In shackles, Arthur Nadel appears in court

Herald Staff WritersJanuary 28, 2009 

TAMPA — Chained at his waist and wrists, Sarasota hedge fund manager Arthur Nadel was taken into federal court Tuesday in Tampa after being on the lam for two weeks.

The hearing came hours after Nadel turned himself in to FBI officials on wire and securities fraud charges.

Nadel, 76, is accused of defrauding investors out of hundreds of millions of dollars. He will remain in the custody of U.S. Marshals at least until a bond hearing Friday.

One of Nadel’s attorneys, Barry Cohen, referred to his client’s alleged crimes as “a white-collar matter” and asked U.S. Magistrate Judge Mark A. Pizzo that he be released on his own recognizance.

“Let him out and stay home and on house arrest,” Cohen said. “This is not a violent person. As soon as he learned of the warrant he came in. He’s not going anywhere . . . three days in a cage is a long time to be locked up.”

Cohen said his client has been suffering from emotional problems and had met with a psychologist in the past week.

But Pizzo refused to release Nadel.

“The amount of money in this matter is not small change,” Pizzo said. “It’s significant.”

Federal prosecutor Terry Zitek argued that Nadel, who fled the area on Jan. 14 and whose car was found at the Sarasota-Bradenton International Airport, was a flight risk.

Zitek asked that the bond hearing be postponed until Friday because he was standing in for prosecutors with the Southern District of New York.

Zitek said he had just been made aware of Nadel’s surrender Tuesday morning and needed to discuss the matter with FBI agents from New York and Sarasota.

Nadel, dressed in a gray argyle cardigan, trousers and silver-rimmed glasses, huddled with Cohen and two other attorneys at the table. Nadel’s wife, Peg, was in the courtroom and began to cry when authorities escorted him in.

Following the hearing, Cohen declined comment as he exited the courtroom with Nadel’s wife and other family members.

Outside the courthouse, reporters asked where Nadel had been the past two weeks. Cohen replied, “He turned himself in, didn’t he?”

Nadel is charged with one count of securities fraud and one count of wire fraud by the Securities Exchange Commission. For the combined charges, Nadel faces a maximum of 40 years in prison and more than $5 million, or twice the gross gain or loss from the offenses, in fines.

In all, more than $300 million is thought to have been lost in a Ponzi scheme, whereby Nadel reported inflated returns to investors when his funds were actually losing money, authorities say.

Last year, Nadel signed checks totaling more than $1 million from the funds to himself and his wife, according to Burton Wiand, the federally appointed receiver in the case.

Wiand also found evidence that another $685,000 was transferred to Nadel and his wife in 2003 and 2004.

“In short, it is apparent in the documentation that large quantities of money were diverted from the Hedge Funds to Nadel and Mrs. Nadel,” Wiand said in his report. “Indeed, to date we have not uncovered any source of income for Nadel or his wife that was not in some manner funded with money from the scheme.”

Nadel also transferred more than $1 million by wire from a New York City brokerage account to bank accounts that he controlled without authorization, according to federal prosecutors.

The receiver also found that the hedge funds overseen by Nadel paid more than $95 million in fees to Nadel’s Scoop Capital and Scoop Management between 2003 and last year.

According to federal prosecutors, Nadel had resisted hiring a certified public accountant to audit the funds he managed, and only did so after the arrest of Bernard Madoff, the New York hedge fund manager who has also been charged with fraud for cheating his investors.

The receiver found that Nadel was a managing member of Tradewind LLC, which operated at least five aircraft and owned hangars at the Newnan-Coweta County Airport in Georgia.

Between 2004 and 2008, Nadel diverted nearly $3.3 million from his investment funds to Tradewind, the receiver determined. He also diverted at least $325,000 to the Venice Jet Center, of which he is a managing member, the receiver found.

The government’s complaint cites information gathered from two of Nadel’s partners, but does not name them.

Neil Moody and his son Chris were partners in Scoop Management Inc. Neither has been charged with a crime.

Neil Moody, of Sarasota, has declined comment and referred questions to his attorney, Todd Thomas, of Hollywood, Fla. Thomas did not return a phone call seeking comment.

Investors not all wealthy

By definition, Nadel’s funds were classified as hedge funds, which are usually associated with wealthy investors and jet-setters willing to let a few million ride on riskier asset classes with the promise of market-beating returns.

But some investors, like Leslie and Larry Collier, of Sarasota, did not fit that mold.

The couple had invested about $450,000 — including proceeds from the sale of a family home — to their Victory Fund and Victory IRA Fund run by Nadel’s company.

But court documents show the net assets of the two funds combined at the end of 2008 only amounted to $33,852.

Even so, Leslie Collier said the couple received statements showing that they had earned in excess of $200,000 on their money.

“I’m a per-hour wage-earner,” says Leslie Collier, a school nurse at Sarasota Military Academy. “So we’re not in high-value social circles.”

Her husband retired from Verizon less than a year ago.

“Larry installed cable and splicing and all that,” Leslie Collier says. “He was the one who climbed the telephone poles and went down in the manholes and dug the ditches.”

Leslie Collier is relieved that Nadel is in the custody of authorities.

“It’s wonderful,” she said Tuesday. “It’s just nice that he’s been caught. I’m just glad of that. Hopefully the courts and the judges will be able to find answers. Unless he’s physically present you’re not going to find answers. It feels good.”

Dr. Brad Lerner, a Sarasota resident, had more than $500,000 invested with Nadel’s funds. His attorney, Drew Clayton, welcomed the news of Nadel’s arrest. But he was skeptical about investors getting their money back.

“It’s certainly a positive development,” Clayton said. “Hopefully there will be an opportunity for authorities to get more answers about where the funds have gone. Whether Mr. Nadel is willing to talk at this point is a different thing. If charges have been brought against him, there’s a chance he will say nothing. But the fact that he has resurfaced is encouraging news.”

Staff writer Duane Marsteller contributed to this report.

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