Nadel Diverted Client Funds To Family: Feds

Florida hedge-fund manager Arthur Nadel turned himself in yesterday to the FBI in Tampa.

Nadel had gone missing Jan. 14. He was immediately jailed. A bail hearing is set Friday.

Previously we’ve written about some of the Nadel parallels to the AdSurfDaily Ponzi scheme case. Some of the parallels grew even more striking yesterday, with assertions by federal authorities that Nadel had diverted client funds to family businesses and his wife.

Federal prosecutors filed a second forfeiture complaint last month against assets tied to ASD. The government seized real estate, automobiles, a boat and other water equipment paid for with ASD money diverted to family members of ASD President Andy Bowdoin.

In a forfeiture complaint filed in August, prosecutors seized tens of millions of dollars Bowdoin had in bank accounts, plus other real estate tied to ASD. The total amount seized in the case is at least $93.5 million.

Burton W. Wiand, the receiver in the Nadel case, now has gone to court to attach family assets.

“Based on our investigation, it is likely that a significant sum of the proceeds of Nadel’s scheme made its way into other accounts controlled by Nadel and/or his wife, Marguerite Nadel,” Wiand said.

Last year, for instance, Nadel signed checks transferring at least “$1,003,500.00” from Scoop Capital to himself and his wife, Wiand said.

The scheme likely had been under way for years, Wiand said.

“Further, in 2003 and 2004 I have already seen documentation showing that at least $685,000.00 was transferred to Nadel and his wife (and have reason to believe that significantly more money was transferred to them),” Wiand said. “In short, it is apparent from the documentation that large quantities of money were diverted from the Hedge Funds to Nadel and Mrs. Nadel. Indeed, to date we have not uncovered any source of income for Nadel or his wife that was not in some manner funded with money from the scheme.”

Nadel made the checks out by hand, making them payable either to himself or his wife and himself. Sometimes he used the couple’s formal names — “Arthur” and “Marguerite”; other times he used the informal “Art” and “Peg.”

As the hedge fun assets dwindled, Nadel acquired jets, airplanes and real estate for the family businesses, according to court filings.

Precisely how clients’ money was plundered virtually it its entirety was unclear. What is clear is that the scheme began to unravel when the alleged Bernard Madoff Ponzi was revealed.

Nadel, prosecutors said, had been under pressure from colleagues to hire an independent accountant to audit the firms’ assets, but always said no. When the Madoff case made headlines, colleagues insisted on an independent audit. Nadel fled on Jan. 14, a date by which it had become clear that the audit would be performed, prosecutors said.

Peg Nadel has not been charged with any crimes.