I forgot to post this interesting news from earlier in the week (January 5, Monday) :

“The patriarch of a German family whose assets include a majority stake in HeidelbergCement died on Monday in an act his family attributed to “the desperate situation of his companies caused by the financial crisis”…….

Merckle’s situation echoes those of Olivant chief operating officer Kirk Stephenson and Access Partners’ Rene- Thierry Magon de la Villehuchet, both of whom committed suicide last year. All faced large, rapid financial losses. All were caught out by forces that may have been hard to accept. Merckle was a once-conservative industrialist seduced by the returns available through heavy leverage. Unable to refinance loans taken out to cover trading losses, including an estimated E400m from short-selling VW shares, he faced a very public liquidity crunch…”

More at The Telegraph

Comment:

The first of the suicides was by Kirk Stephenson, the New Zealand born COO of Olivant Advisors.

He apparently threw himself in front of a 100 MPH train at Taplow railway station in Berkshire while under increasing financial pressure from the credit crisis. Olivant is a private equity firm that tried to buy a 15% (1 million P ) stake in Northern Rock before the bank was was nationalized. Stephenson, 47, married and with an 8 year old son, was a well-respected millionaire City financier.

Merckle, 74, known as the German Warren Buffett and once the 92nd richest man in the world according to Forbes, was until the financial crisis worth $9.2 billion.  His holding company owed $6.7 billion to the banks when he was found dead on the tracks outside his home town of Blaubeuren. He left a suicide note behind.  Merckle expanded his grandfather’s pharmaceutical business from 80 employees to over 70,000 but seems to have run it like a family firm, giving employees as many as six years at home to raise children.  That might have been the reason he took his losses so personally. The last straw apparently came when his holding company shorted Volkswagon and the shares went on to quadruple.

The third suicide (which I posted earlier) was that of Rene-Thierry Magon de la Villehuchet, the French manager of Access International, one of the European “feeder funds” for Madoff. Villehuchet was found dead, his wrists and biceps slashed with box cutters, at his NY office, after losing clients over a billion (1.4 at least) dollars. That sum included his own money as well as the money of family and friends. Villehuchet was a French aristocrat whose ancestors made a fortune in shipping in the 17th century and the (apparent) suicide is attributed to the loss of honor and reputation he suffered. Villehuchet did not leave behind a suicide note. Villehuchet’s brother insisted that the return he and others received from the Madoff fund  (which he described as 17 percent distributed over  4 years) was far from excessive. He also insisted that his brother was a modest and honorable man, not a greedy socialite, as he was being portrayed in the media. However, it does look like Villehuchet used excessive leverage (150 percent) that left him with losses greater than his investment.

Item: There was no suicide note in the Villehuchet case.

Item: Villehuchet lived in Westchester County in New York and worked in New York city.

Item: Villehuchet co-founded Access International Advisors with Patrick Littaye in 1994. Littaye had been investing with Madoff for a while. It was Littaye who brought Villehuchet into Madoff’s ambit. Access raised funds in Europe to invest with Madoff (75% of it was with him) through  LUXALPHA  SICAV-American Selection, a fund managed by the bank, UBS. Its objective was “to provide a consistent performance” for investors, who included the Rothschilds and Liliane Bettencourt.

Item: Prior to founding Access, Villehuchet was CEO and Chairman of Credit Lyonnaise Securities, the US Investment Banking arm of the French bank, and prior to joining there in 1987, he ran Interfinance, a broker firm specializing in the European markets that he founded in 1983. Before that, he worked at Banque Paribas from 1970 and it was then he met Littaye who worked there too.

Item: He was working closely with American financiers from at least 1987, from this account. Twenty years of living in New York where most top fund managers were reportedly aware that something was not right with Madoff, and he didn’t know? Shouldn’t he at least have diversified? Instead, one report says he actually put all of his brother’s money into the fund and 20 % of his own (another report reverses the figures). That sounds as if he knew enough about Madoff to be absolutely sure about the deal. How could he so sure? Could he have been  oblivious to the complaints going on from 1999 and earlier?

Not likely. In fact, I would say impossible. Just as it’s impossible that the SEC was simply incompetent on this. As my previous post shows, the SEC was quite capable of rooting out Ponzi schemes of just this sort in several cases. Note the number of times (8) there were investigations into Madoff:

(1) 1992 – an SEC probe of Florida accountants who allegedly sold unregistered securities brings up Madoff’s name (2) 1999 -SEC examiners review trading practices at Madoff’s investment advisory firm (3) 2001 – The SEC’s Boston office notified by Harry Markopolos about questionably stable returns of Madoff’s firm (4) 2004 – SEC investigates Madoff for improper trading practices (5) 2005 -SEC interviews Madoff and family and finds no improper trading practices (6) 2005 – industry-based regulatory office finds no improper trading practices by Madoff’s firm (6) 2005 – SEC investigators meet Markopolos, who calls Madoff’s firm  “the world’s largest Ponzi scheme” (7) 2006 – SEC enforcement investigation says Madoff and a client misled regulators and Madoff agrees to register as an investment adviser (8) 2007 -Financial Industry Regulatory Authority examines Madoff’s firm but takes no action.

No. Someone with oversight of the SEC squashed the investigation.

And Villehuchet, whatever his personal sense of honor, very likely knew what Madoff was all about.