Bear Stearns Told to Pay $160 Million to Investors
A federal bankruptcy judge on Thursday ordered Bear Stearns to pay nearly $160 million to investors in a hedge fund for failing to properly monitor the activities of the fund before it collapsed in early 2000.
The ruling could force Wall Street firms to step up oversight of some of their most lucrative clients.
Servicing hedge funds is one of the fastest-growing businesses on Wall Street. Called prime brokerage, these activities — which include finding and lending stock to allow hedge funds to sell short (betting their price will fall), structuring derivatives and executing swaps — account for about $8 billion in annual revenue, according to the Vodia Group, an advisory firm in the securities lending market.
The Bear Stearns case involved Manhattan Investment Fund and its Austrian-born manager Michael W. Berger. The fund lost nearly $400 million of investors' money by making wrong bets on Internet stocks during the technology boom of the late 1990s.
In 1999, the fund imploded. As suspicions grew among executives inside Bear Stearns that Berger was providing fake account statements to investors, he transferred $141.4 million to the fund's account at Bear Stearns to meet increased margin requirements and continue selling stocks short, betting that they would decline in value, court filings state. That $141.4 million was used to cover all the positions in the market for which Bear Stearns would have been liable.
On Thursday, the judge said that $121.1 million of the transferred payments had to be returned to investors with interest.
Hamas Clears Way For Unity Government
After months of difficult negotiations and bloody Palestinian street fighting, the Hamas-led Palestinian government resigned Thursday to pave the way for a unity government that will include Hamas and the rival Fatah movement.
Prime Minister Ismail Haniya of Hamas submitted his Cabinet's resignation on Thursday evening at a meeting with the Palestinian Authority president, Mahmoud Abbas, at Abbas' seaside compound in Gaza City. The agreement is intended to help prevent a resurgence of the internal Palestinian battles that have claimed nearly 100 lives in the Gaza Strip since December.
There was no immediate sign that a new Palestinian government would win a restoration of direct financial assistance that Israel and Western countries cut when Hamas came to power a year ago.
American diplomats told Abbas, who is from Fatah, that Washington would continue to shun the new government as long as it did not meet several conditions, according to one of Abbas' top aides, who requested anonymity because he was not authorized to speak publicly.
Israel, the United States and the European Union have demanded that the Palestinian government recognize Israel, renounce violence and accept previous agreements. But with Haniya set to retain his post in the new government, which will again include many prominent Hamas figures, it appears highly unlikely that the new Cabinet will explicitly meet the conditions.
Agreement Reached Over Fate of University's Paintings
Fisk University, which has been embroiled in a yearlong dispute over two prominent paintings, will be allowed under a settlement to sell the works if a donor is not found to keep the collection intact.
The tentative agreement, which Fisk and the Tennessee attorney general made public Thursday, will likely end litigation over a plan by the president of Fisk, Hazel R. O'Leary, to sell Georgia O'Keeffe's "Radiator Building — Night, New York" and Marsden Hartley's "Painting No. 3." The paintings are among 101 works from the collection of Alfred Stieglitz that O'Keeffe, the famed photographer's wife, donated in 1949.
The settlement requires Fisk, a storied but cash-poor historically black university, to seek a donation that would allow the school to keep one or both of the paintings, each of which has been appraised for $8.5 million. The two paintings account for more than half of the estimated value of the entire Stieglitz Collection.
If no donor steps forward within 30 days, the Georgia O'Keeffe Museum - which had sued Fisk to stop the sale - will buy "Radiator Building" for $7 million. Fisk could then also sell the Hartley painting, perhaps through auction.
Hopes For Healing as Spanish Bomb Trial Starts
A widely broadcast trial of 29 suspects opened Thursday in Spain, with hopes that a public forum could offer a catharsis to a nation scarred by the rush-hour train bombings that killed 191 people in March 2004 and that sundered Spain's political establishment.
When the first suspect, Rabei Osman Sayed Ahmed, took a seat before the tribunal, his denials of involvement were shown live on the Internet. His refusal to respond to prosecutors was also broadcast live on Spanish television.
Ahmed took a seat before the judges, in the presence for the first time of some of the victims' families in the courtroom. Others were nearby in another building, where they watched the proceedings on giant plasma screens. A team of psychologists and doctors circulated among them to offer assistance.
Pilar Manjon, whose son died in the blast and who is the leader of the Association of March 11th Victims, walked into court with her legs shaking, but convinced it was a triumph to confront the suspects. "I want them to remember my face, so they won't forget me, because I'm going to be their worst nightmare," Manjon said.