Sarasota money manager Arthur Nadel appears in court

TAMPA — Missing Sarasota hedge fund manager Arthur Nadel, charged with fraud in what authorities say was an elaborate Ponzi scheme that bilked investors out of millions of dollars, has turned himself in to the FBI in Tampa and will be held for a Friday hearing.

Nadel, 76, disappeared from his Sarasota home on Jan. 14, telling his wife in a note that he felt guilty and feared he would be killed. Authorities traced him to Louisiana using cell phone records, but his whereabouts in more recent days had been unknown.

"I'm absolutely elated" by Nadel's arrest, said Chris Moody, whose father, Neil, started several investment funds managed by Nadel. "But other than that, the authorities have told me I can't make any comment."

At an afternoon court appearance by Nadel, Assistant U.S. Attorney Terry Zitek asked that he be held until Friday so the government could prepare.

Tampa attorney Barry Cohen was among the attorneys in court on Nadel's behalf. He argued that detention was unnecessary, noting that Nadel isn't a flight risk.

"He has shown good faith," Cohen said. "He's here. He had planes he could have flown out on. He didn't. He's here. Three days in a cage is a long time to be locked up in a cage.

"This is not a violent person who was out shooting people, out killing people. This is white collar," Cohen said.

The judge held Nadel anyway and postponed the hearing until 1:30 p.m. Friday.

Nadel came in looking all of his 76 years. He wore a gray cardigan with a blue argyle pattern and had chains around his waist connected to his wrists. He wore a loose-fitting olive button down and olive slacks that seemed to hang on a thin, fragile frame.

He wore glasses and slumped over, seeming to force a smile when one of his attorneys, Todd Foster, patted him on the back.

His wife, Peg Nadel, attended, dabbing at her eyes with tissue through much of the hearing.

Cohen said Nadel was suffering from emotional problems and also has medical concerns. At the end of the hearing, Foster delivered a bag of pill bottles over to the U.S. Marshals Service.

A native of New York, Nadel was charged in a complaint filed in the Southern District of New York.

In the criminal complaint filed Jan. 21, FBI Special Agent Kevin G. Riordan charged Nadel with two counts of securities fraud for making "untrue" and "misleading" statement to investors regarding his management of their money. Based on documents provided by the SEC, Riordan said he knew of more than 100 investors throughout the United States.

The complaint said that Nadel managed investments in two groups of funds — one started by himself and the other by a partner who is not identified but appears to be Sarasota entrepreneur Neil Moody.

Nadel was the only person authorized to trade money invested in the funds and from about 2002 through this month, he traded with a brokerage, also unidentified, in New York. At various times, a "wire request form" with the signature "Arthur Nadel" was faxed to the brokerage offices for the purpose of directing the firm to transfer money from one account to another.

The complaint lists five victims, including Victim 1, a New York hedge fund that invested approximately $13.6 million in three of the funds after being told by Nadel's office that total assets came to $216 million — far more than the funds' true value. Victim I was told that the returns on its investments were between 8 percent and 9 percent last year and that earlier returns on investments were much higher.

When Victim 1 asked for its money back in or around October, it was told that the money would be returned this March.

Others listed in the complaint include Victim 3 from Virginia, who received statements showing his/her investments had soared to $2.54 million when in fact "representations in these monthly account statements regarding the value of (the) investments were false," the complaint says.

The complaint further says that Nadel represented to investors that his returns on investments averaged more than 20 percent each year, and that his trading had resulted in losses in only a brief period in 1999.

According to the FBI agent, one of Nadel's partners knew that Nadel had been disbarred from practicing law in New York. The same partner repeatedly urged Nadel to hire an independent certified public accountant, sending him a letter as recently as Jan. 8, but Nadel refused to do so.

Based on conversation with another partner, the agent learned that on or around Jan. 15 some of Nadel's employees had found several pieces of paper in a shredding machine at his Sarasota office. The employees put them together and turned them over to law enforcement, including what appeared to be several pages of a handwritten letter from Nadel to his wife Peg stating in part: "If you want to survive this mess, what follows is for your eyes only. … The avenue 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 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."

The letter went on to offer several instructions, including to sell the Subaru — Nadel's car, which was found at the Sarasota airport, "if you need money." It concluded, "I will send you a letter in a day or so to tell you."

On or about Jan. 15, the second partner learned that the total remaining assets in the two groups of funds came to only about $350,000.

Susan Taylor Martin can be reached at susan@sptimes.com or (727) 893-8642.

Sarasota money manager Arthur Nadel appears in court 01/27/09 [Last modified: Wednesday, January 28, 2009 11:32am]

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