Tremont Group

Tremont Group Holdings, Inc., a Delaware corporation headquartered in Rye, New York, is a hedge fund that was a feeder fund to Bernard Madoff's investment advisory firm in the Madoff investment scandal.^{[1][2][3][4][5][6]} It was the second-largest feeder fund to Madoff's firm, after Fairfield Greenwich, earning fees of 2% of assets for sending customers' cash to Madoff.^[7][8]

History

Tremont Group was founded in 1985 by money manager Sandra Manzke, who was its chief executive officer from May 1994 to August 2000, and co-CEO until 2005.^[9][10][11] It owns Tremont Partners and Tremont Capital Management (formerly Tremont Advisers), a hedge fund of funds.^[11][12] Tremont Holdings also has offices in London, Toronto, and Hong Kong.^[13][14] Its subsidiaries are regulated by the U.S.'s Securities and Exchange Commission and National Association of Securities Dealers, the U.K.'s Financial Services Authority, the Ontario Securities Commission, and the Hong Kong Securities and Futures Commission.^[13]

Tremont Group invested with Madoff, who had a close business relationship with Tremont executives Manzke and Robert I. Schulman, starting in 1997 via its Rye Investment Management division, headquartered in Rye, New York.^{[15][16][10][17][5]}

Massachusetts Mutual Life Insurance Company's Oppenheimer Funds Inc. unit paid $140 million to purchase Tremont from Manzke in 2001.^{[15][16][18][19]} Manzke left Tremont in 2005.^[20]

In January 2006, Rupert A. Allan became President of Tremont Group.^[13] In June 2007, he was also named CEO of Tremont Group, replacing Schulman, who remained chairman of Tremont Group until his retirement in July 2008.^[13][17][21]

Sean Richardson of Tremont Funds wrote the encyclopedic entry entitled "Due Diligence" in the Encyclopedia of Alternative Investments (2008).^[22] He wrote in part:

Due diligence is ... verification into the financial statements ... of a business ... associate. Failure to conduct proper due diligence can lead to .... monetary loss, as well as litigation. Due diligence is of great importance in the hedge fund space.^[22]

Madoff scheme fallout

The hedge fund lost $3.3 billion in the Madoff investment scandal, representing more than half its assets.^[23][24][25]

When the scheme was uncovered in December 2008, Brad Alford, who runs Alpha Capital Management LLC, which helps clients choose hedge funds, said:

It's mind-boggling that people like Tremont ... had been doing this for so long. It's the job of these funds of funds to be doing due diligence. That's why they get paid.^[8]

In January 2009, Tremont Group shut its Rye Investment Management division.^[15]

Madoff scheme litigation

In April 2010, Judge Thomas Griesa, of the U.S. District Court for the Southern District of New York dismissed a lawsuit by Tremont Group investors against Tremont's auditor, KPMG, which charged that KPMG had failed to discover the fraud in its audits of Tremont and was therefore liable to the investor.^[26] Judge Griesa held that KPMG could not be sued, because it lacked actual intent to deceive, manipulate, or defraud the investors.^[26] He wrote: "Merely alleging that the auditor had access to the information by which it could have discovered the fraud is not sufficient."^[26]

In December 2010, Irving Picard, the court-appointed trustee in the Madoff bankruptcy, sued Tremont over $3 billion in customer money that Tremont lost by investing with Madoff.^[16] The lawsuit alleged that Tremont failed to perform independent, reasonable, and meaningful due diligence of Madoff.^[16][27] In July 2011, Tremont Group agreed to settle the lawsuit by paying a $1 billion cash settlement.^[27][28]

See also

• List of investors in Bernard L. Madoff Securities

References

External links

• Group Homepage