Law firm Gersten Savage has formed an interdisciplinary practice to advise hedge funds, investment funds and institutional investors on potential consequences arising from the Bernard Madoff fraud and other aspects of the current financial crisis.
Leading the effort are partners David Danovitch, head of the firm’s corporate and regulatory practice, Eric Roper, head of Gersten Savage’s hedge funds and financial services practice, and Robert Wolf, head of the firm’s litigation practice.
“Fund managers and investors should be taking immediate steps now to deal with the current situation in the post-Madoff environment,” Danovitch said. “For example, funds should conduct an assessment to identify problematic areas where they could be vulnerable in the future. A sense of urgency is paramount. Managers of funds of funds must be certain their current and past diligence practices can withstand 20/20 scrutiny.”
Gersten Savage has tailored a program specifically designed to assist smaller hedge funds, those with assets ranging from $25 million to $2 billion. The firm also can handle smaller fund assignments.
Institutional investors should examine and analyze all the entities and service providers, such as prime brokers, administrators, custodians and auditors, that play a part in investment decisions and/or overall operations, according to Roper.
“Investors should take a look at all those who are involved in the investment process and to whom they have entrusted funds,” he said. “They should ensure that the promised level of due diligence, corresponding disclosures on actions and sufficient levels of transparency are being provided.”
From a litigation perspective, the consequences of the fraud have the potential to expand “like a tsunami,” according to Wolf. “There will be pressure on the courts as the developments in the Madoff case unfold. The ends justify the means here and all bets are off,” he said.