Investment adviser Ballamor Capital Management of Radnor, which manages $1.7 billion for about 100 wealthy investors, says it is trying to help some of its clients get back $30 million placed with accused Ponzi-scheme manager Scott Rothstein.
Rothstein, a Fort Lauderdale, Fla., lawyer, ran what federal prosecutors in amended court filings yesterday called a multimillion-dollar "Ponzi scheme" that persuaded wealthy people to invest in nonexistent confidential legal settlements.
"We have clients who we put into Banyon Income Fund," a Las Vegas fund that invested with Rothstein, Ballamor general counsel Lawrence Rovin told me.
Ballamor president Barry Bekkedam introduced Florida investor Doug Van Allmen to Banyon fund operator George Levin, according to a $100 million lawsuit filed by Van Allmen against Rothstein last week. The lawsuit was reported by the Fort
"That is true. Bekkedam knew both men socially," Rovin told me. "He knew of the strategy, and thought it was of interest." Van Allmen later invested both in Banyon and directly with Rothstein, Rovin said.
Ballamor suggested the fund to investors after conducting a "due diligence" review, but was "not a promoter" paid to market the fund, Rovin said. "We have retained counsel to advise us as to how to best approach this for our clients."
The government has filed documents asking federal court permission to seize Rothstein's properties in Fort Lauderdale valued at more than $15 million, Morocco and Gibraltar bank accounts holding more than $15 million, and a string of fancy cars, all of which it said he bought improperly with investors' money.
Bekkedam, a native of Canada and a former Villanova basketball player, and Ballamor have not been accused of wrongdoing. The government has not filed criminal charges against Rothstein. Rothstein lawyer Marc Nurik declined to comment.
Right, and out
Brian Kennedy, then a stock analyst at Jefferies & Co., made a prescient call when he urged clients, in a report April 24, to sell shares of CardioNet Inc., of Conshohocken, because it was likely to face declining Medicare payments for its heart monitors.
He based the call on his own research in the health-insurance business, including information he said came from Pittsburgh insurer Highmark Medicare Services.
At the time, CardioNet had been hiring salesmen, projecting higher sales and profits, and trading above its March 2008 initial offering price of $18, under the leadership of chief executive Randy Thurman, an ex-Rhone-Poulenc-Rorer executive.
At first, Kennedy's report depressed the stock. But CardioNet's Thurman quickly denied the report was based on anything Highmark would have told Kennedy. Jefferies stuck by Kennedy, and later issued a second report supporting his "sell" recommendation.
But instead of digging deeper, analysts at Citigroup and other firms covering the stock took Thurman's and CardioNet's claims at face value, and kept recommending clients "buy" CardioNet. The stock even recovered a little.
And then, on June 30, CardioNet announced Highmark's reimbursement payments as tumbling. That turned CardioNet from a profitable into a money-losing company. Citi and other firms finally followed Kennedy in downgrading the stock. CardioNet fell below $10, and now trades around $5.
What's happened to the principals in this drama?
CardioNet chief executive Thurman, who was wrong about Medicare payment levels, has so far kept his job. Analyst Kennedy, who was right, has resigned, feeling pressure from what he calls "a hostile environment" among his Wall Street peers, who scolded him for "rocking the boat," according to the Wall Street Journal.
CardioNet spokesman Marty Galvan won't return my calls. Jefferies spokesman Tom Tarrant noted his firm had stood by Kennedy and continued to rate CardioNet a "sell." He said he couldn't comment on why Kennedy quit.
Contact Joseph N. DiStefano
at 215-854-5194 or JoeD@phillynews.com.