Monday, June 6, 2005
Arts patron and investment adviser Alberto Vilar (nee Albert Vilar, originally from West Orange, NJ) spent his second weekend in jail after not being able to meet a reduced $4 million in bail for release on securities fraud charges. Vilar was arrested on Thursday, May 26, at the Newark airport on a warrant for allegedly stealing $5 million from a client of Amerindo Investment Advisers Inc., the investment advisory firm which he founded. The government claims that Vilar and Amerindo's co-founder, Gary Tanaka, took the money for personal use, and that Vilar used a portion of it to make good on charitable pledges and to pay for the repair of the dishwasher in his New York apartment. Although a few family friends put up assets to help Vilar make bail, he fell about $1 million short of the amount needed, although his attorney is hopeful he will make bail this week. None of his high-society arts friends have volunteered to help him. See the Reuters story here.
In addition to criminal charges, the SEC filed a securities fraud suit against Vilar and Tanaka, and the Litigation Release (here) states:
[I]n approximately June 2002, Vilar solicited an Amerindo client and close personal friend to invest $5 million in a limited partnership, the Amerindo Venture Fund LP, that was purportedly being organized to qualify and be operated as a Small Business Investment Company (“SBIC”). Shortly after the investor wired $5 million to a brokerage account as Amerindo had instructed, Tanaka began to transfer a portion of her funds to other accounts Vilar and Amerindo controlled. Specifically, within several days of her investment, Tanaka signed letters of authorization directing the transfer of at least $1.65 million to other accounts, including $1 million to a personal checking account held in Vilar’s name, and $650,000 to a bank account Amerindo controlled. Vilar then used the funds he received from the investor to pay personal expenses, including transferring $540,000 to Washington and Jefferson College, his alma mater to which he had pledged large sums, and $177,000 to the American Academy in Berlin, an institution to which Vilar had donated money in the past.
At the SEC's request, the U.S. District Court also appointed a monitor for Amerindo's accounts, and institutional and individual investors are likely to seek to withdraw their money as soon as possible. Morningstar, the mutual fund rating firm, urged investors to sell their shares in the Amerindo Technology Fund (see MarketWatch story here), which will worsen the run on the firm's investments. I think it is unlikely that Amerindo will survive, and an orderly liquidation probably is the best many investors can hope for in this type of situation, although any time there is a fire sale of investments -- particularly those in the small tech companies in which Amerindo specialized -- the losses can be substantial. (ph)