Seeking Alpha – Scammy and Danny Bayou still await sentencing on charges associated with the collapse of their corrupt hedge fund – formerly based in the eponymous Scamford, Conn. – but the investorswho thought they\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2d safely escaped the pair\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s clutches have their judgement: Keep the original stake, but cough up gains that turned out to be ill-gotten.<\/p>\n
In what has come to be pretty much the standard deal in hedge fund fraud cases, UT Medical Group Basic Pension Plan agreed to repay $432,847 in what it thought was profits, but gets to keep its original $2 million investment. Bayou\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s bankruptcy trustee has sued investors for more than $121.7 million in principal and almost $16 million in fictional profits. UTMG was one of several investors put into the various Bayou entities by Memphis-based Consulting Services Group.<\/p>\n
According to court papers, UTMG made its first investment, of $1.6 million, in Nov. 2002 but filed its redemption notice in Apr. 2004 on the advice of UTMG\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s auditors and ERISA counsel because a six-month lag between Dec. 31 audit and the Jun. 30 pension plan year-end meant they could not readily ascertain the value of UTMG\u00c3\u00a2\u00e2\u201a\u00ac\u00e2\u201e\u00a2s investment. UTMG contemporaneously sought redemptions of other other investments that posed similar valuation problems.<\/p>\n
(The Bayou audit was, of course, prepared by the entirely faux Richmond-Fairfield Associates, meaning the six-month lag was, in fact, the least of issues at hand).<\/p>\n