Manager's luxe life on the line in Madoff case
Wed Jan 28, 5:49 pm ET
John Christoffersen, Associated Press Writer

GREENWICH, Conn. – Walter Noel Jr. and his wife Monica had it all: Luxurious houses on Connecticut's wealthy coast, Palm Beach and the Hamptons, a Park Avenue pied-a-terre and, most of all, a hilltop retreat on an exclusive island in the Caribbean named after a goddess. They hobnobbed with Mick Jagger and Tommy Hilfiger, who sounded a bit jealous of their view.

The couple's five tall, attractive daughters mostly married foreign men in high social circles, adding to an extraordinary network of international connections that along with remarkably consistent returns helped Noel expand his New York-based money management firm with billions of investments from the elite around the world.

"They almost were like a fashion magazine version of a very wealthy, prosperous attractive family," said David Patrick Columbia, who runs New York Social, a site that observes the lives of the rich. "They're very well liked, very popular."

That world is now in jeopardy as investors line up to sue over the $7 billion in client funds that Noel's Fairfield Greenwich Group invested with Bernard Madoff, the alleged architect of what investigators say may be the largest Ponzi scheme in history. Madoff is accused of duping investors out of as much as $50 billion by paying returns to certain investors out of the principal received from others.

The lawsuits filed against Noel and his company accuse them of ignoring obvious red flags with Madoff and unjustly enriching themselves of at least $1 billion, and say Fairfield Greenwich Group failed to provide even minimal scrutiny of Madoff. Investors say the firm misled shareholders about monitoring the investments, all while collecting lucrative investing fees.

"I don't think they were active participants in the fraud," said Robert Finkel, attorney for a retirement trust fund that lost $200,000. "They're probably 'hear no evil, see no evil.' "

Noel had a business relationship with Madoff for more than 20 years, according to one of the lawsuits. Fairfield Greenwich Group earned hundreds of millions of dollars and possibly more than $1 billion in fees for raising large sums of money from investors that was invested with Madoff, according to the lawsuit.

Fairfield Greenwich says it performed extensive due diligence and, like many others, was victimized by a sophisticated criminal scheme. The company says Noel and other partners invested about $60 million of their own money with Madoff.

But over the years, there were warning signs. Experts who looked at Madoff concluded his claimed investment strategy was statistically impossible, the lawsuits claim.

Michael Markov, chief executive of Markov Processes International, said his company analyzed one of Fairfield Greenwich's funds that invested with Madoff in 2006 and concluded the returns were most likely not real. Such returns would have required perfect foresight and more option contracts than existed in the market, he said.

"It was impossible to replicate," Markov said.

There were other signs, too: The lawsuits say Madoff's firm could not have bought and sold the volume of options it claimed to run its strategy because the total of necessary trades on any given day would have far exceeded the publicly reported total trading volume in the market for those days, according to one of the lawsuits.

One hedge fund adviser was shocked to discover in 2007 that the entire internal audit function at Madoff's company involved a firm with three employees, including a 78-year-old man living in Florida, a secretary and a 47-year-old accountant. Newspaper articles dating back to 1992 raised issues about Madoff's operation.

Noel's firm has not been charged in the Madoff case. FBI agents have not contacted Fairfield Greenwich, according to a person close to the firm who spoke on condition of anonymity because he was not authorized to speak about the matter. The person said regulators with the Securities and Exchange Commission did visit the company's headquarters in New York recently, but said they were not from the enforcement division.

Federal authorities should investigate Fairfield Greenwich and others who invested client money with Madoff, said Stephen A. Weiss, a New York attorney who represents Madoff investors.

"There are many compelling reasons why federal authorities should investigate entities like Fairfield who oiled the Madoff capital machine," Weiss said. "It seems evident that they were either complicit or grossly negligent in not undertaking due diligence that would have uncovered the scheme. Of course, I can think of several hundred million reasons why Walter Noel was incentivized to look the other way."

Noel, a 78-year-old Tennessee-born financier, declined an interview request through his company, and did not return messages left at his home. Friends described him as well liked in the wealthy social circles he frequented.

Family friend George Ball compared Noel to Jimmy Stewart's character in the movie "It's a Wonderful Life."

"He's a very decent person, very caring person, perhaps naive in some ways, but far from a fool," Ball said. "I think he is on balance a victim."

Noel's family has been spending most of its time in Greenwich these days, in an 8,600-square-foot colonial on prestigious Round Hill Road. The eight bedroom, nine and one-half bath home had a market value of $6 million in 2005. When they're not there, they're at their hilltop retreat on the exclusive island of Mustique, which they named Yemanja for the goddess of the seas in Brazilian folklore.

Monica Noel, who raised in Brazil by wealthy Swiss parents, recently described to Town and Country Magazine how she decorated her holiday table there with palm tree leaves, red butterflies and moving snakes. She also talked about shopping from New York to Florida for bamboo side tables and an African tribal stool placed near an infinity-edge pool that followed the curve of the mountainside.

"They've got the best view on the island," Hilfiger, a neighbor and frequent guest, told the magazine.

It's not clear how long it will take for the lawsuits to wind through the courts, but if Noel is found liable, he could be forced to dip into his personal wealth to pay damages. Those who know him suggested that he may have simply trusted Madoff, and do not believe he willingly engaged in fraud.

Ball compared Noel's longtime relationship with Madoff to that of an old reliable truck in the barn that the owner assumes is reliable: "Familiarity leads to comfort," he said.

That explanation is not likely to satisfy investors who lost large sums of money.

"They're under enormous pressure and stress," said Robin Chandler Duke, a family friend who spoke to Noel last week. "I think he will be in lawsuits forever."

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