Joe Biden - interesting story developing; possible train wreck for TOTUS

http://zerohedge.blogspot.com/2009/04/is-joe-biden-associated-with-hedge-fund.html

Courtesy of Zero Hedge

Is Joe Biden Associated With A Fund Of Funds Feeder Scam?

Posted by Tyler Durden at 9:52 PM
Zero Hedge is always happy to discover something rotten in the state of capital markets. We are even happier when others dig independently and come up with their own startling conclusions. Tonight - we are very happy. John Hempton, who writes the insightful blog Bronte Capital, has done some amazing dot connecting in what, if true, and not swept promptly under the carpet by the powers that be, could expose a hedge fund scandal that could rival the Madoff fiasco, for the simple reason that it implicates none other than Barak Obama's right hand man: Joe Biden. The fund in question is Paradigm Capital, a fund of funds, that is controlled by Hunter and James Biden, the VP's son and brother, respectively.

The full story is quite intricate but very much worth it. In putting the facts together, Hempton had a temporary brush in with "the adversary's" legal counsel, only the be vindicated when his initial subject, Ponte Negra Capital, ended up having its assets formally frozen by the SEC. But it does not end there. As Hempton lays it out best:

Firstly the [Paradigm] business was not started by the Bidens – it was purchased by them. It was started by Dr James Park. When the Bidens purchased the business they believed it to have 1.5 billion of funds under management. This little section from an affidavit signed by James Biden (the VP’s brother) is revealing. The affidavit is here.
(a). The Paradigm Hedge Funds had only between two and three hundred million dollars under management, which were leveraged to over five hundred million, not the more than $1.5 billion under management represented to us by Lotito and Fasciana.

(b) The returns on the Paradigm Hedge Funds were not as represented to us by Lotito and Fasciana; and (with editing)

(d). The primary manager of the funds, Dr. James Park, had an apparent substance abuse problem and had been an absentee manager for several years...
Now please put this in perspective. The Bidens – mostly through failure to do proper due diligence – seem to have wound up in control of a fund of hedge funds which they claim (in sworn affidavit) that

• Had less than a fifth the funds under management that they represented to their customers,
• Had misrepresented their returns and
• Had a primary manager who had “an apparent substance abuse problem”.

Now if you were told a fund manager only had a fifth the funds that he represented to the world, had misrepresented his returns and had a primary manager with a substance abuse problem what you say it is?

Whatever – it quacks.

Now this affidavit was signed 13 April 2007. I presume it is the truth otherwise James Biden is guilty of perjury.

The affidavit is signed a few months after Hunter Biden resigned as the CEO of Paradigm Global – a position he took up in late 2006.

Now I am going to give you one more detail. In 2006 Paradigm represented that they had 28 staff. They represented that they had offices in multiple cities including a largish office in New York on Fifth Avenue. I have uploaded a few of their marketing documents here and here and here.

Two hundred to three hundred million in funds under management would represent less than 5 million in revenue and probably less than 3 million after any third party costs. Most funds of funds of that period took a percentage of the performance fees – and given the performance of the funds the revenue would have been less than 1% of net funds under management however Paradigm's fee structure was somewhat higher suggesting revenue about 5 million per annum.


With 28 staff mostly in New York and (according to this marketing document) with representative offices in Los Angeles, Monte Carlo and Tokyo you can’t make this business work very well.


Of course you could make it work if all the staff members were paid well under $70 thousand dollars (which does not seem likely in finance in New York, Los Angeles, Tokyo and Monte Carlo). You could also make it work if you subsidized it.


None of this would allow the senior manager to fail to show at the office and indulge a drug habit (as sworn by James Biden).


Now go back and look at this marketing document. It contains a few staff members on the marketing side. Alla Babikova is still given as an email contact on the Paradigm website. She is also listed on this document as working for Onyx Capital. Onyx was the marketer of the allegedly fraudulent Ponta Negra hedge fund. Onyx – or at least staff that worked for Onyx – were also marketers of Stanford.


Jeffrey Schneider is the contact on this document from the allegedly fraudulent Ponta Negra fund. He was the founder of Onyx.


I see lots of possibilities: all of them reflect very poorly on the Bidens.


They were and remain controllers of a fund of funds which they allege misrepresented its returns and yet which they kept operational.
They were and remain controllers of a fund of funds which houses an alleged fraud in its offices (Ponta Negra).
They were and remain controllers of a fund of funds which employed a marketing organisation (Onyx) which was associated with distributing alleged frauds (Ponta Negra and Stanford).
They were and remain controllers of a fund that claimed to have 28 staff many of whom are difficult to trace and where the revenue to fund those staff did not obviously exist. This suggests that either the staff were not paid, did not exist or (more sinisterly) they were paid by stealing from the small amount of funds under management. You could only steal the client money if the asset custody safeguards were not robust. There is an audit statement on the SEC files qualified as to the robustness of these protections – however there is no evidence that the lack of robustness was exploited.

All of this was done from the 17th Floor of 650 Fifth Avenue New York. There are a few other things housed on that floor and you need to walk past Paradigm’s desk to get to them.
There is much more to this story, and for the whole sequence please go here, here, here, here and here, in that order. Makes for one hell of a late night thriller, and if the author is correct, Vice President Biden, by implication, could soon find himself in the shoes of Walter Noel of Fairfield Greenwich.

Regardless, it is only a matter of time before Joe Biden ends up on the list of people in which the president has 100% confidence.