PhillyDeals: Arvedlund was right: Madoff was too good to be true

"Investors need, or should want, transparency in their money manager's investment strategy. But [Bernie] Madoff's investors rave about his performance - even though they don't understand how he does it," Erin Arvedlund warned in a Barron's column titled "Don't Ask, Don't Tell," back in 2001.

She asked the right questions. Arvedlund's 300-page follow-up book, "Too Good to Be True: The Rise and Fall of Bernard Madoff," is due out today from Penguin Group (USA) Inc.'s Portfolio publishing label.

Arvedlund grew up in Wilmington, where her father, Dick Arvedlund, was boss money manager at Cypress Investments. She graduated from Ursuline ('84) and Archmere ('88) Academies, before leaving town for Tufts University and careers on Wall Street and in Moscow.

Now she's settled with her husband, Patrick Beattie, a McGivney & Kluger P.C. litigator, in Center City, commuting the distance from her freelance gigs and Wall Street sources, as they start a family.

Blank Rome L.L.P. last month agreed to pay $20 million to settle a complaint by bankruptcy trustees for the estate of the failed American Business Financial Services Inc.

Blank Rome "expressly denied and continues to deny all allegations of any wrongdoing or liability against it whatsoever" as part of the settlement order approved by federal Bankruptcy Judge Mary F. Walrath in Wilmington on July 29.

Lawyers for trustee George Miller had alleged "breach of contract, professional malpractice, and breach of fiduciary duty" by the Philadelphia law firm, which represented the Center City subprime lender before its 2005 bankruptcy.

The money "will be paid by Blank Rome's insurers," said John Harkins, the attorney who represented Blank Rome.

Blank Rome was sued along with accounting firm BDO Seidman L.L.P., investment banks JPMorgan Chase & Co., Morgan Stanley, and Credit Suisse First Boston, and others that did work for American Business, in an attempt to recover up to $700 million in losses. The other cases are pending.

American Business founder Anthony Santilli died of a heart attack after the bankruptcy filing. Insurers for his widow, Beverly, and other former executives and officers last year agreed to pay $33 million to the trustee and a bondholders' group.

In the investment meltdown that hit Harvard and other Ivy League schools last year, the University of Pennsylvania may have gotten off easy.

In a note to staff and students from president Amy Gutmann yesterday, Philadelphia's largest private employer said it balanced its budget without mass layoffs or financial aid cuts, thanks in part to relatively low investment losses - around 16 percent for the year ending June 30 vs. 26 percent for the S&P 500.

Gutmann credited "a well-diversified portfolio with a core position in Treasuries," and "a decision in early 2008 to reduce equity exposure." She said Penn's investment office "took strategic actions to protect Penn leading up to the crisis, which both reduced our losses and improved the long-term prospects for the Penn endowment."

That means, when the crisis hit, Penn was able to raise needed cash by selling the one class of asset investors still wanted, instead of having to dump sophisticated but illiquid investments at deep discounts, executive vice president Craig Carnaroli told me.

Philadelphia's Republic First Bancorp Inc., backed by Commerce Bank founder Vernon Hill, and Metro Bancorp Inc., formerly Commerce's Harrisburg affiliate, have pushed back the date of their proposed union for the second time, to Oct. 31, with a possible extension to Dec. 31, as regulators mull the plan.

Metro said last week it lost $1.3 million for the quarter due partly to the expense of setting up its own computer systems after ending agreements with Commerce's successor, TD Bank.

Republic lost $5.4 million, and boosted its provision for loan losses to $8.3 million on June 30 from $4.8 million on March 31.