Hedge Fund Horsemen’s Dubious Past

May 29 2008 | 2:00am ET

Michael Iavarone and his International Equine Acquisitions holdings have enjoyed nothing but good press as their horse, Big Brown, makes a bid to become the first Triple Crown winner in 30 years.

Now, here comes the backlash.

It turns out that Iavarone had a less-than-sterling reputation on Wall Street prior to his founding IEAH in 2003. Garden City, N.Y.-based IEAH is preparing to enter the hedge fund business, with plans to raise $100 million for a fund that will invest in racehorses.

Iavarone was fined, censured and suspended by the NASD for making unauthorized trades in 1995, Bloomberg News reports. He’s also found himself on the wrong side of several lawsuits for failure to pay for things. IEAH’s Web site makes no mention of Iavarone’s past, and includes a profile of him from the Thoroughbred Daily News that credits him with earning a bachelor’s degree from the University of California, Los Angeles. In fact, he went to St. Joseph’s College on his native Long Island.

Iavarone acknowledged that the TDN claim was a mistake, and admitted he had made some other mistakes, though he noted that he neither admitted nor denied the NASD charges when he settled them in 1999.

According to the NASD, he made trades worth more than $20,000 without permission of clients in 1995 while trading penny stocks at A.R. Brown, which later pleaded guilty to corruption and shut its doors in 1997. Iavarone settled the charges, paying a $7,500 fine and serving a 10-day suspension in 1999.

He’s also been sued twice. The Showboat Hotel and Casino in Atlantic City, N.J., accused him of writing a $20,000 bad check in 1999, but Iavarone claims his identity had been stolen.

Four years later, after he had left Wall Street, Keeneland Association of Lexington sued and won a $554,156 judgment against him for failing to pay for five horses he bought at auction.

“Back in 2003, I wasn’t in good financial shape,” he told Bloomberg.

Bad news aside, Iavarone has a chance to make horseracing history next Saturday, when Big Brown seeks to win his sixth race at the Belmont Stakes, becoming the 12th Triple Crown winner and the first since Affirmed took the Kentucky Derby, Preakness Stakes and Belmont in 1978.

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Chicago-based independent futures brokerage and clearing firm R.J. O’Brien & Associates (RJO) has hired industry veteran Daniel Staniford as Executive Director, responsible for the firm’s institutional business development in New York and London.

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