Latins quiet about Madoff losses
Latins quiet about Madoff losses

The Wall Street Journal

Sunday, January 04, 2009

Wealthy Latin Americans appear to be among the big losers in the $50 billion Ponzi scheme orchestrated by financier Bernard Madoff, although many in the region are reluctant to step forward due to the private nature of Latin American fortunes, worries about security, and concerns about tipping off local tax authorities.

Some were brought into the Madoff investment fund, which the New York-based financier confessed earlier this month was a Ponzi scheme, through Banco Santander, the Spanish bank, which has major operations through the region.

Bernard Madoff scandal
The veteran Wall Street money manager, a part-time Palm Beacher, is accused of duping a long list of investors in a huge Ponzi scheme.

Other investors appear to have been introduced to the scheme through their friendship with Andres Piedrahita, a socially prominent, Colombian-born banker living in Madrid and London. Piedrahita, is a son-in-law of Walter Noel, founder of the Fairfield Greenwich Group, which may have lost $7.5 billion it had invested with Madoff. In a statement released in Spain, Fairfield Greenwich said it was a victim of fraud and was considering legal action to protect its clients. Piedrahita couldn't be reached for comment.

Earlier this month Banco Santander, which operates in Puerto Rico and eight Latin American countries from Mexico to Argentina, admitted losing more than 2.3 billion euros ($3.22 billion) it had invested in the Madoff fund.

"Santander clients in Monterrey were invited to invest in that fund," says Ernesto Canales, a top Mexican corporate lawyer in Monterrey, known as Mexico's industrial capital. Canales believes that given Santander's size in Mexico and the size of the bank's acknowledged losses, Mexican clients of the bank may have lost as much as $300 million. A spokeswoman from Banco Santander had no comment.

Members of the wealthy Clariond family of Monterrey - who raked in a windfall worth hundreds of millions of dollars when they sold their multinational steel fabricator, IMSA, to Argentina's Ternium Group - were among the wealthy Mexicans who are believed to have lost money to Madoff, according to people familiar with the matter. Reached at his office in Monterrey, former IMSA CEO Eugenio Clariond Reyes said he had nothing to say about the Madoff affair.

In Brazil, no investors have yet stepped forward to declare losses, even though local fund managers said some wealthy Brazilians invested alongside Madoff. Lawyers say the likely reason for investors' silence in Brazil is that they invested overseas without declaring that money to Brazil's tax authorities, a relatively common practice in Brazil due to heavy regulation and high tax rates.

"It was not declared money, and if that is the case, the victims are not going to appear," said Marcelo Trindade, a lawyer and former chief of Brazil's market regulator, the Comissao de Valores Mobiliarios, or CVM.

One large fund that fed billions to Madoff, the Fairfield Greenwich Group, had a Brazilian presence. According to Fairfield's Web site, it employed a representative in Brazil, Bianca Haegler, who is the niece of the fund's founder Walter Noel. Noel's wife, Monica, comes from a wealthy family in Rio de Janeiro with Swiss roots and whose members appear frequently in the society pages.

Fairfield's Sentry fund was Madoff's largest single investor, with $7.5 billion in the apparent Ponzi scheme.

Several messages and emails left at the Haegler investment company, located in a Rio office tower that also houses hedge funds and money managers, weren't returned. According to Brazil's market regulator, Haegler wasn't registered to sell investments in Brazil. Following inquiries about Haegler, Fairfield removed her name from its Web site.

Actively marketing an off-shore fund in Brazil is illegal. However, officials with Brazil's regulator said this month they had received no complaints about Fairfield and didn't plan to investigate. "If a billionaire loses money in New York, that is not our affair," said Carlos Alberto Rebello, a CVM official.

Felipe Taylor, co-founder of Ciano Investimentos, a hedge fund in Rio, said affected investors include members of Brazil's large and wealthy Jewish enclave. Taylor declined to name specific investors.

According to other fund managers, wealthy Brazilians invested in Madoff or Fairfield's funds via private banks, including Safra and UBS. Safra said it had purchased Madoff products for some private banking clients, but declined to discuss individual cases. UBS said it may also have offered clients access to Madoff's fund, but didn't provide details.

In Chile, two of the country's leading brokerages last week said that they had been hard hit by losses tied to investments controlled by Madoff.

In a profile of Piedrahita last week, Poder, a Colombian business magazine, said that local investors may have lost as much as $200 million to Madoff's apparent scam through the Fairfield Sentry fund, which had been promoted by Piedrahita in Colombia for the past 15 years.

"A lot of wealthy Colombians got burnt," said one leading Bogota businessman. But to date, no Colombian investor has acknowledged losing money in the Madoff affair. Colombia has a history of kidnappings and businessmen are generally wary of talking about their wealth in the media.
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