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Missing Sarasota Hedge Fund Manager Nadel Surrenders

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By ELAINE SILVESTRINI | The Tampa Tribune

Published: January 27, 2009

Updated: 01/27/2009 04:21 pm

TAMPA - Arthur Nadel, the hedge fund manager from Sarasota who disappeared recently, turned himself in today, an FBI spokesman said.

Before disappearing, Nadel wrote a letter to his wife giving her instructions "if you want to survive this mess," telling her to take money out of credit and other accounts before the authorities blocked access, according to a criminal complaint.

Although the investor funds Nadel controlled were nearly empty, Nadel had homes in Sarasota and North Carolina, and he owned 500 acres of a development in North Carolina and three private planes, a Lear 35A and two Citation 2s, the complaint states.

Nadel, 76, surrendered at 9:45 a.m. at the Tampa field office, FBI spokesman Dave Couvertier said. Two attorneys, Barry Cohen and his partner, Todd Foster, were with him.

The bespectacled defendant, wearing a gray sweater over a tan shirt, appeared in court this afternoon with shackles on his hands and feet. Several family members, including his wife, sat in the courtroom spectator section, but declined to talk to reporters.

The only statement Nadel made was when he was asked whether he understood his rights. "Yes, I do," he said.

Cohen told U.S. Magistrate Mark Pizzo that Nadel is "suffering some emotional problems" and has been "visiting with a psychiatrist the past week." Nadel wanted to check himself into a hospital, but turned himself in at the insistence of the U.S. Attorney's Office, Cohen said. The attorney added said he told federal authorities Monday that Nadel would surrender today.Cohen asked that Nadel be released on his own recognizance, but Pizzo granted a request from Assistant U.S. Attorney Terry Zitek that he postpone the bail hearing for three days to give Zitek time to prepare. Pizzo said he was not legally allowed to grant Cohen's other request, to allow Nadel to serve home detention during the three-day interim.

Zitek told Pizzo that Nadel "represents a significant risk of flight."

Cohen didn't say where Nadel has been the past 13 days, but told Pizzo his client "came back when he was notified of a warrant."

Nadel will be prosecuted in the Southern District of New York, at least initially, according to Couvertier, who said the Tampa and New York FBI are working together.

Couvertier said Nadel has victims nationally and internationally.

A federal criminal complaint out of New York charges Nadel with securities fraud and wire fraud. Each charge carries a maximum prison sentence of 20 years, along with financial penalties.

The complaint accuses Nadel of using "manipulative and deceptive devices" to defraud investors.

It says he transferred more than $1 million from a New York brokerage firm to an account he controlled. The Securities and Exchange Commission, in a civil complaint last week, said Nadel transferred $1.25 million into secret bank accounts.

The criminal complaint describes victims in New York and California and says two funds had more than 100 investors nationwide. A New York-based hedge fund invested $13.6 million into funds controlled by Nadel, according to the complaint.

In the meantime, a court-appointed receiver reported that he found evidence that Nadel's fraud goes back at least to 2003 and probably earlier. That year, Nadel had funds worth a total of $80.8 million, but represented to investors that the accounts were worth nearly $129 million, according to the receiver, Burton W. Wiand. By Dec. 31, 2007, Nadel had a total of $18 million in six funds that were represented to investors to be worth nearly $314 million.

"Based on our investigation, it is likely that a significant sum of the proceeds of Nadel's scheme made its way into other accounts controlled by Nadel and/or his wife, Marguerite Nadel," Wiand wrote. In addition to the money transferred into secret accounts in 2008, Wiand said he saw evidence that at least $685,000 was transferred to Nadel and his wife in 2003 and 2004. Wiand wrote he has "reason to believe that significantly more money was transferred to them."

As a result of the receiver's report, a federal judge expanded the scope of Wiand's control to include other businesses Nadel had interests in, Venice Jet Center and Tradewind. Both businesses were described as viable businesses which Nadel purchased interest in with proceeds from his fraud.

Nadel rejected a partner's advice that he hire an independent accountant to audit the investment funds, according to the criminal complaint.

The partner told the FBI that after Bernard Madoff was arrested in New York, he again told Nadel to hire an independent auditor, and Nadel agreed to do so Jan. 9.

Five days later, on Jan. 14, Nadel's family reported him missing.

The next day, Nadel's employees found several pieces of paper in a shredding machine in Nadel's office in Sarasota. The employees put the pieces together and gave them to law enforcement. They appeared to be pieces of a multipage letter handwritten by Nadel to his wife:

"If you want to survive this mess, what follows is for your eyes only. I strongly suggest you destroy it after reading. …

"The avenues to money for you will likely be blocked soon. You must use the trust (yours) to your benefit as much and as soon as possible. Please look for the (bank) credit card account and you will see a large credit balance that can be used in the usual way or to withdraw cash. Withdraw as much cash as you can, as this account might also become blocked. …

"All the bills will come to 3966 and I have closed the POBx. Look at all the recently paid bills in the 'package' to see where they stand. Also in the package are enough documents that I think will do the trick to give you complete control and ownership of what is left, and even documentation for divorce. Sell the Subaru if you need money. I will send you a letter in a day or so to tell you. …"

Stay with TBO.com for updates.

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