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Bail Denied For Hedge Fund Manager

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By ELAINE SILVESTRINI

esilvestrini@tampatrib.com

Published: January 31, 2009

TAMPA - A Sarasota hedge fund manager who went missing for 13 days after being accused of misleading investors will be held without bail pending trial, a federal magistrate ruled Friday.

Arthur Nadel, 76, faces charges of securities and wire fraud, which each carry a maximum sentence of 20 years in federal prison.

In denying bail, U.S. Magistrate Mark Pizzo said he was concerned about Nadel's access to "millions and millions and millions of dollars." He also said Nadel had not provided a sufficient explanation as to his whereabouts while missing.

As much as $300 million is missing from funds Nadel controlled, officials say. He is accused of exaggerating the amount of money in his investment funds and transferring millions of dollars of investors' money to his bank accounts.

Assistant U.S. Attorney Terry Zitek said Nadel and his companies were paid $95 million in asset- and performance-based fees over the years for earnings that didn't exist.

As some investors cashed out, they were paid with other investors' money, Zitek said, describing the situation as "at least a partial Ponzi scheme."

After Nadel turned himself in Tuesday, he was asked by an FBI agent where he had been, Zitek said: "Been on vacation," was the response.

Nadel's attorneys, Barry Cohen and Todd Foster, tried to persuade Pizzo to release their client on his own recognizance and place him on electronic monitoring.

Cohen said Nadel called him Jan. 20. He said he tried to persuade Nadel not to commit suicide and put him in touch with Tampa psychiatrist Robert Fernandez, who conducted a number of sessions over the telephone.

One issue in the bail hearing was a note Nadel wrote to his wife, Peg, which she gave to law enforcement when she reported her husband missing.

In it he wrote: "My ego, stupidity and self deception crept in slowly and I could not resist the temptation to 'gild the lily' with my stock trading. The funds did not reflect their true performance. Despite all my efforts and belief that I could turn the tide, they are gone. My addled brain kept believing that I could trade my way out of it ... There are many people who would like to kill me, but you can assure them that I will do the job myself."
Zitek said Nadel's note was a form of confession and an attempt to deceive the public and investors into believing he had killed himself, in order to give him a chance to flee.

Cohen said the note was proof of Nadel's severe depression and that Nadel had no money left.

Nadel's case is being prosecuted by the same Manhattan federal prosecutor's office that is prosecuting Bernard Madoff, who is accused of the largest Ponzi scheme in history.

Krista Klaus of WFLA, Channel 8, contributed to this report. Reporter Elaine Silvestrini can be reached at (813) 259-7837.

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