Madoff ‘Red Flags’ Could Have Been Raised by Software

Madoff ‘Red Flags’ Could Have Been Raised by Software - 1/29/2009

Home

Index of Filings

News and Press Releases

Filings

Decisions

Settlements

Litigation Activity Indices

Top Ten List

Annual/Quarterly Updates

Clearinghouse Research

Articles & Papers

Search

Related Sites

About Us

Local Rules

Sponsors

Register

_______________
Copyright © 2001
Stanford Law School

2009 News and Press Releases

SEARCH

News	News 2009
HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

HEADLINE NEWS:

Madoff ‘Red Flags’ Could Have Been Raised by Software
Tom Cahill

Bloomberg. January 29, 2009
_________________________________________________________________________

EXCERPT: Banco Santander SA’s hedge fund unit used risk software that according to its developer may have “waved red flags” about Bernard Madoff investments. “You definitely would have seen it,” Riskdata SA Chief Executive Officer Ingmar Adlerberg said in a phone interview from Paris. Many of the company’s 80 customers have thanked it for flagging risks linked to Madoff, he said. He refused to name them or comment specifically on Santander. Santander offered on Jan. 27 to pay 1.38 billion euros ($1.8 billion) to private banking clients hit by Madoff-related losses through the bank’s Optimal Investment Services hedge fund arm. Geneva-based Optimal said Riskdata’s FOFiX product was key to “quantitative risk analysis” for hedge fund investments in a 30-page due-diligence questionnaire dated last April. “Risk profiles are calculated for each hedge fund in order to estimate the systematic factors influencing the returns of the fund,” Optimal said in the document, which was reviewed by Bloomberg News. “Deviation from expected risk profiles need to be explained.” “Potential breaches of the risk parameters would be immediately notified to the chief operating officer and if appropriate the chief executive officer,” Optimal said in the document. A Santander spokesman declined to comment on the risk management software or the hedge fund questionnaire. […] Riskdata’s FOFiX is a tool for fund of hedge fund investors that compares the performance of products with the same strategy to find aberrations in the pattern of results. It also analyzes returns to help explain how a fund made or lost money. The system costs 50,000 euros to 200,000 euros a year. ‘Due Diligence’ When the software sifted through 2,281 comparable funds, it highlighted 20 with “suspicious” performance, including those linked to Madoff and one run by Samuel Israel, Riskdata said.

Back to News page | Back to Archived News 2009 page | Back to Top

�