Brooklyn, NY – The Oceana condominium complex in Brooklyn’s Brighton Beach is an idyllic place. Inside the gated beachfront community, where apartments go for as much as $2 million, retirees take in the fresh sea air as they play with their grandchildren in manicured gardens, while younger residents tool around town in their Range Rovers and Mercedes SUVs.
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It’s also home to a most unlikely alleged Wall Street fraudster, a limousine driver named Alan Fishman.
A 49-year-old native of Ukraine, Mr. Fishman chauffeured investment bankers and corporate lawyers in his black limo for several years before deciding to take a crack at his passengers’ game. Although he had no prior investment experience, in 2003 he and two partners launched a hedge fund called the A.R. Capital Global Fund.
The fund, investors were told, would buy shares in overseas real estate companies and trade currencies, oil, gas and other commodities while using “active, leveraged trading” and “fundamental and technical analysis” to make money. The facile use of Wall Street marketing jargon impressed novices eager to get in on the red-hot hedge fund fad, and 70 clients from around the country responded to cold calls and sent $20 million.
It was a scam, the government says. Federal prosecutors say the fund employed none of the investment strategies it advertised. Client money was invested in three Ukrainian stocks or parked in a Ukrainian money market fund. Investors, many of whom were senior citizens, got worried when their account balances started to show unexplained changes. They tried to withdraw cash but were unable to. Investigators started sniffing around. Soon after, in 2006, management disappeared and virtually all the customers’ money vanished. Last week, Mr. Fishman and three associates pleaded not guilty to four counts of fraud and conspiracy.
“These guys are real scumbags,” says Robert Banks, an Oregon lawyer who advised some cheated clients. “They should go to jail for a long time.”
The type of scam allegedly run by Mr. Fishman’s firm is as old as Wall Street itself, going back to the days when rogue brokers sold stock in nonexistent railroads or gold mines. The explosion in hedge funds, a catchall term for lightly regulated investment pools, merely provides the latest cover for unscrupulous operators who prey on the gullible. That’s one reason Congress is keen to increase supervision of these funds, which number some 8,000 and manage $1.3 trillion.
“If they want to continue to swim in our capital markets,” said Rep. Paul Kanjorski, D-Pa., at a Congressional hearing this spring, “they must, at a minimum, fill out the forms and get an annual pool pass.”
Mr. Fishman’s lawyer, Don Savatta, says that his client was primarily an administrator at the hedge fund, which was run by his wife’s nephew, Gary Gelman, who has been indicted and remains at large in Ukraine. Mr. Savatta says that no fraud took place at the fund while Mr. Fishman was overseeing things, and that matters went awry after it was sold in 2006 to an individual named Alexey Panov. Mr. Panov hasn’t been indicted, but in the case docket he is listed as a defendant. He couldn’t be located for this story.
“When all the facts come to light, what really happened will prove very different” from what the government believes, Mr. Savatta insists.
That’s cold comfort to victims like Todd Williams, 54, a cabinetmaker in a small Minnesota town who lost $100,000. He said he received a cold call in 2004 from an A.R. Capital sales executive, Edward Veisman, who shares a name with a Brooklyn broker banned from the business in 1997. Mr. Veisman, who was indicted last week and whose lawyer didn’t return a call seeking comment, pitched some currency trades that made money. When he called back to suggest investing in his group’s hedge fund, Mr. Williams was all ears.
“They would win your trust, and then pull one over you,” he says. “I guess after seeing how many people were fooled by Madoff, I’m in good company, but this still hurts a lot.”
A meeting in a deli
To the naive, Mr. Fishman’s operation could have easily appeared legitimate. Its office at 39 Broadway was miles from the preferred hedge fund addresses of Park Avenue, but it sounded classy. Its marketing literature said one top employee “attends numerous hedge fund conferences worldwide and has done extensive research evaluating the many different hedge fund strategies and the interrelation between such strategies.” (Even this rather vacant claim was a lie; the employee later told investigators that his research consisted of Internet searches when the fund was started.) The fund appears to have had no more than a handful of employees.
Fund officials, who charged clients a lofty 3% of assets and 15% of investment gains, were so careful to cultivate their image as experts that when a worried investor traveled to New York, the fund managers refused to meet the client at their office because they said it was being renovated. The meeting was instead held at a nearby deli.
In the meantime, Mr. Fishman kept working at the limousine company, popping in at the hedge fund a couple of days a week, says his lawyer, to ensure that the paperwork was in order. Prosecutors paint a different picture, alleging that Mr. Fishman, as president of the fund’s parent, presented himself as having primary responsibility for investment decisions.
In any case, in February 2006, Mr. Fishman and his partners sold the hedge fund for what appears to be an extremely low price. Although the fund managed about $15 million at that time, it was sold for only $150,000, or 1% of assets, and Mr. Fishman split the proceeds with his associates. (Money managers typically sell for 3% of assets.) Mr. Savatta says it was valued by an outside party.
It appears Mr. Fishman used some of his earnings to acquire his Brighton Beach oceanfront condo, which was built 31/2 years ago, according to a resident. The condo is serving as security on his $700,000 bail. A hearing in Mr. Fishman’s case is scheduled for July 23 in federal court downtown.
Between the time of the fund’s sale to Mr. Panov and when it shut down, A.R. Capital raised another $5 million. It funneled all that and more to bank accounts in Lithuania, including one held by a company located in St. Kitts and Nevis. Only $700,000 was left behind when the new owner disappeared in September 2006.
It’s been a bitter lesson for Mr. Williams, the cabinetmaker. He’s resigned to the fact that he’ll never get his money back and has had to rethink how he will afford college for his two teenage children. More than that, he’s lost faith in other people.
“I just don’t trust anyone anymore,” he says.
Mr. Fishman and his pals are the type who make many Jewish people ashamed and embarrassed. Unfortunately, the non Jewish world reads and hears of horrors like this, and develops false opinions of the vast majority of decent and honest Jewish people who would NEVER do something like this at all.
I sincerely hope that anyone who even thinks of schemes and dirty tricks like this, should please stop themselves from ruinining their lives and from causing the rest of the Jewish People to experience the pain and embarrassment of rejection, hate, attack, and murder. Please.
Horror stories like this, gives our enemies more reason to hate us and ridicule us. This is exactly like those self haters in the big shot, show off Neturei Karta, who shame us and feed our enemies and give reason for our enemies to quote them, so the enemies feel justified in attacking and killing and hating us even more strongly.
May the enemies of our people, who cause us so much suffering, be given what they deserve for damaging the Jewish People, both in our eyes, and in the eyes of the world; certainly in the Eyes of the One Creator.
Just because his name is Fischman doesn’t mean that he is Jewish
He is Russian. Old Russian ideas. Honestly never existed there.
were you all blind???…..the limo driver took you for a ride……gevaldig
London chauffeur from First Class Cars for all chauffeur driven cars in the London areas including Heathrow Stansted Gatwick and Biggin Hill.