into the Hansard (permanent record) or the Australian Parliament. The inquiry was quite nice to me. They essentially accept all my propositions about how the fraud worked and described me as "persistent". I can't complain at any of the comments about me or this blog.

After reading the report (from Parliamentarians who had more resources and more time than me) I  conclude I knew most - but not all - of what was going on. I don't find anything in the recommendations I strongly disagree with - but I can't see why the clients of ARP Growth should be treated any differently to the clients of (say) Tarrants - both were in self-managed super funds established in cookie-cutter fashion by their financial planners.

And I thank the Joint Committee for their observation that whilst the response to my letter was exemplary the persistence with which the regulators followed leads after an admission of guilt leaves a bit to be desired. In particular I have been surprised and disappointed that so little has been done to examine the ARP Growth Fund. The Committee expressed the same surprise.

Astarra-Trio may be a one-off. But somehow I doubt it. There is over a trillion dollars invested in superannuation schemes and almost all of the end-clients are way less sophisticated than the readers of this blog. I hope the Parliamentary Inquiry leads to a closer regulatory focus on ways of preventing theft in Superannuation. A honey-pot like the Aussie Super Pool is too attractive to fraudsters to leave so lightly guarded.


*I responded that it was hardly an insult to claim a hedge fund manager is motivated by greed. My clients expect nothing less. Controlled greed is what my clients pay me for.

**Joint Committee simply means that members come from both the Senate and the Lower House.

Monday, June 6, 2011

Reminding Peter Johnston what he once thought about Astarra

Some people are just too precious.

Longtime followers of this blog will remember that I was instrumental in the exposure the biggest funds management theft in Australian history - Trio/Astarra.

Most of the victims of Astarra were clients of financial planners where the planner was a member of the Association of Independently Owned Financial Planners (the AIOFP). Astarra and its principals were regular attendees at AIOFP conferences and AIOFP members received kick-backs from Astarra - some disclosed, some not disclosed.

Peter Johnston is the executive director of the AIOFP and a regular apologist for AIOFP members. He is quoted today in Investor Daily - an Australian industry newsletter:
Association of Independently Owned Financial Planners (AIOFP) executive director Peter Johnston said it was a comfort that Trio and Astarra Asset Management were deemed "a blatant fraud". 
"The advisers are tired of being blamed for product failure, these products should not have been in the market in the first place and the ultimate responsibility lays with the successive politicians over the years who have failed to understand the industry," Johnston said.

Well Peter, I differ. Financial Planners market themselves as having expertise and are required under law to understand the products they sell. Moreover Peter clearly thinks he has this expertise. I have an email he sent to two financial planners who put their clients into Astarra. It says:
Peter/Steve, met with Shawn [the guy who ran Astarra] today. I am still of the opinion that he is innocent of any fraudulent behaviour with Astarra, I will back my 30 years of being in business and dealing with all sorts of characters with my assessment. He no doubt can be accused of sloppy paperwork but that is a far cry from the hell he has been through.
It is funny how Peter conveniently forgets that he vouched for Shawn Richard. He did so repeatedly (although not publicly since Shawn admitted guilt).

Peter Johnston agreed to a $100 thousand bet with me on the innocence/guilt of Shawn Richard and whether the money would be found where Peter thought it was. He later backed out which is a pity because I would otherwise be $100k richer. (You can read the story here.)

Peter accused me in the press of being motivated by "professional jealousy" re Astarra. I told him that was defamatory: I am a hedge fund manager - I am motivated by money.

Finally Peter thought that I would get sued over Astarra. To quote an email to me:
I suggest you read below and start amending your views or check your sources as you ‘can never believe what you read in the paper.’ I checked with the asset consultant then Shawn himself, this is now been confirmed by the Administrator, ALL of the non hedge fund monies are exactly where they were supposed to be. You will also now find that the ASF cash and 3 of the 5 Hedge Funds are now accounted for. We are awaiting the final 2 which is going to put the spot light and legal proceedings in a different direction, you can be assured of that.

Peter Johnston
Executive Director
Bluntly, Peter Johnston threatened to sue me. He defamed me in the press.

And now he revises history to absolve himself and his members.

But that is not my problem with Peter Johnston. Peter Johnston is a coward who does not have the courage of his convictions. He bet 100 thousand dollars on the Astarra outcome. And then - when he realized that I was serious - he backed down.



Friday, March 18, 2011

Danger danger: The Wall Street Journal has no idea on how to do hedge fund due diligence

About 30 percent of Bronte's portfolio is shorting frauds.  We are very good at identifying frauds: we are experienced and diligent.

Alas some members of the fourth estate – often those with high profile mastheads – have no idea what they are doing.  This article: “Danger danger, thinking of investing in a hedge fund.  Here are some tips for sniffing out potential fraud” is so misguided as to be comical.

Lets state it up front.  There is a single tip that will allow you to avoid almost all the frauds – just one.  The tip is this:

Do not invest in a fund where the fund manager has access to your assets.

Ok – that needs a little explaining but its not complicated.  If – as an American -  you invest in Bronte Capital you don't give us the money.  We are not even legally allowed to take it.  You send the money to Citco.  Citco is the world's largest hedge fund outsource company – but there are alternatives.  David Einhorn's Greenlight Capital uses one of the bigger banks.  There are smaller players such as Spectrum, Conifer and others.

When you send the money to Citco they hold the assets.  We just trade them by issuing instructions to brokers.  However if we asked Citco to send the money to our personal bank account they would (rightly) refuse.  Moreover Citco value our assets every month and they – not us – send the statements to the clients.  We don't do the valuation so we can't fake it.  We don't hold the assets so we can't steal them.

Private clients surprisingly don't get this.  One of my friends runs a successful (albeit small) fund from his home.  People regularly make out checks out to him.  (If you send us money we will say thank you and send it back...)  The core due diligence test is simply not understood by retail clients – and alas the Wall Street Journal perpetuates their ignorance.

And guess who was the custodian for the assets invested in Bernie Madoff's fund.  BMIS – and that stood for Bernie Madoff Investment Securities.  And Bayou- another large fraud.  Well Bayou of course.  How about Astarra – the fraud I exposed in Australia.  Well their custodian was Trio Capital – a small custodian in the rural Australian town of Albury.  And guess what – Trio and Astarra had the same owners!  What about New World Capital Management – a fraud I wrote up but which was never prosecuted: well the perpetrator himself of course.  I could go on and on and on.  It is really easy to spot frauds and the fact they keep reappearing is testament to people not having a clue how to look for one.

If there is a single due diligence lesson then it is this: ensure that your money mangers have an independent custodian and preferably one of the majors.  And the first step in due diligence is this: don't do your due diligence on the fund manager – do it on the custodian.  Ring the custodian through their switch (not on a phone number provided by the fund manager) and confirm statements of the fund manager with the custodian.*

If you do this you are unlikely to get fleeced.  Simple as that.

Rob Curran misguidedly – and in the interest of the financial establishment tells you what his first red-flag in assessing managers is.  I quote:

The Fund Came to You: The Fund Came to You:  While it's not unheard of for a hedge fund to approach a wealthy individual, reputable funds usually concentrate their prospecting on institutional investors, says Randy Shain, executive vice president of First Advantage Litigation Consulting, who has been looking into hedge funds for 20 years. Always ask for the names of a fund's institutional investors, then contact them to verify that they are investors and have no qualms about the fund's legitimacy. While it's not unheard of for a hedge fund to approach a wealthy individual, reputable funds usually concentrate their prospecting on institutional investors, says Randy Shain, executive vice president of First Advantage Litigation Consulting, who has been looking into hedge funds for 20 years. Always ask for the names of a fund's institutional investors, then contact them to verify that they are investors and have no qualms about the fund's legitimacy.

Well politely – garbage.  I have written before on how institutional investors are right people to contact when you want to move the fund from $500 million under management to $1.5 billion under management.  They are absolutely useless at finding the hot fund manager with $5 million under management on their way to five years of 30 plus percent returns.  If you used this rule you would never have invested with Warren Buffett when he ran Buffett partnership.  All of the Buffett biographies make clear he approached well-to-do people like local medical specialists.

But its worse.  If you invest in managers that come to you through funds of funds or institutions you will probably wind up paying double-layer fees to get something like the average of all hedge fund managers.  Our initial client sent us the multi-fund manager record for a major (and successful) fund of fund.

(Click to expand).

He thought this these returns were BS.  I was kinder – these returns ok relative to equities over the same period – and more stable and probably ex-ante lower risk – so I believe this fund of funds has added value.  But the returns are not what you get from a couple of clever guys doing smart stuff.  Moreover there is a real danger in going through the institutional managers – which is that you get something that averages near the financial consensus.  And being in a crowd on Wall Street feels safe but it is actually shockingly dangerous.

Anyway my summary is that the number one method of choosing a fund given by Rob Curran (that is avoid one that comes to you) is counterproductive.  And the number one method of proving you are not defrauded rates a very thin method in the Rob Curran article.

And the Rob Curran article annoys me too – because at Bronte we are careful about trying to construct portfolios without regard to the consensus.  We don't look like institutional managers (no suits).  We don't sound like institutional managers (those accents).  And we we don't think like institutional managers (we don't like style boxes and we will happily change styles if market conditions change).  Rob Curran is telling all the WSJ readers to avoid funds like Bronte or Kerrisdale or any of the other thoughtful start-ups out there.**  And if this criticism sounds a little strident then it should be.  He is defending the financial consensus and the big institutions and frankly I don't think the big institutions covered themselves with glory over the last five years.

Secondary steps to chose the individual hedge fund

You know my view – the really good fund managers are outside the consensus.  Ratbags if you will – but ratbags with risk control.  Danny Loeb was a tearaway when he was younger.  [The rumor is that he posted more than 100 thousand messages on chatboards under the moniker of Mr Pink.]  David Einhorn might look like he is 18 (he is preternaturally young) but listen to what he says and he throws grenades.  (Who can forget the stoushes with Allied Capital and Lehman Brothers?)  And these guys are really smart.  And I guess if you want to chose a hedge fund and you don't want to work too hard you could ring them up.  In the mutual fund space my old boss at Platinum in Australia is far less out-there than those two but he is super-smart and he is not afraid to have people disagree with him.

But you would have missed Einhorn and Loeb when they were young and their best returns were mostly when they managed relatively small amounts of money.  Being an initial year investor in either of these funds was frightfully good.  [Incidentally Buffett's best returns were also when he was younger and smaller.  Buffett partnerships returns were substantially better than Berkshire Hathaway.]

So how do you chose a smaller manager?

Well first remember my test: do they hold the assets themselves of give them to a reputable third party to hold.  Don't forget this rule – it solves almost everything.

Then ask how they get the returns.  Leverage levels matter (they should be low – but 120 long 40 short is probably less risky than just 100 long).  Position size matters.  Short positions should generally be small (or using other mechanisms that limit risk like shorting debt rather than equity).  Long positions can be (much) larger.

Then ask them questions.  Pick an industry that you know really well and they profess to know.  If you can't do that work out some other mechanism to check out that they are not talking through their posterior.  (Clever and well thought through shareholder letters are a good start.  A blog is not bad either!)

Finally there is a test which I do (and which has enabled me to see many frauds) but that is seldom done elsewhere.  Match the stated returns to the ex-ante stated positioning.  For example I have disclosed several times on this blog that I am interested in shorting fraudulent Chinese stocks.  It should then come as no surprise that we are doing (very) well this month.

Likewise alas it was well known that Bank of America was our biggest position as it fell back from the 19s to the 11s.  Bank of America was above 19 in March 2010.  Here are our returns:

(These returns are for a separately managed account for our foundation client.)

The Bank of America position wasn't the only reason for the dud-period in the middle.  We are a global fund and measure ourself in US dollars.  The US dollar appreciated sharply through that period (devaluing our largish Euro denominated positions).  We quite explicitly generally do not hedge currency so you would expect to see currency volatility in our returns.  We also had a position in Maguire Preferred (now MPG Preferred) which gave us a wild though profitable ride.

More to the point – this was done primarily with big cap long positions (and small profitable positions in some defaulted preferred securities) and highly diversified and usually small cap shorts.  The positioning is as explained in my lament post.

Finally I have some strong views about prime brokers.  You should use only funds with US domiciled prime brokers for the reasons outlined in this post.

In other words it is pretty easy to do due diligence on us.

Incidentally the question we are asked almost all the time is "how much money do you manage?"  The implication that you need to be large to be good.  I assure you in almost every case returns are negatively correlated to funds under management.  You want the answer to be low - another inversion of the normal presumption.  Large however is the comfort of crowds - a comfort misplaced in markets.

Here are the steps generalized for any small gun hedge fund manager you might want.

Step 1:  Check the independence of the asset custodian.  This is a black-and-white test.  Any gray in the answer then the fund fails.  Period. Actually if it fails email and see if you can get bounties for spotting it.

Step 2:  Are they smart?  Test them on some industry. Bring an expert if you have one. Otherwise carefully read their material.

Step 3: Do they keep the position size and the leverage low enough to be safe?  Shorts must be smaller than longs.

Step 4: Do their returns correlate with what they say?  Focus on the particularly good months and the flat months.

Step 5: Is their brokerage arrangement sound (especially do they use US domiciled prime brokers).

And if you are a rich guy and they ring you out of the blue.  They are either trying to steal from you or they are being entrepreneurial.  Entrepreneurial is good – sometimes very good.

Follow the above steps and you will sort the wheat from chaff.

Is it too much to ask the Wall Street Journal to do the article properly next time?


*If you ring the custodian at a phone number provided by the money manager you could find yourself talking to a Potemkin custodian – just as people who rang advertising agencies at phone numbers provided by CCME would up talking to Potemkin advertising agencies. No kidding.  When someone gives you a reference do not ring the number they give you – ring the switchboard of the company they work at.  Always.

**Kerrisdale is far more aggressive than Bronte.  Their returns are better too.  But I have wondered openly whether aggression and risk are actually that well correlated - and I would use them as a case example.  I have conducted none of the tests described here on Kerrisdale.

Thursday, November 26, 2015

Philidor 2.0: Valeant and Stephen King play Chess with a lot of pharmacies

Valeant (VRX:NYSE) has managed the improbable.

It sells 

(a). Generic drugs often with close substitutes,

(b). It has raised their prices sometimes to absurd levels ($1000 acne antibiotics with full generic substitutes is an example)

(c). It claims to raise volumes of these products.

I call this the improbable trio. It seems improbable that a company could do this. Not impossible, just improbable.

The trick it appears is reliance on non-traditional distribution models. 

The size of non-traditional channels

Valeant's non-traditional channels are very large. During the dispute between Allergan and Valeant Allergan noted that the IMS sales data for Valeant products was crappy. 

Valeant responded that IMS data was unreliable for Valeant. To quote:

U.S. IMS data will cover less than 30% of Valeant’s business and, for that portion of Valeant’s business IMS covers, the IMS data will not properly collect sales through a numbers of channels (e.g., specialty pharmacy, physician dispensed sales, corporate accounts, and alternative fulfillment).

The non-traditional distribution methods are hugely important in Valeant.

The Philidor allegation

The Philidor allegation is that Valeant [through undisclosed proxies] established or owned pharmacies (such as R&O in California) and used their pharmacy numbers to deceive insurance companies into believing that scripts for expensive drugs with generic substitutes were being presented at smaller suburban pharmacies rather than at a Valeant captive pharmacy. 

If however they put all those scripts through one Valeant associated pharmacy the insurance companies would wise up.

So they put the scripts through multiple pharmacies - deceiving the insurance companies into not checking for the fraud.

How many pharmacies?

One of the games we have been playing is spot-the-Valeant proxy pharmacy.

We know pharmacies outside the Philidor web: the proxy captive pharmacies extend beyond Philidor.

But the scale of Philidor problems is not widely understood and has not been disclosed to the market. I doubt Mr Ackman would have adopted his Martingale strategy had he fully understood.

So lets start.

All these pharmacies were registered in Delaware. Many are named after chess terms (as are many previously disclosed Philidor entities) but we are also noting a distinct Stephen King theme.

This should keep the fraud investigators for various insurance companies busy. I suspect this will also get added to the list of things Congress is investigating.

EntityStateEntity IDRegistered AgentNotes
Fifty Moves, LLCDE5640758Corporation Service CompanyChess term: Fifty Move Rule
ELO Pharmacy, LLCDE5762328Corporation Trust CompanyChess term: ELO ranking system
C-K Pharmacies, LLCDE5762330Corporation Trust CompanyChess term: The Caro-Kahn defence
Tarrasch Pharmacy Holdings, LLCDE5762881Corporation Trust CompanyChess term: Tarrasch was a great player
NC3 Pharmacy, LLCDE5770687Corporation Service CompanyChess term: The rarely used Dunst Opening
Lasker Pharmacies, LLCDE5770702Corporation Service CompanyChess term: After the great player and theorist Emmanuel Lasker.
B&W Pharmacies, LLCDE5770706Corporation Service CompanyBlack and White: the usual colours of chess pieces.
NC3 Pharmacy Holdings, LLCDE5770708Corporation Service CompanyAnother Dunst Opening reference
Knight & Knight Pharmacies, LLCDE5770718Corporation Service CompanyChess Knights I presume.
First Rank Pharmacies, LLCDE5770741Corporation Service CompanyAnother entity is called "Back Rank: another chess term.
Forsta, LLCDE5774549A Registered Agent, Inc.Entity by same name sought wholesale pharmacy registration in AZ with Gary Tanner (Owner) and Jacob Power (Pharmacist-in-Charge), both ex-Philidor/VRX
Charmberlain Pharmacy, LLCDE5775980Corporation Service CompanyNamed for a favourite Stephen King location...
Mears Pharmacy, LLCDE5775991Corporation Service CompanyNamed for a repeated Stephen King character...
Marsten House Pharmacy, LLCDE5775997Corporation Service CompanyNamed for a key location in Salem's Lot. Notably a symbol of evil.
Torrance Pharmacy, LLCDE5776000Corporation Service CompanyNamed for key characters in The Shining.
Overlook Pharmacy, LLCDE5776004Corporation Service CompanyThe Hotel in The Shining.
Topiary Pharmacy, LLCDE5776008Corporation Service CompanyTopiary animals in The Shining.
Hallorann Pharmacy, LLCDE5776022Corporation Service CompanyNamed for the chef at the Overlook Hotel in The Shining.
Decker Pharmacy, LLCDE5776025Corporation Service CompanyPossibly named for another Stephen King character...
Twinner's Pharmacy, LLCDE5776026Corporation Service CompanyNamed for Stephen King's repeated doppleganger meme.
Parkus Pharmacy, LLCDE5776027Corporation Service CompanyA Stephen King character in The Talisman.
Halleck's Pharmacy, LLCDE5776029Corporation Service CompanyNamed for another major Stephen King Character.
Flagg Pharmacy, LLCDE5776032Corporation Service CompanyRandall Flagg is a major Stephen King Character
Derry Pharmacy, LLCDE5776033Derry is a repeated location in Stephen King novels.
Pennywise Pharmacy, LLCDE5776037Corporation Service CompanyPennywise the Clown is a recurring Stephen King character.
Plymouth Pharmacy, LLCDE5776038Corporation Service CompanyThe iconic Stephen King car in The Shining and others was a Plymouth.
Hanscom Pharmacy, LLCDE5776039Corporation Service CompanyFrom Ben Hanscom, a Stephen King character
Trips Pharmacy, LLCDE5776042Corporation Service CompanyFrom Captain Trips, a virus that exterminates most the human population in The Stand, a Stephen King novel.
Delain Pharmacy, LLCDE5776044Corporation Service CompanyFrom Delain, a mythical Stephen King domain.
Creed Pharmacy, LLCDE5776045Corporation Service CompanyFrom Louis Creed, the main character in a Stephen King novel.
Odetta Pharmacy, LLCDE5776046Corporation Service CompanyFrom Odetta Holmes, a recurring Stephen King character
Hemingford Pharmacy, LLCDE5776047Corporation Service CompanyFrom Hemingford Home, a Stephen King location.
Ludlow Pharmacy, LLCDE5776048Corporation Service CompanyFrom Ludlow Maine, a Stephen King location.
Crandall Pharmacy, LLCDE5776050Corporation Service CompanyFrom Jud Crandall, a Stephen King character.
Sheldon Pharmacy, LLCDE5776053Corporation Service CompanyFrom Paul Sheldon, a major Stephen King character.
Freemantle Pharmacy, LLCDE5776054Corporation Service CompanyFrom Abagail Freemantle, a major Stephen King character.
Revlowe Pharmacy, LLCDE5776055Corporation Service CompanyPresumably from the Reverend Lowe in the Cycle of the Werewolf.
French Landing Pharmacy, LLCDE5776058Corporation Service CompanyThe location in Black House, a Stephen King novel.
Wilkes Pharmacy, LLCDE5776059Corporation Service CompanyFrom Annie Wilkes, a Stephen King character.
Henreid Pharmacy, LLCDE5776060Corporation Service CompanyPossibly from Lloyd Henreid, a minor Stephen King character.
Beaumont Pharmacy, LLCDE5776062Corporation Service CompanyFrom Thaddeus Beaumont, another Stephen King character.
Sawyer's Pharmacy, LLCDE5776064Corporation Service CompanyFrom Jack Sawyer, another Stephen King character.
DH Stark Pharmacy, LLCDE5776065Corporation Service CompanyPossibly short for Dark Half from the novel of the same title. George Stark is the major character.
Shardik Pharmacy, LLCDE5776066Corporation Service CompanyShardik is one of the twelve guardians of the Beams that hold up the Dark Tower (again a Stephen King reference). 
TCM Pharmacy, LLCDE5776067Corporation Service CompanyWe are fairly sure this is associated - but have not worked out the link.
Burlingame Pharmacy, LLCDE5776070Corporation Service CompanyJessie Burlingame is a major Stephen King character.
Lauder & Cross Pharmacy, LLCDE5776071Corporation Service CompanyTry these names...
Claiborne Pharmacy, LLCDE5776072Corporation Service CompanyDolores Claiborne is a Stephen King novel.
Edgecombe Pharmacy, LLCDE5776073Corporation Service CompanyFrom Paul Edgecombe, who used to run Death Row in a Stephen King novel.
Georgia Pines Pharmacy, LLCDE5776074Corporation Service CompanyGeorgia Pines is a retirement home in Stephen King novels.
Garraty Pharmacy, LLCDE5776075Corporation Service CompanyFrom Ray Garraty, another Stephen King character.
Cold Mountain Pharmacy, LLCDE5776076Corporation Service CompanyThe Cold Mountain Penitentiary is where Paul Edgecomb ran death row.
Coffey's Pharmacy, LLCDE5776078Corporation Service CompanyJohn Coffey is another Stephen King character.
Stillson Pharmacy, LLCDE5776079Corporation Service CompanySteve Stillson is the President of the United States in a Stephen King novel.
Rainbird Pharmacy LLCDE5776080Corporation Service CompanyJohn Rainbird is a Vietnam Veteran in a Stephen King novel.
Longmont Pharmacy, LLCDE5776083Corporation Service CompanyLongmont VA is a location in the Stephen King novel, The Shop.
Dawes Pharmacy, LLCDE5776086Corporation Service CompanyBarton George Dawes is another Stephen King character. 
Castle Rock Pharmacy, LLCDE5776088Corporation Service CompanyCastle Rock Maine is a location of paranormal activity. I guess like a Valeant pharmacy. 
The Shop Pharmacy, LLCDE5776089Corporation Service CompanyThe Shop is a secret Government Agency in Stephen King novels. I guess this is a secret Valeant agency.
Cambers Pharmacy, LLCDE5776096Corporation Service CompanyJoe Cambers, a Stephen King character runs an auto-repair shop in Castle Rock. Probably another paranormal shop.
McGee's Pharmacy, LLCDE5776099Corporation Service CompanyCharlie McGee, a Stephen King character, has pyrokinetic powers - perhaps they include ripping off insurance companies.
Juco Pharmacy, LLCDE5776103Corporation Service CompanyA nickname for Joe Cambers rabid family dog. 
Roland's Pharmacy LLCDE5776108Corporation Service CompanyRoland Deschain, a major Stephen King character. 
Tower Pharmacy, LLCDE5776110Corporation Service CompanyPossibly a reference to The Dark Tower, a Stephen King novel.
Hawkmarten Pharmacy, LLCDE5776111Corporation Service CompanyWe think this is one of the many aliases of Joe Flagg. Suggestions accepted. 
Carrietta Pharmacy, LLCDE5776115Corporation Service CompanyThe full first name of Carrie, of the infamous Stephen King novel. 
PBG RX Pharmacy, LLCDE5794828Corporation Service CompanyWe have not found the reference here. The registration details make us think it is related.
Decker Pharmacies, LLCDE5794834Corporation Service CompanyAnother reference to Decker.
French Landing Pharmacies, LLCDE5794836Corporation Service CompanyAnother reference to French Landing.
NC3 Pharmacies, LLCDE5794839Corporation Service CompanySee the above chess reference.
C-K Pharmacy, LLCDE5794840Corporation Service CompanySee the above chess reference.
ELO Pharmacies, LLCDE5794842Corporation Service CompanySee the above chess reference.
Roland's Pharmacies, LLCDE5794844Corporation Service CompanySee the above reference to Roland Deschain.
Hemingford Pharmacies, LLCDE5794849Corporation Service CompanySee the above reference to Hemingford Home
Flagg Pharmacies, LLCDE5794852Corporation Service CompanyJoe Flagg again.
Overlook Pharmacies, LLCDE5794854Corporation Service CompanyThe hotel in the Shining again. Do we see a recurring theme.
Fischer Pharmacy Holdings LLCDE5805160Corporation Service CompanySurely a reference to Bobby Fisher, world Chess Champion

We are just playing with one State here.

There are pharmacies in other states. And they are all we think related to Valeant.

But here is the gem. The registration of false pharmacies continued AFTER Philidor was exposed and after Valeant said that they would stop doing business with Philidor.

And the people on registration documents are also often on the pay roll of Valeant (not Philidor).

I hope the longs can explain that inconvenient fact away - because it is not obvious how you do that.


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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.