This case involves a woman who developed neuroma formations at the site of a previous cesarean section scar. The patient complained of intractable pain after surgery and her doctors recommended a resection procedure to relieve the pain. The surgeon identified an iliofemoral neuroma but chose not to resect the mass. Instead, he decided to bury it beneath the scar tissue. The patient now suffers from increased pain that was recently diagnosed by a pain management specialist as complex regional pain syndrome.

For some time, the literature has described neuromas sonographically as ovoid, hypoechoic masses. Ultrasound also provides guidance during corticosteroid injections as a means to alleviate pain. In addition, it has been reported to be helpful in the detection and treatment of painful stump neuromas from amputations. Frequently, this condition is missed in patients who often have their complaints dismissed as psychosomatic. It is now common belief that ultrasound can provide valuable assistance in identifying the neuroma, defining its exact location, and improving the success rate of neuroma injections. This should improve the long-term prognosis. Also, ultrasound scanning should be considered as a diagnostic and therapeutic modality when a neuroma is suspected.

1. What is the standard of care in making a timely diagnosis to prevent the long-term effects of the pain syndrome?

Location: Ohio M.D., University of Naples Medical School Residency, Neurological Surgery, University of Naples Medical School Residency, Surgery, Memorial Sloan-Kettering Cancer Center Residency, Neurological Surgery, Northwestern University Medical School Board Certification, Neurological Surgery Active Medical Licenses: Ohio, Pennsylvania, New Jersey, California, Illinois, and Italy Member, American Association of Neurological Surgeons Member, Congress of Neurological Surgeons Former A******** N*********** U********* o* C********* L** A****** M****** C***** Former C**** S**** B*** S****** a** N************* U********* o* C********* I***** M****** C***** Former C**** N*********** C***** H******* Former A******** P******** N*********** U********* o* C********* L** A****** Former A******** P******** N*********** U********* o* C********* I***** Former P******** U********* o* M******* a** D******** o* N** J***** Current P******** N*********** m**** m****** s***** Current D******* S**** B**** N*********** m**** m****** c***** Current D******* S*********** R*********** m**** m****** c*****

This neurosurgeon remained in active practice for over 30 years, has been a visiting professor in 6 countries, and has been invited to present at neurological centers and conferences on an international level. He's been an editor and peer reviewer of journals, as well as published over 100 times in peer-reviewed journals, books, and abstracts. Finally, he has been recognized as among the 'Best Doctors in America' for five consecutive years.

C-section Leaves Woman With Chronic Intractable Pain Syndrome

This case involves a private equity fund’s managing partner and the manager of the fund’s trading operations. The managing partner told potential investors that the fund was an investment vehicle that would allow investors to capitalize from both bull and bear markets. The managing partner directed investors to send monies by check or wire transfer to an account which was under the control of the trading manager and his wife. Neither the managing partner nor the trading manager filed registration statements with the SEC as required by the Securities Act for any fund offerings. The trading partner received over $22,000,000 in investor funds but lost $890,000 through his trading activity. The trading partner also used $4,500,000 to buy jewelry, gemstones, gifts, and real estate. The managing partner and trading partner made numerous misrepresentations to investors by not telling them that there was only minimal trading going on and that the fund’s only source of income was new investors. The SEC filed a complaint against the managing partner and the trading partner for violating the Securities Act.

The types of misrepresentations made to investors in this case suggest that the managing partner and the trading partner were actually involved in a Ponzi scheme. A Ponzi scheme is a fraudulent investment scheme where existing investors are paid with monies contributed by new investors and where all the investors are promised high returns. The managing partner and trading partner in this case are probably guilty of violating the Securities Act because the trading partner told investors that he was a capable equity trader and misrepresented to investors that he could generate substantial profits for investors. Under the Securities Act, the fund was required to submit registration statements for their securities and the fund’s failure to do so violated Sections 5(a) and (c) of the Act. The managing partner and trading partner are also probably guilty of fraud under the Securities Act since they made numerous misrepresentations to investors and since the majority of money raised from investors was not traded but was used for their personal means. Because of this, the managing partner and trading partner probably violated Section 17(a) of the Securities Act by making material misrepresentations to investors.

1. Can a private equity fund that promises investors a high rate of return from trading securities be charged with violating the Securities Act if the fund makes misrepresentations to investors and only engages in minimal trading?

Private Equity Fund Manager Violates Securities Act With Ponzi Scheme

This case involves an alleged Ponzi scheme at a hedge fund in which approximately 30 investors lost between $250,000 and $300,000 each, for total losses of about $10 million. The fund’s investment manager chose to invest in unknown companies, rather than the blue chip stocks they had initially invested in. The fund administrator was instructed to send the values of these positions to investors on a regular basis, as determined by the investment manager. The hedge fund administrator never received those valuations from the investment manager. At the time, investors believed that the fund administrator was performing proper due diligence, vetting the positions they were invested in, but they received little to no response from the investment manager. The fund administrator also knew that the investment manager had not obtained an audit for 3 years.

The plaintiff alleges that the defendant failed to verify the existence of the hedge fund’s holdings, ignored a multitude of red flags and inconsistencies in the fund’s accounting practices and even manipulated the fund’s accounting in order to support an inflated net asset value calculation and communicated this false information to the fund investors. Ultimately, the fund collapsed, the investors lost all of their investments and the hedge fund manager pleaded guilty to criminal fraud. The plaintiff believes the hedge fund administrator had more responsibility in ensuring their investments were legal, safe and transparent.

I have spent more than 20 years conducting investment and operational due diligence on alternative investment managers, specifically hedge funds, fund of hedge fund and 40-Act alternative mutual funds. The business process management I follow places a strong emphasis on the assessment of operational risk factors, including the independent verification and communication with outside service providers, including the administrator. Most institutional investors and consultants seek a top-tier administrator to provide credibility to the fund under review. The role of the administrator has morphed over time, but the general functions are fund accounting, including independent portfolio pricing, which typically includes everything from trade capture to calculation of NAV. The administrator will also conduct profit and loss calculations, as well as fee calculations and partnership accounting. There are also other shareholder and corporate services an administrator may be engaged to undertake, depending on the needs of the client. It is precisely this independence that is so critical to outside investors. In the course of my due diligence review, I will contact the administrator for screening. These responses are a critical component of any thorough due diligence process. This expert has nearly 22 years’ experience in the financial services industry, with a focus on direct investment and operational due diligence of alternative investments. The experthas a B.S. in Finance and Accounting, and focuses on in-depth inspection of hedge funds and their operations including hedge fund administrators. At a major asset management firm, this expert served on the national due diligence unit and was responsible for the monitoring of hedge fund, fund of hedge fund, and liquid alternative investments in the U.S. and Asia. The expert currently serves as President and CEO of an alternative investment consulting firm that, among other things, focuses on thorough investment and operational due diligence and insurace risk assessment.

1. Can you discuss your experience in hedge fund administration? 2. What are the duties of the administrator when it comes to safeguarding investors from fraud?

Location: Massachusetts B.A., Economics, Ripon College M.B.A., Business Administration, Washington University-Olin School of Business Certified: Chartered Alternative Investment Analyst Member, Hedge Fund Group Association Former C********* L*** O****** F**** W******** N******* B*** Former M********* C********* L**** H****** a** C****** Former S***** V*** P******** o* R*** M********* S**** S***** C********** Present, Principal, financial services consulting firm

This expert has extensive experience in the hedge fund administration experience with over 25 years at State Street Corporation where he was in the Alternative Investment Solutions branch and was responsible for commercial lending services and fund administration services. Earlier in his time, he performed Investor Services Risk Management for State Street. A Certified Alternative Investment Analyst, he has a B.A. in Economics from Ripon College and an M.B.A. from Washington University's Olin School of Business. He currently serves as a Principal for a consulting firm where he provides support to the financial services industry regarding various matters including risk management due diligence processes.

Hedge fund administrator ignores red flags of Ponzi scheme

In this case, an accounting expert was called in by the plaintiff in order to examine financial records detailing alleged irregularities by the defendant. The plaintiff was the receiver appointed to oversee proceedings to benefit hedge fund investors in Ohio who lost millions in a widespread Ponzi scheme perpetrated through several hedge funds over the course of 10 years. The fund managers collected fees from the hedge funds for their purported investment management services, utilizing numerous software appliances including Quickbooks to track their business enterprises. Approximately $100 million of investor funds were paid in management fees. The hedge funds paid approximately $50 million in false profits to net winners of the scheme. Losers incurred losses of at least $168 million. The funds’ owner and Ponzi scheme operator pleaded guilty to securities fraud, mail fraud and wire fraud and was sentenced to prison.

Throughout the scheme, the funds allegedly used several bank accounts at a bank to move the money. The receiver has sued the bank alleging it had actual knowledge of conversion of breach of duty, knew the scheme operator’s background and that his account opening documents had discrepancies, failed to implement adequate account monitoring programs, participated in investments in two of the hedge funds, knew the operator was commingling money across several accounts, and knew of transfers between non-matching trading and shadow accounts.

The receiver filed claims of negligence, fraudulent transfer and unjust enrichment against the bank.

In my opinion, based on the extensive information that I have reviewed, it is evident that the scheme operator ran a classic Ponzi scheme. This Ponzi scheme collapsed because the hedge funds paid management fees (based on inflated balances from purported gains) of approximately $100 million and transferred monies to investors as purported trading gains and principal redemptions when the hedge funds, in fact, had actual trading losses of more than $24 million. At no time could the hedge funds meet their obligations to investors for the principal they invested. The hedge funds never produced profits to pay investors. The operator indiscriminately commingled investor funds regardless of the hedge fund in which an investor invested. The data reviewed clearly shows that he operated the hedge funds as one continuous Ponzi scheme. The operator maintained shadow bank accounts at the defendant bank. The use of these shadow bank accounts permitted the furtherance of the Ponzi scheme by facilitating the surreptitious transfer of funds among the various hedge funds. The operator would have been unable to operate his Ponzi scheme without access to and the use of the shadow accounts.

1. How were the bank funds used? 2. Could the scheme have operated without the bank accounts?

Midwest

Ohio

Accounting Expert Examines Financial Transfers Used by Ponzi Scheme

The Securities and Exchange Commission filed an enforcement action against the operator of a large-scale Ponzi scheme. The hedge fund operator pleaded guilty to a multi-count indictment for securities fraud, wire fraud, mail fraud and other charges. The SEC appointed a receiver who sued numerous hedge fund investors seeking to claw back false profits under the theories of avoidance of fraudulent transfers under the state’s uniform fraudulent transfer act and unjust enrichment, scamming customers in a ripoff attempt to earn back profits.

Even using the numbers provided by the receiver that we feel are incorrect, the data shows that the hedge funds' actual trading performance from inception to 2005 was a positive of nearly $23 million, net of trading losses incurred to that date. Further, it appears that the receiver assumed that all distributions made were from profits. In fact, people who withdraw from a hedge fund receive a return of capital that is not part of a profit distribution. These different classifications of amounts distributed should be factored out when determining if distributions made were in excess of income. When all of the funds in question are totaled for profitable years from 2002 through 2005, there were trading profits of more than $40 million. When losses are included for the years that had losses, we calculated net investment trading profits in excess of $38 million. The receiver acknowledges net profits of more than $28 million for the same period. So, while our numbers may differ from the receiver, we agree that during the years in question (2000-2005) the hedge funds at issue earned a significant net profit on trades. Woefully insufficient evidence exists to support the claim that to a reasonable certainty the hedge funds operated in 1999 to 2004 were Ponzi schemes. We conclude without fear of contradiction that based on the evidence we have received to date, the manager appears to have operated a substantial underlying investment business during this period. The evidence supports a position that the entities were not a Ponzi scheme from the beginning but went through a fundamental change at some point. With specific reference to the investment club, it appears that considerable information is missing, as well as at least one brokerage account, as related to over $2.8 million of gains. It is my opinion that the investment club fund did not use new investor monies to pay past investors, as distributions were from earnings and profits and a return of capital when the additional transactions and profits are included in the analysis. The expert is a certified public accountant with more than 20 years of experience.

1. At what point were the hedge funds and managers insolvent? 2. Was the investment club at issue ever involved in a Ponzi scheme?

SEC receiver seeks to recoup false profits from hedge fund investors

This case involves a business professional who was convicted of involvement in a Ponzi scheme and sentenced to jail. The federal judge verbally ordered the sentence of one year, which was different from what was written. According to the written sentence, the man was actually sentenced to an additional 18 months. His attorney did not pick up on this at the time and did not pass this information along to his client. The man expected to get out of prison after 12 months but later discovered he had another 18 months to serve. He corresponded with his attorney in an attempt to remedy the situation but the attorney remained unresponsive. An expert criminal defense attorney was sought to opine on an attorney’s duties to the client and who was at fault for this error.

I have been a criminal defense attorney for the past 11 years in the state of New York (and, prior to that, as a prosecutor with the Marine Corps). I have practiced extensively in both state and federal court and have taken more than fifty cases to trial. I am licensed to practice law in New York and DC, as well as all military courts. I have also taught CLEs on best practices, ethics, evidence and trial tactics. In addition, I have a number of federal and state criminal defense clients and I have had clients that have been charged in both state and federal court on similar charges. Best practice is to get the federal sentence to run first, and then get the state to sentence the defendant or the attorney could get an explicit agreement from the judges to sentence the defendant concurrently.

1. Do you have experience representing alleged criminals in instances similar to the one described above? 2. Can you speak to the best practices for a criminal defense attorney as it relates to advising your client on sentencing?

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Ponzi Scheme Expert Witness Case Studies

C-section Leaves Woman With Chronic Intractable Pain Syndrome

Private Equity Fund Manager Violates Securities Act With Ponzi Scheme

Hedge fund administrator ignores red flags of Ponzi scheme

Accounting Expert Examines Financial Transfers Used by Ponzi Scheme

SEC receiver seeks to recoup false profits from hedge fund investors

Criminal Defense Attorney Fails To Inform Client Of Sentence Length

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