Closing the Barn Door

S.E.C. Accuses Hedge Fund of Deceiving Its Investors

So reads the headline in today’s New York Times, and so the Feds, arriving at the farm in Ketchum, Idaho, prepare to securely close the barn door after the horse has scampered out over the north forty, splashed across the Wood River and made its way to the freedom of the mountains beyond. “There was no effective oversight of the investment manager and no effective control or checks on his [John Whittier, manager of Wood River Capital Management] actions,” said Peter Bresnan, associate director in the enforcement division at the Securities and Exchange Commission.

As opposed to the effective oversight and effective control at, say, Refco—which had real auditors, unlike the fake ones employed by Wood River (identified by Whittier as “American Express Tax and Business Services” although that firm does not perform audits)—and real investment bankers and real SEC-filed documents detailing everything except what the CEO wanted the auditors and investment bankers and the SEC to find out.

Add Wood River to the list of hedge funds with the bucolic names (Bayou among them) and the hellish business model that no amount of supervision from above could prevent, given bad intent by the likes of John Whittier and Phillip Bennett, and the rest.

How forcing all hedge funds to register with the SEC—the very same entity that missed the massive alleged fraud at Refco and is now searching vainly for what caused the barn door at Wood River to be left wide open in the first place—is beyond me.

Jeff Matthews I Am Not Making This Up

© 2005 Jeff Matthews

The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews’ recommendations.