White Collar Crime News

Hedge Fund Manager Charged With Fraud November 27, 2009

This is an interesting case because it seems like this guy suffered some huge losses but tried to cover it up to avoid facing the music.  Based upon my conversations  with my own client, I am sure he thought that he would make it back at some point not matter how impossible that may have seemed to a rational person.  Denial is very powerful. 

Jay C. Nolan allegedly defrauding a handful of victims of approximately several million dollars they invested in a commodity futures hedge fund he managed. He has been charged with mail fraud in a criminal complaint filed in the Northern District of Illinois.

According to the complaint, Nolan operated Lodge Capital Group, LLC and managed a hedge fund known as Lodge Diversified Fund LP, which maintained a futures trading account with ADM Investor Services, Inc.

Investor A told federal agents last Saturday that in 2005, he invested approximately $720,000 with Nolan in the Lodge Diversified Fund and made additional investments of approximately $1.5 million in 2006 and $750,000 in 2007. Investor A told agents there were six other investors with Nolan in the Lodge Diversified Fund, according to the charges. Investor A said that he received monthly account statements in the mail since 2005, listing the balance for the fund as well as Investor A’s personal account balance and other investment details. Beginning in 2007, the statements were printed on ADM Investor Services letterhead, and Nolan reported each week’s investment activity by telephone.

Earlier this month, Investor A reported that he received an account statement showing that his balance at the end of October was $5,611,901.26, and that the Lodge Diversified Fund had a balance of $6,308,409.51. Investor A contacted ADM Investor Services and learned that the Lodge Diversified Fund had an account balance of approximately $170,000. Investor A, accompanied by Investor B, then met with Nolan and allegedly learned that Nolan had lost much of the money in the hedge fund in 2006 and had been sending false statements to investors to hide the substantial losses that he had incurred. A bank account that purportedly contained millions of dollars in government securities to collateralize the ADM futures trading account, allegedly had a recent balance of approximately $100,000. Despite the losses, Nolan allegedly continued taking a two percent monthly management fee from the investors.