Louis Bacon pal gets jail time. Is he next?

Billionaire hedge-fund miscreant Louis Bacon, who has fled Lyford Cay vowing never to return after his scandalous disregard for the laws of The Bahamas, may be one step closer to finding his way to the destination he was always headed for – a jail cell.

One of Bacon’s associates at his mega fund Moore Capital Management LLC is headed for prison after admitting to insider trading in collusion with a trader at HSBC, in what has turned out to be a massive case of insider trading in British financial circles that has ultimately ended up in the hands of the U.S. Justice Department.

Julian Rifat, 45, a principal target of Operation Tabernula — “the biggest, most complex insider-trading investigation in British history”, according to Bloomberg News, was swooped up by British authorities just over five years ago and has since copped to the nefarious activity while at the hedge fund.

In March, Rifat, who pleaded guilty to insider trading in November, stood in London’s Southwark Crown Court and was sentenced to 19 months in jail and ordered to pay about $382,000 in fines and costs. “Eight others have been caught up in Tabernula and an accompanying investigation codenamed Aldershot,” wrote Bloomberg Business.

“Rifat had a front-row seat at one of the world’s most powerful hedge funds. Inside Moore’s offices on Curzon Street, he served as the eyes and ears of Bacon as a trader focused on financial stocks. He executed trades for the Moore Global Investors fund. The two often spoke or e-mailed, sometimes several times a day. At [the] sentencing, the judge said Rifat played a ‘pivotal’ role at Moore.”


Bloomberg also notes that while Bacon himself has not been implicated in the court case, he was very familiar with Rifat and maintained close contact with the disgraced trader.

Bacon, who has famously been embroiled in a long feud with his Lyford Cay neighbor Peter Nygard, has long been suspected of engaging in business practices as shady as those his colleagues in the financial sector have been accused of.

Nygard’s Bahamian attorney, Keod Smith, said he believes the insider trading doesn’t end with Rifat, but the U.S. government is now eyeing Bacon himself as a target in tis probe.

“With the Pia 2010 conviction costing Bacon’s Moore Capital Management $73.4 Million Dollars in settlement money willingly paid between regulatory agencies and investors along with a suspended sentence deal to keep him out of jail, I had wondered whether the big net criminal investigation recently announced by the U.S. Justice Department at about the same time when Rifat pled guilty after five unbelievable years since his arrest, meant that he had made a deal to become a whistleblower against his former employer, Bacon’s hedge fund,” said Smith..

“What has now been revealed at Rifat’s sentencing confirms my belief that he was in talks with law enforcement to make a deal as a whistleblower against Bacon’s interests,” said Mr. Smith.

In meting out the 19-month sentence against Rifat, the Wall Street Journal reports that in handing down the sentence, Judge Alistair McCreath of Southwark Crown Court, London, said that “…He also took into account a late attempt by Mr. Rifat to assist authorities in the UK and the U.S. after deciding to plead guilty last fall. The court heard that Mr. Rifat in recent months had given information to U.S. authorities including the Justice Department that could lead to action against an unnamed individual, for an unspecified criminal offense. No one at the Justice Department was immediately available to comment.”

Smith said, “In looking at all of these matters, I am left to conclude that Moore Capital Management is fertile ground for these acts, the conduct of which is regarded as improper although such acts have earned the company and its principals, millions of dollars if not billions. It is no wonder that the Wall Street Journal reported last November that the U.S. Justice Department intends to broaden its criminal investigation into these matters that puts huge pressure on various financial related markets causing significant losses to unsuspecting investors and other persons doing normal business.”

Moore Capital Management, which was founded in 1989 by Louis Bacon and led by him ever since, had operated under antiquated financial regulations going back to the 1940’s until July 2010 which President Barack Obama passed the Dodd–Frank Wall Street Reform and Consumer Protection Act, the long title of which is “An Act to promote the financial stability of the United States by improving accountability and transparency in the financial system, to end “too big to fail”, to protect the American taxpayer by ending bailouts, to protect consumers from abusive financial services practices, and for other purposes.”.

With the Dodd-Frank legislation, like all other hedge fund managers, Louis Bacon’s Moore Capital Management must now endure increased reporting requirements to the Securities & Exchange Commission and, by extension, to the U.S. Justice Department as to the details of investment in terms of its risk management practices, trading, and disciplinary records.

“On the basis of my experiences over the last two years having exposed Louis Bacon as having lied to the Audubon Society about leading a grassroots movement in The Bahamas in order to be granted the coveted award, and not owning up to his lies after being exposed, I wonder if his refusal to return the award to the Audubon with an apology to the Bahamian people always had a greater purpose for him that relates to this investigation,” Smith said.

“What must be more than coincidental is that all of these matters seem to have the common thread of the first quarter of 2010 being the chronological genesis of the arrests and convictions of Bacon’s employees. This period is just a few months before the passage of Frank-Dodd in July 2010 which was 2 years in making and is widely held to mark the end of the three-year U.S. financial crisis that reverberated in world markets, including in our little Bahamas,” said Smith.

Smith has been relentless in his quest to expose Bacon and his claims about having led the grassroots campaign in The Bahamas to save Clifton from the hands of unscrupulous developers between 1999 and 2004.

As Bacon’s naked influence in the upper echelons of Bahamian society has been laid bare, support for Smith’s cause in unmasking Bacon has been steadily growing.

Even as Bacon used his foreign media contacts to have a recent posting by Smith on the Huffington Post Blog site, unceremoniously removed.

Smith has now added to his supposition that “ [he] believes that Bacon’s attempt to rewrite Bahamian history despite it being rejected, is designed to write himself into the social and political fabric of The Bahamas at a time long before his financial woes come to the fore. In that way, any personal assets that might become subject to confiscation by the U.S. government if a Rifat whistle blows against Bacon, might have some added protection.”

Smith went on to point out that as a result of the Investor Protection and Securities Reform Act, 2010 (IPSRA) of the United States of American under Dodd-Frank, the U.S. Freedom of Information Act no longer applies to the SEC when it considers such information as being key for use in the furtherance of “…surveillance, risk assessments, or other regulatory and oversight activities” which may come from whistleblowers who have 10 percent to 30 percent monetary incentive under the IPSRA for monetary sanctions over $1 million where their information leads to a successful SEC enforcement”.

“When the SEC was subject to the provisions of the U.S. Freedom of Information Act, persons who had something to hide, could use the system to get information to know when and how to conceal illegal activities,” Smith said.

“Is it not now clear why Louis Bacon has been hiding behind the guise of his “Coalition to Protect Clifton Bay” (aka “Save the Bays”) in the most presumptive and aggressive moves to compel The Bahamas Government to promulgate a Freedom of Information Act in The Bahamas? It is not because he loves The Bahamas and its environment as has been shamelessly promoted by Bacon’s mouth piece, Fred Smith, it is because he wishes to have the same kind of cover in The Bahamas that he lost with the passing of Dodd-Frank in the U.S.”

Keod Smith - Keod Smith

Keod Smith is a Barrister in The Bahamas practicing at Commercial Law Advocates, Trinity Place Nassau.

He served as a Member of Parliament for 2002 – 2007 and as Ambassador for the Environment and Chairman of the BEST Commission from 2002 to mid 2006.

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