Yesterday I reported on a New Canaan hedge fund manager who had a guy arrested for calling him multiple times saying he was a crook for working at Bear Stearns. The headlines were about some kind of harassment going on where the guy was obsessed with Higgins wife – who he use to date. I thought Higgins stalker was a bit off because Higgins actually left Bear Stearns in 2004 so how could he have helped caused their spectacular 2008 downfall. Well I might have been wrong about that.
Today in the DOJ civil fraud suit against the rater, S&P, we learn all about this $500 mn-ish asset backed CDO that was sold to a California credit union and blew up a year after S&P gave it a glowing buy signal. It was called Sorin VI Ltd and issued in March 2007. Well guess who picked the collateral that went into that CDO at the center of the DOJ’s lawsuit – non other than James Higgins firm Sorin Capital Management. And guess who the underwriter was…yep his buddies at Bear Stearns on the resi mortgage desk specifically Mike Neirenberg who ran the Alt-A desk.
Moody’s records show they started taking negative down grades on the toxic CDO Higgins managed in April 2008. His Bear Stearns buddy, Nierenberg, is one of the main traders in my big rmbs fraud story at The Atlantic that was also part of the Frontline Flim The Untouchables. I reported in May 2010 for The Atlantic analysts that worked for Nierenberg were told to make up loan level detail for the raters (like S&P) to get the bonds rated faster. Something that pretty much equals fraud.
Now this story gets even funnier because S&P thought the CDO was so screwed up – while they were rating it – that they even made a little song called ‘Burning down the House’ about it. FTAlphaville has some fun insight on the CDO and the suit today. The California credit union that bought $100mn of the CDO ended up loosing 90 percent of their investment, while Hedgies acting as collateral managers made some nice extra change ‘managing” the CDOs. And as long as they didn’t also own a tranche of the toxic stuff they took care of there wasn’t a lot risk for them.
New Canaan town records show 2008 was the year Higgins bought his huge spanking new mansion at 1480 Ponus Ridge Rd for near $8 million. Then at the end of the year he had to tell his investors his $1.5bn flagship fund was well…negative 36 percent.
Maybe Higgins alleged stalker, Donato Minicozzi, really did know something about how Higgins worked when he called to tell him “Bear Stearns Crook. Notre Dame Sucks. See you at South Beach.” But then this was a guy who threaten the millionaire by saying he’d send pizzas and girls to his house– so he might not be that clever.