Lying About One’s Size to Get Inside

by StockJockey

Tuesday, November 29, 2005 - 9:48 am

Come on, we've all done it. Exaggerating our, ahem, assets to get closer to something we want. Well, watch out, because while that might fly in the bedroom, the SEC ain't too happy about it happening in the board room. According to Bloomberg, more and more hedge fund managers are overstating the size of their bond holdings to gain a seat at the table during bankruptcy proceedings. Why? Access to inside information, of course. The SEC's first case in this area ended in a fine with no admission of guilt. Van Greenfield, a 60-year-old New York City resident and principal of Blue River Capital, coughed up $150,000 to make charges that he falsely claimed to own $400 million of Worldcom bonds to get a spot on the company's creditors' committee in 2002. Greenfield ran Blue River, whose only investors are Greenfield himself and a family trust he established in 1984, out of the ground floor of his townhouse at 129 East 64th Street (swanky!), employing two full-time traders and one assistant trader. According to the SEC action, the fund has not made any new investments since November 2004. SEC Investigates Bankruptcy Committees [Bloomberg] SEC Administrative Proceeding #3-12098 [SEC.gov]

Comments:

If you read the SEC document, it looks like Greenfield owned only $6.5 million (face value) of Worldcom bonds. It also says he made a profit of $425,000 trading in Worldcom securities while on the committee.

Posted by Jason C on 12/31/1969 at 03:00 PM

Speak for yourself Mr. UTC. Size matters.

Posted by Slim Shady on 12/31/1969 at 03:00 PM

I am surprised that this clown was able to wangle his way on to the committee. I and people who work for me have served on several committees (mostly in emerging markets) and the very first fight that the inchoate committee tends to have with the defaulted debtor is over how and to whom aspiring committee members will have to prove their holdings. Generally, an agreement is reached whereby creditors provide evidence to the law firm representing creditors and that firm assures the debtor’s counsel that everybody involved in the committee is a bona fide large holder of debt. The second fight tends to be over the nature of the confidentiality agreement and/or chinese wall that creditors will have to commit to in order to serve on the committee. Therefore I am surprised that anyone would expect to get away with trading on inside information obtained by serving on a creditor committee. It is a matter of record that you’ve served and you’ve almost certainly signed a confidentiality agreement that makes it perfectly clear that you know you are not supposed to trade on information you receive through serving on the committee.

Posted by on 12/31/1969 at 03:00 PM

Thanks, Ben. Very interesting--it does make you wonder.

Posted by UTC on 12/31/1969 at 03:00 PM