Investors Hire Gumshoes to Snoop on Fund Managers

Fraud schemes prove boon to private eyes
By Nick McMaster,  Newser Staff
Posted Mar 23, 2009 4:24 PM CDT
Investors Hire Gumshoes to Snoop on Fund Managers
Sir R. Allen Stanford poses for photos at the Lords Cricket Ground in London in this 2008 photo.   (AP Photo)

Investors are increasingly hiring private investigators to dig up dirt on fund managers in hopes of avoiding the next Madoff-style fraud, Bloomberg reports. Background checks are expensive—depending on the firm, they may cost $1,000 per company or individual investigated—and can take weeks, but investors say they are often highly effective at identifying questionable funds.

That’s because screw-ups tend to be screw-ups for life: If managers have dodgy practices, they’ve likely had run-ins with regulators in the past. Personal indiscretions, like citations for drunk driving, are also reliable red flags, investigators say. For example, Arthur Nadel, a manager from Florida who was recently caught for having perpetrated a $300 million investment fraud, was disbarred in New York in 1982. (More investor stories.)

Get the news faster.
Tap to install our app.
Install the Newser News app
in two easy steps:
1. Tap in your navigation bar.
2. Tap to Add to Home Screen.