NIR Group’s court appointed liquidators, PricewaterhouseCoopers, have discovered Corey Ribotsky pigged out on fees while hundreds of mom and pop investors had their pension investments frozen. I reported this week for Long Island Business News, Ribotsky’s hometown paper, that the alleged hedgie fraudster is set to reap a whopping $52 million in fees. On top of that he had to resign from the fund after PwC and a group of US investors pressured him to quit after they realized the broker dealer market won’t do business with him because of reputation risk and his ‘management’ skills were not effective any longer.
There is a ton of detail on how investor cash was used while the funds were gated since late 2008 in the LIBN story so click here to read it. I will note that Ribotsky’s pressman Brad Gerstman told me this week Ribotsky has always told investors he reinvested his fees into the fund. But the PwC cash flow report shows only $300,000 was invested since November 2008. Hummm something doesn’t add up.
The staggering amount of fees is not the only thing PwC found when they were given access to NIR’s books. According to a Dec 15th letter, the liquidator also told some investors that funds were comingled. You see in Ribotsky’s view, although he sold investors into separate onshore and offshore funds, all their money was one big pot to do what he wanted with.
Ian Stokoe of PwC wrote, “In practical terms, NIR confirmed that while each Fund held one or more bank accounts, cash was routinely allocated from the various bank accounts to which ever entity needed it at the time to discharge liabilities.”
The FBI’s Mike Ryan has interviewed NIR investors for over two years now, and while investors say it was a relief to see the SEC finally sue Ribotsky for investor fraud, they simple don’t get why the Feds didn’t step in earlier and prevent the cash bleed from what appears to be needless fees on inflated assets.
UPDATE 2.6.12: DealFlow Media got the PwC liquidator on the record to say he’ll be looking into the legitimacy of the fees Ribotsky/NIR took while the funds were gated. This was something Ian Stokoe hinted he’d do when I first reported PwC was taking over the offshore fund this summer. So it will be important to watch if Ian follows through or is throwing out ‘friendly PR quotes.”