Arthur Nadel is gone.
So is the $350 million the Sarasota, Fla., hedge-fund manager claimed to be managing.
He reportedly left a suicide note. But police found his Subaru parked at Sarasota-Bradenton International Airport last week. The FBI has joined the search. Nadel’s victims are left bewildered.
At 75, he was a fixture in Sarasota society circles. Now they’re calling him a “mini-Madoff” because $350 million is nothing beside the $50 billion Bernard Madoff allegedly stole.
Nadel’s case is more similar to that of Samuel Israel III, a former hedge- fund manager who was convicted of stealing $400 million. Israel faked his death last June to ditch a 20-year prison sentence, only to turn himself in a month later.
There are more than 8,000 hedge funds, all run by professed geniuses who claim they can charge exorbitant fees and still beat the market. There are thousands more private investment managers and advisers making the same claims, despite history’s lessons that they rarely hold true.
What if just 1 percent of these people are Ponzi-scheming thieves? What if the percentage is higher?
As the recession rages on, the ghost of 1920s swindler Charlie Ponzi is everywhere.
Even in Idaho, where state securities regulators and the FBI reportedly are investigating allegations that Daren Palmer, 40, of Idaho Falls may have duped investors out of as much as $100 million.
“He seemed so legit,” Kevin Taggart, who claims he lost $600,000, told The Wall Street Journal.
They usually do, until they stop faking their investment performance and start faking their deaths.
Authorities last week found a 38-year-old financial adviser from Indiana, Marcus Schrenker, at a Florida campground. He is suspected of making a distress call from his plane, parachuting out, allowing the plane to crash and then speeding away on a motorcycle he’d stashed in Alabama.
He’s now recovering in a Tallahassee, Fla., hospital, after bleeding from a gash he’d carved in his wrist.
Whatever happened to simply hiding behind the lawyers? Settling with regulators without admitting or denying guilt? Or posting bail and hanging out in a $7 million apartment like Madoff?
We are, after all, a Ponzi nation, relying on new investors to pay off the old, building up fortunes on paper, pretending the market can only go up.
The P-word is increasingly used to describe Social Security, our bailout- happy government, our banking system and our financial markets. It’s not just a few wack-job conspiracy theorists who say this but real market participants, including renowned money manager Bill Gross of Pimco.
“The U.S. and many of its G7 counterparts over the past 25 years have become more and more dependent on asset appreciation,” he wrote in his monthly investment outlook for January. “We became a nation that specialized in the making of paper instead of things. . . . We have met Mr. Ponzi and he is us — all of us.”
Al Lewis 201-938-5266 or al.lewis@dowjones.com
