Wood River Fund woes run deep - News Archives

""Alarmed investors in hedge fund can't get money back; firm faces lawsuit from Lehman.
October 11, 2005: 12:03 PM EDT
by Amanda Cantrell, CNN/Money staff writer

NEW YORK (CNN/Money) - Investors in Wood River Capital Management started running for the exits around the same time Lehman Brothers sued the hedge fund firm over a stock transaction, but the firm is having a hard time giving investors their money back, according to a person familiar with the situation.

Lehman Brothers, the hedge fund's broker, said it lost $8 million after buying shares on Wood River's behalf in a micro-cap telecommunications company, Endwave Corp (down $0.43 to $13.06, Research)., but was never paid for the shares, according to a complaint filed Oct. 3 in California Superior Court in San Francisco.

Investors began requesting their money in late September and early October, but not everyone who asked has been able to get money back, as the estimated $265 million onshore fund sunk a large chunk of capital into shares of Endwave Corp. Wood River now holds 4.3 million shares of Endwave, valued at about $60 million, according to filings with the Securities and Exchange Commission.


Such a large, concentrated position in one stock violates the terms of Wood River's offering memorandum, which said individual long positions would typically be capped at 10 percent of the portfolio, according to a person who has seen the documents.

Scott Berman, an attorney with Friedman Kaplan Seiler & Adelman who is representing some investors in Wood River's offshore fund, whose size wasn't immediately available, said he began hearing from investors last week.

Berman said that right after his clients subscribed to the fund, they found out the management team had resigned, that the SEC had subpoenaed the fund's administrator, and that Wood River had not issued a statement of the fund's net asset value, among other things.

"As soon as they learned of these things, they sent a cancellation of their subscription, which they were entitled to do, but which has not been honored," Berman said.

Lehman said in its complaint that it agreed to act as Wood River's agent in a stock transfer that would have moved Endwave stock from a Merrill Lynch account controlled by Wood River to another of its accounts at Wedbush Morgan Securities.

Lehman bought the shares, but Wood River did not arrange for the Endwave securities to be transferred to Wedbush, leaving Lehman holding the bag on more than $20 million of Endwave stock, the complaint alleges.

Lehman also said it believes Wood River, based in San Francisco and Ketchum, Idaho, has shut down. In its complaint, Lehman Brothers says it was unable to reach the firm's founders.

Wood River's offshore fund opened in July. The onshore fund opened in February 2003; according to a person who has seen the firm's offering documents, the firm's portfolio typically has 40 to 50 long positions.

This is the second high-profile hedge fund drama in recent months. Last month, two executives of Bayou Group turned themselves into authorities and pleaded guilty to felony fraud charges. Investors in that fund are still trying to recover the $450 million they invested.

John Whittier, Wood River's managing partner, started telling investors within the last month about the fund's large position in the stock, according to a Wall Street Journal report. Endwave's share price has plunged from $54 in July to its close Monday at $13.49.

The rapidly declining stock price caused investors to start asking for their money back; other investors became alarmed when they had difficulty reaching Whittier, according to the report.

The Wall Street Journal reported separately Monday that the Securities and Exchange Commission is also investigating the firm. The SEC declined to comment.

Whittier did not return a call for comment, nor did his attorney. Lehman Brothers declined to comment. ""

Source
http://money.cnn.com/2005/10/11/markets/wood_river/index.htm

http://money.cnn.com/2005/09/29/markets/bayou_investors/index.htm

So Lehman is Connected to the "Bayou Hedge Fund Scandal" - Lehman is hooked up with Proskauer Rose and Proskauer Rose negotiated teh Neuberger Berman Sale... and the conflicts and party tricks just keep adding up..

Read more...

Walsh in Line to Take Over Lehman Funds

""Mark Walsh is leading a team of Lehman Brothers executives who are close to taking over management of the bankrupt company's property funds, a move that would mark the return of one of Wall Street's biggest real estate dealmakers.

The largest limited partners in three funds with $7.2 billion of total equity signed off on transferring the management rights to the Walsh group after considering counteroffers from other fund operators, including AREA Property Partners of New York. It's unclear if the group will also be named operating partner of Lehman's two mezzanine-debt funds, which have $2.3 billion of total equity. The transfer is still subject to a vote by all of the funds' limited partners, who are expected to approve the hand off.

The Walsh team plans to relinquish the right to draw down $1.6 billion of uninvested capital from investors and focus on harvesting existing investments. It will also slash management fees. The fund's largest limited partners evidently were swayed by the team's familiarity with the assets and the fact that the group offered to manage them for less than the other bidders. Lehman declined to comment.

As head of Lehman's global real estate group, Walsh financed dozens of major property transactions during the real estate boom, supplying both equity and debt. He built a reputation as one of Wall Street's savviest and most aggressive real estate operators. But Lehman's mammoth $33 billion real estate portfolio was hammered by the downturn, contributing to the company's bankruptcy filing last September and leading to Walsh's departure.

Real estate players have been speculating about when they would see the re-emergence of Walsh, who was a 20-year Lehman veteran. The operation being formed by the Walsh team to manage the Lehman funds could eventually become an investment platform.

"This is very good for the investors because it brings Mark Walsh back to the market," said one veteran real estate player. "He has had his head down since the bankruptcy, but it is good for the market that he is back."

Joining Walsh are Brett Bossung and Mark Newman, co-heads of Lehman's real estate private equity division, who have continued to oversee the funds since the firm entered bankruptcy. The buzz is that the team also includes Kevin Dinnie and Rodolpho Amboss, both managing directors and principals in Lehman's fund shop.

But Michael McNamara announced in an e-mail to colleagues that he would resign as managing director and principal at the end of the month. He spent nine years in that position, with a focus on acquisitions. The buzz is that he decided against joining the new firm because the Lehman funds won't be making new investments. He plans to explore new opportunities.

The Walsh team would become general partners of three global property funds - the $1.6 billion Lehman Brothers Real Estate Partners 1, the $2.4 billion Lehman Brothers Real Estate Partners 2 and the $3.2 billion Lehman Brothers Real Estate Partners 3. Lehman will retain its equity stakes in the vehicles. The first two funds are fully invested, and the third fund is about half invested.

The management group will draw down a small amount of the $1.6 billion of uninvested capital in the third fund to support existing investments. But investors will be released from most of those commitments.

The management fee will be 0.55%, well below the industry norm of 1.5%. The incentive fees are also being pared back. However, the team would be entitled to higher compensation if prescribed performance hurdles are achieved.

The fund's investments will be wound down slowly to avoid fire sales in the depressed market.""

Source
http://www.realert.com/headlines.php?hid=52897

Read more...

Wayne L. Berman Lobbyist and Owner, Berman Enterprises, Inc

Name: Wayne L. Berman
Occupation: Lobbyist & Owner, Berman Enterprises, Inc.
Industry: Lawyers & Lobbyists
Home: Washington, DC

Political Contributions: Bush Gubernatorial Races: $16,000
Republican Hard Money: $136,128
Republican Soft Money: $0
Democratic Hard Money: $0
Democratic Soft Money: $0
Federal PAC Hard Money: $13,750
Total Contributions: $165,878

Soft Money from Employer: $165,300
to Republicans: $165,300
to Democrats: $0

This ex-Bush Administration Commerce Department assistant secretary suspended Bush Pioneer fundraising to comply with a federal probe into his ties to ex-Connecticut treasurer Paul Silvester.

Silvester was convicted in 99 of taking kickbacks from the private money managers to whom he awarded contracts to invest state pension funds. Four other Pioneers were large donors to Silvesters campaign (Herbert Collins, Thomas Foley, Maurice Greenberg and Peter Terpeluk, Jr.). Berman snagged a $500,000 finders fee for helping Pioneer Greenbergs AIG Capital Partners land a contract to invest $100 million of these pension funds.

Berman hired Silvester to work with his lobby firm (which was then Park Strategies) after Silvester lost a 98 re-election bid (see also Pioneer Christopher Burnham, another ex-Connecticut Treasurer who left office under an ethical cloud). Berman has lobbied for two other firms that won major investment contracts from Silvester.

These firms are PaineWebber and the Carlyle Group. The Carlyle Group was started by top officials in the Bush seniors administration (who reportedly gifted the former president an equity stake in this firm). Another Berman lobby client is the plaintiff firm Scruggs Millette Lawson Bozeman & Dent, which made a fortune leading state lawsuits against the tobacco industry. Finally, Berman lobbies for Flo-Sun, the Everglades sugar company owned by the First Family of Corporate Welfare.

The Fanjul family has such extraordinary political access that President Clinton took a call from Alfonso Fanjul while being serviced by Monica Lewinsky.



Source of POST
http://info.tpj.org/pioneers/wayne_berman.html

Read more...

The Carlyle Group - "Neuberger spokesman Randall Whitestone declined to comment." Fall 2008 Financial News Archives

""Neuberger Berman sale not a done deal
Fund firm's value could wane amid volatile markets;
portfolio managers favor Bain-Hellman bid

By David Hoffman
November 23, 2008 12:01 AM ET

(Investment News)—Although the sale of Neuberger Berman was thought to be a done deal more than a month ago, the company is still in limbo as an auction process drags on—one that could do damage to the company's value, according to industry experts.

A former subsidiary of Lehman Brothers, Neuberger was orphaned when Lehman went belly-up in September.

Private equity firms Bain Capital Partners and Hellman & Friedman announced Sept. 29 that they were going to acquire Neuberger for $2.15 billion in partnership with its portfolio managers, the management team and senior professionals.

But that deal was challenged by another private equity firm, the Carlyle Group, and former Neuberger chief executive Jeffrey Lane.

Mr. Lane and Carlyle argued that the process that resulted in the Bain-Hellman & Friedman acquisition was flawed and did not allow Lehman to get the best deal possible for Neuberger. As a result, on Oct. 17 the U.S. Bankruptcy Court in New York approved a new auction, which ends Dec. 1.

The tussle can't help but hurt Neuberger. Theoretically, a floor of $2.15 billion has been set as the asking price. But given the fact that all asset managers, including Neuberger, have been hemorrhaging assets in volatile markets these last few months, “I wonder how permanent that floor really is,” said Burton Greenwald, a mutual fund consultant in Philadelphia.

Not including money-market funds, Neuberger saw $615.97 million come out of its funds in October and $302.07 million leave in September, according to Morningstar.

Adding to concerns, two managers recently left the firm.

Milu Kromer, co-manager of the $451 million Neuberger Berman International Fund, left the company for New York value manager Cramer Rosenthal McGlynn. And Steven Brown, lead manager of the $41 million Neuberger Berman Real Estate Trust, left for American Century Investments of Kansas City, Mo.

Any departures during a time of uncertainty raise concerns, said David Kathman, a mutual fund analyst at Morningstar. But the departures of Ms. Kromer and Mr. Brown probably aren't cause for alarm, he said, because they were not high-profile managers.

Other portfolio managers likely won't leave the firm, he said.

They have good reason not to. If the Bain-Hellman deal holds up after the auction process—something industry experts said is still a strong possibility—it's believed that portfolio managers have agreements in place with the two private equity firms that would give them a great deal of control over Neuberger, Mr. Kathman said.

Neuberger spokesman Randall Whitestone declined to comment.

There is no doubt, however, that a majority of Neuberger portfolio managers want the Bain-Hellman deal to go through, Mr. Kathman said. “They are hoping they can sell to Bain/Hellman like they agreed. If they can't, it's another wrench that could cause complications.”

That's because most of the names being bandied about as potential buyers of Neuberger are other private equity firms, said Geoff Bobroff, a mutual fund consultant in East Greenwich, R.I. Most private equity firms don't hold on to their investments for long, and that can be disruptive, he said.

A prime example is Delaware Investments of Philadelphia, Mr. Bobroff said.

The company was purchased in a leveraged buyout in 1988 by Legend Capital, a partnership managed by Castle Harlan, a New York private equity firm. In 1994, Legend sold Delaware to Lincoln National Corp., then in Fort Wayne, Ind.

At the time of the sale, Castle Harlan trumpeted the fact that since the initial acquisition, Delaware Investments' assets had increased by more than 50%. But after being acquired by Lincoln, Delaware went into a steep decline.

“I'm not a fan of private equity firms, because they don't have a long-term perspective,” Mr. Bobroff said. ""


Source of Post
http://www.financialweek.com/article/20081123/REG/311249988/1011/rss15

Read more...