Financial Mines

News and notes from the business reporters for the Connecticut Media Group.
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Ponzi scheme charges tie up Highview funds

Monday, May 16, 2011 by:Rob Varnon
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The U.S. Securities and Exchange Commission announced monday it has charged Highview Point Partners LLC, a Stamford-based investment adviser, with engaging in a multi-year Ponzi scheme involving hundreds of millions of dollars.

The charges come just days after Highpoint filed for Chapter 11 bankruptcy protection.

Here are excerpts from the SEC’s press release on the situation.

Highview was added as a defendant to a case the SEC previously filed in January 2011, and three hedge funds managed by Highview were named as relief defendants because, according to the SEC’s charges, they are in possession of funds tainted by the Ponzi scheme. After a hearing, the Honorable Janet Bond Arterton, U.S. District Judge for the District of Connecticut, entered a consented-to order on May 13 temporarily freezing the assets of Highview and the three hedge funds it advises. A hearing on the SEC’s motion for a preliminary injunction is set for May 23.

Highview appears to be entagled in the case involving Francisco Illarramendi and MK Capital Management, another alleged ponzi scheme that might have cost investors $53 million. Illarramendi and MK Capital’s funds were already frozen by a court order.

On May 10, the SEC filed a second amended complaint adding Highview as a defendant, and charging that Illarramendi conducted his alleged fraud while he was a partial owner of Highview, a Commission-registered investment adviser, and that he used the two advisory firms (Highview and MK Capital Management) in tandem to conduct the scheme. In particular, the second amended complaint alleges, among other things, that Highview Point Partners, acting through Illarramendi, misappropriated money from the three hedge funds it advised: Highview Point Master Fund, Ltd., Highview Point Offshore, Ltd., and Highview Point LP. The second amended complaint alleges that Illarramendi hid the misappropriation in the Highview hedge funds by misappropriating money from different hedge funds managed by MK Capital Management. According to the second amended complaint, this acted as a fraud on both sets of clients, in that Illarramendi used money from one set of investors to repay earlier investors.

Categories: General

Post Galleon: A really brave new investors’ world?

Friday, May 13, 2011 by:Rob Varnon
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Galleon co-founder Raj Rajaratnam’s conviction on insider trading violations raises a number of questions and concerns for the investment community, but should one of those be about whether an investors keeps profits gained as a result of these kinds of activities?

Fred Wilpon, who the trustee investigating the Madoff fraud, has said owes investors about $1 billion in profits, is shopping a minority stake in the Mets as he and his partners defend themselves against the allegations.

One of the potential buyers of that stake is Steve Cohen, whose firm SAC Capital, is now bogged down in an insider trading investigation involving former employees.

So with federal prosecutors claiming that Rajaratnam, a Greenwich resident, pocketed more than $63 million in profits from his insider trading scheme, should Galleon investors worry?

Attorney Rick Slavin, head of Cohen and Wolf P.C.’s securities group and a former SEC litigator, said probably not from the government, but a private lawsuit might arise.

“Using the reasoning I’ve been using with Madoff, it’s an ill-gotten gain,” Slavin said. “When you can show one investors lost everything and one who got paid because he win first, it’s an easy argument that the one who got paid should pay back the illegal profits.”

Bernard Madoff ran a $65 billion ponzi scheme that wiped out a lot of money, but early investors apparent got paid. And that’s what the trustee says Wilpon was.

In effect, you can see who lost money and who gained.

In the Galleon case, it appears investors made money with Rajaratnam. But are those profits ill-gotten.

“Investors of the fund benefit from his trading,” Slavin said. “It’s certainly possible the fund becomes a defendant in a civil action.”

That requires a party to show some harm was done.

In Galleon, Slavin said it was the market that was harmed and ultimately, investors in the stocks that weren’t privy to the same information that Rajaratnam had.

There are a lot of interesting arguments to be made in regards to who should pay for insider trading.

Should an investor who didn’t know about the insider deals, be penalized? Certainly there was no intent or action to do wrong.

But should ignorance serve as a defense when people profit off of illegal activity?

If the government really wants to stop insider trading, wouldn’t going after profits from investors accomplish that? Certainly investors would be more diligent about who gets their money to invest if they might face a federal investigation and possibly losing profits?

Ultimately, Slavin said he didn’t think the fund will face fines.

Categories: General

Movie costs trim WWE profit in 1Q

Thursday, May 5, 2011 by:Rob Varnon
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Stamford-based WWE reported net income of $8.6 million, or 11 cents per share, for the first quarter 0f 2011, down from the $24.7 million, or 33 cents per share for the first quarter of 2010.

The company has expanded its entertainment offerings during the last few years and branched into movies. It said its cinematic reveneus were off in the quarter, largely due to impairment charges related to its 2009 movie, 12 Rounds and marketing and related costs associated with its latest offering The Chaperone.

Last year, the WWE’s big revenue generator, Wrestlemania occured in the first quarter, but this year it happened in the second. So that also trimmed first quarter profits. However, this sets up expectations for a stronger second quarter than last year.

Revenues at WWE for the first quarter topped $119.9 million.

Executives will hold a conference call with anlysts, later today.

Categories: General

Net income at Silgan misses

Wednesday, May 4, 2011 by:Rob Varnon
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Stamford-based Silgan Holdings reported net income failed to meet analysts expectations in the first quarter. The mean EPS for the consumer goods packaging company, according to a survey by FactSet Research was 39 cents a share.

Silgan reported net income of $26.1 million, or 37 cents a share for the first quarter of 2011. The company reported net income of $26.8 million, or 35 cents a share, for the same quarter a year ago.

Silgan said it had a couple of one-time costs related to recent acquisitions in the quarter but also saw an impact in its metal container shipment business, which was slower this quarter because customers adjusted their buying cycles.

The company held a conference with analysts to discuss the earnings, but barred media from accessing the live venue on Wednesday. A replay will be available on May 19.

Like much of the market, Shares of Silgan traded down on Wednesday and were off 37 cents to $45.30 in trading before noon.

Categories: General

GE share votes lift Lafley, not pretty for Avon chief

Tuesday, May 3, 2011 by:Rob Varnon
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GE filed on Monday the final tally of votes from its Salt Lake City meeting  revealing who shareholders like at the helm of the Fairfield-based giant.

Alan “A.G.” Lafley, the former Proctor & Gamble chief, was the most popular director, with 6.09 billion votes for and garnering less than 100 million against. He was the only director to have such a low against total.

He just edged out Robert J. Swieringa, an accomplished accountant and academic, who taught at Stanford, Yale and served as the dean of Cornell’s Johnson Graduate School of Management for a decade.

The dubious honor of least popular director went to Andrea Jung, chairman and chief executive officer of Avon Products Inc., who got 5.2 billion shares for 841.8 million against.

 Here’s the table from the SEC filing.

A. Election of Directors:

 

                                 
     Shares For      Shares Against      Shares Abstain      Non-Votes  
W. Geoffrey Beattie      5,717,325,631         383,106,769         43,344,740         2,116,572,066   
James I. Cash, Jr.      5,645,873,768         458,620,354         39,283,018         2,116,572,066   
Ann M. Fudge      5,980,010,414         125,446,071         38,320,655         2,116,572,066   
Susan Hockfield      5,753,374,448         352,901,081         37,501,611         2,116,572,066   
Jeffrey R. Immelt      5,820,576,981         287,746,410         35,453,749         2,116,572,066   
Andrea Jung      5,264,422,127         841,842,544         37,512,469         2,116,572,066   
Alan G. (A.G.) Lafley      6,009,125,481         94,909,446         39,742,213         2,116,572,066   
Robert W. Lane      5,693,451,078         410,460,140         39,865,922         2,116,572,066   
Ralph S. Larsen      5,687,148,399         415,960,151         40,668,590         2,116,572,066   
Rochelle B. Lazarus      5,721,498,411         384,331,125         37,947,604         2,116,572,066   
James J. Mulva      5,755,998,766         348,124,546         39,653,828         2,116,572,066   
Sam Nunn      5,561,936,241         543,866,478         37,974,421         2,116,572,066   
Roger S. Penske      5,503,458,091         569,136,352         71,182,697         2,116,572,066   
Robert J. Swieringa      6,001,616,478         102,018,837         40,141,825         2,116,572,066   
James S. Tisch      5,420,316,467         684,167,933         39,292,740         2,116,572,066   
Douglas A. Warner III      5,639,542,216         465,911,295         38,323,629         2,116,572,066   
Categories: General

Sikorsky delivers 300th Seahawk

Wednesday, April 27, 2011 by:Rob Varnon
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The 300th Sikorsky Seahawk sits on display during a ceremony Wednesday. Photo by Autumn Driscoll

Sikorsky Aircraft and the U.S. Navy celebrated the delivery of the 300th Seahawk helicopter in Stratford Wednesday.

Off the East Coast of Africa patrolling for pirates, delivering humanitarian aid in Japan and supporting NATO missions in Libya, Rear Admiral Paul Grosklags, vice commander Naval Air Systems Command, said the Seahawk has become the first responder for the U.S. Navy, which is itself more and more the nation’s first responder.

“You are kicking butt,” Grosklags said, as hundreds of workers gathered in front of rows upon rows of Seahawks in various stages of completion at the factory on Main Street.

They learned there’s a potential contract extension that would bring about 576 more helicopters to the Stratford plant.

During the ceremony, Grosklags read comments from commanders in the field expressing their appreciation for the Seahawk.

Many workers expressed pride in their work and were especially glad to hear the report from the field during this time of war.

“It’s right in front of you every day,” said one line worker, of the war, that seems to too often get lost in news about a lackluster economy, political posturing and celebrity gossip.

“It’s a big deal,” said Tom Van Nostrand, a crew chief from Ansonia, as service mechanic James Kucharski, of East Haven, agreed. The two men combined have 58 years experience at Sikorsky. They work in the hangar making sure the helicopters are ready to perform.

Sikorsky is delivering two versions of the Seahawk, the MH-60 S, called the Sierra, and the MH-60R, called the Romeo. Wednesday market the 200th Sierra delivered and the 100th Romeo.

“One hundred is a big milestone for us,” said Kucharski, of the complex Romeo.

The Romeo is a sub hunter and contains what can best be described as highly evolved electronics. The Romeos are delivered to Lockheed Martin in Oswego, where the cockpit and those additional systems are added.

The Sierra’s provide search and rescue and transportation, as well as many other functions.

Dennis Jarvi, Sikorsky vice president for Navy and Marine Corps programs, also commended the workers.
“What you do every day makes this happen,” he said.

Both Jarvi and Grosklags said it was vitally important for helicopter systems to come in on time and on budget, tasks made harder in a world of rising materials costs and constrained budgets.

But Jarvi said after the ceremony that Sikorsky has been able to control costs largely through the maturation of the United Technologies Corp.’s Ace program, designed to trim costs through efficiency and rewarding workers for finding those efficiencies.

He and other Navy officers said costs can also be controlled through long-term contracts to allow the purchase of materials over a period of time.

Rear Adm. Paul Grosklags, vice commander Naval Air Systems Command visits Sikorsky Aircraft Wednesday. Photo by Autumn Driscoll

During the ceremony, the Navy and Sikorsky announced they are beginning negotiations for an extension of a contract that could lead to 500 more helicopters for Sikorsky over the next five years.

Categories: General

Military looking to cut energy usage

Wednesday, April 27, 2011 by:Rob Varnon
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In a speech Tuesday, Deputy DefenseSec. William Lynn III called for more fuel efficiency as conflicts have become long-term. DoD will be creating energy usage plans and could be investing in newer greener tech. It will also be looking for better jet and helicopter performance, presumably.
Visit defense.gov for details

Categories: General

Hexcel shares surge Tuesday

Tuesday, April 26, 2011 by:Rob Varnon
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Shares of Stamford-based Hexcel Corp. surged more than 8 percent in morning trading as executives headed into a meeting with analysts to discuss first quarter performance.

Hexcel, the maker of composite materials and engineered products for aircraft and industrial uses, reported net income of $26.4 million, or 26 cents per share, for the first quarter of 2011. Both beat analyst estimates.

Shares in Hexcel traded as high as $22.08 near the open of the market, up from Monday’s close of $19.58 on the New York Stock Exchange. Just before 11 a.m. shares were still holding above $21.

So far, composite materials makers are reporting they have pricing power at a time when higher materials costs are worrying some industries. But Hexcel’s customer  base includes defense contractors, so a bigger concern might be government budgets going forward.

Categories: General
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