Hedge Fund News Wrap: Week Ending 9/27/13

Despite Investigation, SAC Capital Up 13% YTD

Despite being caught in the middle of a criminal investigation, Steve Cohen’s hedge fund, SAC Capital, was up 13 percent this year as of September 20th.

According to the HFRI Index, the average hedge fund was only up about 4 percent through the end of August, largely underperforming the broader S&P, which rose 15 percent during the same period of time.

In July, SAC was indicted on criminal insider-trading charges, causing most of its outside investors to file redemption requests for about $5 billion of the $14 billion the firm has in assets under management.

The hedge fund firm has continued to deny all allegations of insider trading, and is said to be negotiating a settlement of the charges. According to a source for Dealbook, the government is seeking a guilty plea from SAC and a financial penalty of as much as $2 billion.

 

See detailed coverage from:

Reuters

FINalternatives

Opalesque

 

Hedge Fund Imposter Gets Six Years

Scott Atkins, who posed as a hedge fund manager and a lawyer, has been sentenced to six years in prison for scamming investors and earning $1.4 million in the process.

Atkins defrauded more than fifty clients, and pleaded guilty in April to fraud and tax-evasion charges.

Allegedly, Atkins would use the money from investors to pay off personal expenses, and would open bank accounts for fake entities using his minor daughter’s social security number.

The government has ordered Atkins to pay $1.7 million in restitution and $271,000 to the Internal Revenue Service. In addition, Atkins will serve three years of probation after his release.

 

See detailed coverage from:

FINalternatives

Phoenix Business Journal

7th Space

 

Ackman Shakes Up Air Products Board

After an unsuccessful campaign to turn J.C. Penney around, activist investor William Ackman has turned his attention to Air Products and Chemicals Inc. Pershing Square Capital, Ackman’s hedge fund, announced a 9.8 percent stake in the company back in July.

Now, Air Products has announced that it will replace its CEO, John E. McGlade, in 2014 and elect three new directors to its board. According to people familiar with the matter, Ackman proposed adding Matthew Paull, former CFO of McDonalds Corp. and now a member of the Pershing Square advisory board, and Seifi Ghasemi, the chairman and CEO of Rockwood Holdings, Inc.

The shakeup is considered to be Ackman’s first successful activist move since his bitter departure from the J.C. Penney board in August, causing his fund to lose more than half a billion dollars. Shortly after, Ackman sent a letter to investors, acknowledging that retail is not his “strong suit.”

In a statement, Bill Ackman said, “We invested in Air Products because it is a great business in an industry with excellent long-term prospects. In recent weeks, we have been delighted to get to know John and the rest of the board working with them on their mission of continuous improvement and long-term shareholder value creation.”

 

See detailed coverage from:

The Wall Street Journal

The Street

Dealbook

 

Hedge Fund Manager Sentenced to Four Years in Fraud Scheme

Hedge fund manager, John C. Tausche, was sentenced to 4 ½ years in federal prison after he was found guilty of participating in the K1 Group scheme which defrauded investors out of more than $311 million.

Tausche was also ordered to pay $115 million in restitution to Barclays, which was one of the largest victims of the K1 fraud ran by founder Helmut Kiener.

According to prosecutors, Kiener used vehicles provided by Tauche’s Oceanus Funds for a series of roundtrip payments that made it appear as if K1 was growing, when in fact, Oceanus was returning money that K1 had sent. In addition, Tausche provided false financial information to Barclays and Bear Stearns, which caused the banks to offer more than $200 million in financing to K1. Both banks lost that money.

Allegedly, Tausche earned $114 million from the scheme.

Kiener has already been tried and is serving an 11 year sentence in Germany as of 2011.

 

See detailed coverage from:

FINalternatives

Opalesque 

Philly