Fairfield Greenwich Group
Fairfield Greenwich Group is an investment firm founded in 1983 in New York City. The firm had among the largest exposures to the Bernard Madoff fraud.
History of the firm
The firm was founded in 1983 by Walter M. Noel Jr. At one time, the firm operated from Noel's adopted hometown in Greenwich, Connecticut, before relocating its headquarters to New York City, New York.In 1989, Noel merged his business with a small brokerage firm whose general partner was Jeffrey Tucker, who had worked as a lawyer in the enforcement division of the Securities and Exchange Commission. Both Noel and Tucker are semi-retired.
Fairfield offered feeder funds of single-strategy trading managers. Fairfield also started several fund of funds, each investing in a basket of hedge funds, though the offering of feeder funds has been the primary business of Fairfield. It described its investigation of investment options as "deeper and broader" than competitive firms, because of Tucker's regulatory experience.
Fairfield Greenwich's website says it "employs a significantly higher level of due diligence work than typically performed by most fund of funds and consulting firms". It is an employee-owned firm with 140 employees, 21 of whom are shareholders. At one time, it reported $16 billion in assets under management.
It was reported that foreign investors provided 95% of its managed assets, 68% from Europe, 6% from Asia, and 4% from the Middle East. Each of Noel's four daughters married into international families.
In 2008, Fairfield Greenwich reported more than $14 billion in assets under management.
Founding partners
Walter M. Noel, Jr. and family
Presently, Walter Noel has a 17% ownership interest.Walter Miller Noel, Jr. was born in Birmingham, Alabama in 1930 to Walter and Corinne Noel. At the time of Noel's birth, his father was a mortgage appraiser. The family moved to Kenmore, New York, a suburb of Buffalo, where Noel was raised. Noel attended Montgomery Bell Academy, Vanderbilt University and Harvard Law School. Noel had previously been a private banker in Lausanne, Switzerland, then worked at Citigroup, before becoming the head of Chemical Bank's international private banking practice in Nigeria, Switzerland, and Brazil.
Noel met his Brazilian-born wife, Monica Haegler, who hails from a prominent Swiss family, while she was studying at Wellesley College in Massachusetts. They have five daughters and 19 grandchildren. Their daughters married into families that provided additional connections for the firm and helped funnel money into Madoff's fund:
- His eldest daughter, Corina, married Colombian Andrés Piedrahita in 1989; she lives in Madrid, London and Manhattan.
- Lisina, who lives in Milan, married Yanko Della Schiava, the son of the editor of Cosmopolitan in Italy and of the editor of Harper's Bazaar in Italy and France.
- Ariane married Florence-born Marco Sodi, head of VSS's London-based affiliate, Veronis Suhler Stevenson International, and a partner and managing member of Veronis Suhler Stevenson Funds. They live in Notting Hill, London.
- Alix married Philip Jamchid Toub, the son of a director of the Saronic Shipping Company in Lausanne, Switzerland. He is also a former FGG partner, and the couple lives in Greenwich.
- The youngest daughter, Marisa, married Matthew Brown, an asset manager and the son of a former mayor of San Marino, California. Marisa listed her New York townhouse after the Madoff revelations; she is now a jewelry designer and founder of TRE, an accessories business.
Jeffrey Tucker
Jeffrey Tucker also had a 17% interest in the firm. Though he is not as prominent as the Noels, Tucker benefited from Fairfield's success. In 2007, Tucker, chairman of Empire Racing, led the group of thoroughbred investors, who sought to bid for New York State's horse-racing franchise.Joint venture
In 2004, the firm formed a partnership with Lion Capital of Singapore, now Lion Global Investors, and created Lion Fairfield Capital Management, a joint venture meant to introduce Asian investors to the firm. Richard Landsberger, a Fairfield partner, is director.Merger
In September 2008, Banque Bénédict Hentsch, a private Swiss bank, managing $2 billion in assets, merged with Fairfield Greenwich Group, intending to create an $18 billion venture in combined assets. Bénédict Hentsch, founder and chairman of the board of directors, stated that clients would gain access to Fairfield Greenwich's funds, while Fairfield Greenwich clients would be able to access BBH's wealth management services. Bénédict Hentsch and Robert Pennone became directors of Fairfield Greenwich Group, and Charles Murphy and Mark McKeefry joined the board of Banque Bénédict Hentsch Fairfield Partners SA.In mid-December 2008, it terminated the merger due to the Madoff crisis. It had $47.5 million of client assets at risk with Madoff.
The founding shareholders of the bank have terminated their partnership with the Fairfield Greenwich Group. They have concluded an agreement with the latter whereby they have repurchased the total capital of the bank ... Banque Bénédict Hentsch have immediately taken all appropriate steps in order to protect the interests of its clients and those of the bank.
Relationship with Bernard Madoff
Noel and Tucker were introduced to Madoff in 1989 by Tucker's father-in-law, from Scarsdale, New York, who knew Madoff and had invested with him.In 2006, the Securities and Exchange Commission, as part of an investigation into Madoff's activities, determined that Fairfield Greenwich had not properly disclosed that Madoff oversaw its investment decisions, though no evidence of fraud was found. Subsequently, Fairfield Greenwich formally disclosed Madoff's role – and in the process raised about $1.7 billion from investors in the US and Europe.
During the summer of 2007, several private equity firms were discussing taking a large investment in the firm, but Madoff ended any potential deal by refusing to grant the potential investors access for due diligence.
By 2008, the firm had 48 percent of its capital tied to Madoff.
Fairfield Sentry Fund
Noel and Tucker created the Fairfield Sentry fund in 1990 with $1 million in "seed money", and began expanding it a year later. At the time, Noel and Tucker said Madoff provided more information and transparency than most hedge funds, and operated a reputable Wall Street firm.The Fairfield Sentry fund required a $100,000 minimum investment, and was billed as a way to tap Madoff's trading expertise using "algorithmic technology" while Fairfield with due diligence conducted "systematic investment compliance". It had more than $7 billion invested with Madoff, and became one of his largest victims. It was Fairfield's signature fund, one of several feeder funds through which money from wealthy foreign investors could capitalize on Madoff's supposed investment acumen. Its marketing prospectus promised low volatility and steady returns, and boasted an 11 percent annual return over the prior 15 years, with only 13 losing months, a record that grew increasingly desirable over recent years of volatility. The fund was backed by loans from banks including Banco Bilbao Vizcaya Argentaria and Nomura Holdings, which invested about $304 million.
The Mugrabis, extremely wealthy art collectors from Colombia who have lived in New York for more than 20 years, and long-time friends of Piedrahita, were investors.
"We had very little money with the fund — just under a million dollars — so I am not that upset personally," said Alberto Mugrabi, a son of the family patriarch. "It was a very informal thing. We know Andrés since forever, from Bogotá, he's a great guy, and he says to us, 'This is the Madoff thing, he's the master.' I trusted Andrés. I still trust him."
In early 2005, The Abu Dhabi Investment Authority invested approximately $400 million. After redemptions in 2005 and 2006, it continued to invest $132 million, 2% of the fund's assets. One of the largest of the world's sovereign wealth funds, its assets were estimated in early 2008 to be approaching $700 billion.
In August 2008, JPMorgan Chase pulled $250 million from this Madoff feeder fund account. Chase had become "concerned about lack of transparency", and had performed due diligence which had "raised doubts" about Madoff's operation.
The firm set up feeder programs with such banks as Banco Santander, SA private banking unit, Banif, Swedish Bank Nordea, Zurich-based NPB Neue Privat Bank, of Geneva, all conduits of fresh money to Madoff which extended his global reach.
Fees
Fairfield's fee arrangement earned them approximately $400 million from 2005 to 2008. The firm charged clients larger fees than most similar firms did, including a 20% share of profits on investments, about double what competitors charged that farmed out clients' money to a variety of fund managers. In October 2004, it also began collecting a 1% fee on assets under management.Madoff didn't charge additional fees, rather a commission on trades he allegedly executed. This arrangement raised suspicions and doubt among other money managers. Harry Markopolos, the main whistleblower in the Madoff scandal, for instance, wondered why Madoff would leave money "on the table", which was usually unheard of on Wall Street. Hedge fund manager Suzanne Murphy believed that Noel and other Fairfield executives should have wondered why Madoff wasn't charging them anything when "all they were doing was collecting the money."
Massachusetts regulators alleged that in 2007 Tucker earned more than $30 million in fees from Madoff.