Saturday, November 18, 2017
Business

Ponzi schemer "Mini-Madoff" Nadel is dead but efforts to mop up his mess is very much alive

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Florida Ponzi schemer Arthur Nadel, the "Mini-Madoff" of Sarasota, fled with millions in investor money in early 2009. He was arrested and in early 2010 was convicted of securities fraud. He was sentenced at age 77 to 14 years in prison in October 2010 only to die behind bars earlier this month at 80.

Justice served? End of story?

No way.

Promising fat returns, Nadel and his business partners ripped off more than 400 investors for nearly $170 million, making this scam the biggest Ponzi scheme in southwest Florida history. That money fueled a luxury lifestyle for Nadel and his wife, Peg, plus Nadel hedge fund partners Chris Moody and son Neil Moody. Their newfound wealth made them admired figures on Sarasota's charity circuit.

Now it's the court-appointed receiver's turn to find and start returning as much missing money as possible to Nadel's victims. Ultimately, millions will be reimbursed. But many millions will not because the stolen funds were spent on fancy living and personal Nadel investments that did not pan out or were drained during the recession.

"I marvel at the audacity of the people who concocted these schemes," says receiver Burt Wiand. He and his legal team at Tampa law firm Wiand Guerra King have tried to piece together the Mini-Madoff debacle for the past few years.

It's working, slowly. The first refund of about $26 million — 20 cents on the dollar — will be sent out shortly, says Wiand, 65, a former attorney with the U.S. Securities and Exchange Commission's enforcement division. Consider it a down payment on refunds to come as the Nadel receivership sells off more assets or demands repayment of funds via lawsuit.

For starters, Wiand has seized real estate assets to sell, including an entire mountain development near Asheville, N.C. Nadel and his wife, Peg, bought Laurel Mountain Preserve with grand ambitions. Now Wiand is stuck in a real estate recession with a vast property few want to touch. That sale may have to wait for better market conditions.

Assets Wiand did sell include the Venice Jet Center, an aviation service provider. Nadel bought it and invested millions with "no clear business vision," Wiand says. The outcome was a sale for only several hundred thousand dollars.

Wiand also recently sold a bond trading business called Bonds.com, a business started by the Moodys, that brought in just over $2 million to the receivership.

Other Nadel assets, including a Georgia aviation business and an Englewood manufacturing firm called Home Front Homes, fizzled or failed, leaving little of value.

Wiand has also sued Wells Fargo (which inherited the Nadel mess when it bought Wachovia Bank) for allegedly facilitating Nadel by allowing him to set up bank accounts that let him blur investor and business accounts for his personal use.

There's bigger game in Wiand's sights. He filed a lawsuit two years ago seeking close to $170 million against a major law firm, Holland & Knight, alleging malpractice and complicity in Nadel's activities.

"They are contesting the case vigorously," Wiand says. "This is what happens when a law firm does not do its job."

Both Holland & Knight and Wells Fargo deny wrong doing and are fighting these claims.

There are other targets. Wiand extracted a $10 million settlement from major Wall Street firm Goldman Sachs, plus $2.5 million from a broker/dealer called Shoreline Trading Group.

Wiand also is suing about 150 investors in Nadel's scheme who, the receiver says, actually profited from ill-gotten gains. Wiand wants those profits back via a legal maneuver called a clawback.

"We probably have $15 million to $20 million in clawbacks to pursue," Wiand says.

What motivated Nadel to pursue a Ponzi scheme?

"Greed and ego," Wiand says. "Probably more ego than greed."

Didn't it dawn on Nadel that this would eventually blow up in his face?

"At some point, he had to know," the receiver says. "It did not take long before the sum of money he was obligated to pay investors dwarfed the amount he had."

Nadel thought early on that he could trade his way out of his deficit. But Wiand says Nadel was no whiz kid at trading. And since he took so much of any profits for himself, there was no way Nadel could make up the overall losses.

Wiand rattles off the names of other prominent Ponzi schemers in Florida: Boy band producer Lou Pearlman in Orlando. Lawyer Scott Rothstein in Fort Lauderdale. Foreign currency trader Beau Diamond in Sarasota. Even New York's Bernie Madoff hit on Floridians via his part-time home in Palm Beach.

They are all in jail now. But they only represent the schemers that have been discovered.

Nadel's demise is not the end of Ponzi schemers in the Sunshine State.

"Florida is full of people with investable assets," Wiand says. "The guys who perpetrate these schemes seem able to generate credibility in a community or within a group in a community.

"And people flock to put their money with them," he says with wonder. "They flock to the slaughter."

Contact Robert Trigaux at [email protected]

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