Print this
Victor Niederhoffer’s Garage Sale

By Robert Hunter

Most people’s idea of a garage sale involves putting the valueless, kitschy items that accumulate in closets and basements over the course of decades onto the front lawn for quick sale. But what if you live in a 20,000-square-foot mansion in tony Weston, Conn., and you’re trying to sell a world-class collection of silver trinkets to keep creditors off your back? Putting a Podolian ox horn with Swedish silver mounts once owned by King Charles XV of Sweden on the lawn in the hopes of catching the attention of random passersby, after all, is clearly a sketchy proposition.

For Victor Niederhoffer, famed hedge fund manager, five-time U.S. squash champion and author of the well-received The Education of a Speculator, the choice was simple: contact Sotheby’s, auction house of the gliterati. Niederhoffer’s $130 million funds blew up on October 27, 1997, when the Asian crisis spooked the U.S. equity market, wiping out all his capital. His prized silver collection quickly became part of the detritus. In order to pay down his debts, Niederhoffer took a mortgage on his estate and sold an interest in a small investment banking business for $1 million, but these steps were not enough to maintain even a modicum of the lifestyle to which he and his family had been accustomed. The result: the silver had to go.

The auction took place last December 15 amid great fanfare. Sotheby’s had estimated the collection’s value at between $2.1 million and $3 million, and produced a lavish catalog to accompany the proceeding, which it dubbed “Symbol of Excellence.” The results, by all accounts, were satisfying: the auction netted Niederhoffer a cool $2.56 million. “The auction went off like clockwork—it was remarkably successful,” says Kevin Tierney, senior vice president in charge of silver at Sotheby’s. “It did the trick for him as well, I think.”

Niederhoffer could not bear to watch the event in person—and understandably so. A number of the items held deep personal and historical significance. The top seller was a “massive silver sculptural group of victory” made for the Visconde De Figueiredo, a merchant and banker in Rio de Janeiro who played a major role in the overthrow of the Brazilian monarchy in 1889, which sold for $244,500 (see photo, next page). Runner up: a “monumental silver two-handled punch bowl,” designed in 1887 by Tiffany and Co. for the James Gordon Bennet Cup yacht race by James Gordon Bennett Jr., which sold for $145,500.

Among the more modest, but no less meaningful, items in the collection was a tribute to a war horse named Old George, who suffered a horrific injury in the Battle of Waterloo and lived on for many years afterward. The piece, a Victorian silver gilt inkstand with two horse-hoof inkwells topped with a bullet (see photo, previous page), had a Latin inscription that translates roughly as “In memory of an exceptional war horse who in his youth received a grave wound at the Battle of Waterloo; you see here the bullet taken from his testicles at death and two of his hooves…”

Niederhoffer’s collection, says Sotheby’s Tierney, was unique. “Victor was obsessed by talent and success. It was a personal thing in his life. As a young man growing up, he really proved himself, becoming a champion in squash—traditionally a conservative, Waspy sport. He reflected in his silver the idea that these items were given to mark a moment of remarkable achievement, and as a result, they themselves had to be of special quality. It was a two-pronged theme.”

The December auction represented only part of Niederhoffer’s collection. Sotheby’s had been auctioning off bits and pieces of his holdings throughout 1998, and many more items will be presented in a sale of Chinese export silver later this year.

John Field’s Fall From Grace

Most attorneys consider federal prosecutor jobs and high-level regulatory posts as worthy—and lofty—professional goals in their own right. But John Field III, a former U.S. attorney and top enforcement official at the Commodity Futures Trading Commission, seems to have viewed his governmental experience as an ideal training ground for his ultimate calling: a life of crime.

Field, a Nixon-appointed federal prosecutor from 1972–77 and CFTC head of enforcement from 1977–

1980, pleaded guilty last December to a conspiracy charge in a Newark, N.J. U.S. District Court for his role in a series of boiler-room investment scams that cheated victims out of an estimated $200 million. Two weeks earlier, Field had pled guilty in a New Hampshire court to racketeering and money-laundering charges. Ensnared by federal prosecutors more than three years ago, Field agreed to cooperate with authorities and participate in an elaborate sting to nab boiler-room artists from California to South Carolina.

In the scams for which Field and his cohorts were prosecuted, hapless investors were offered shares in bogus investments such as wireless cable systems and nonviolent television programming. Field admitted in District Court to drafting false documents in connection with the rip-offs and advising perpetrators on how to avoid regulatory trouble. He also acknowledged knowing at the time that, with sales commissions on the investments exceeding 40 percent, a mere 16 percent of investors’ money was being devoted to the sham corporations. It was also disclosed that one investment group paid Field a $1,500-a-week retainer, regardless of the amount of work he performed. “The scams were rigged from the start,” said Faith S. Hochberg, U.S. attorney for New Jersey. “The only ones who made money were the criminals.”

The sting operation, meanwhile, was the stuff of Hollywood. The FBI and U.S. postal inspectors teamed up to create a fake foreign currency fund called Unex 2100, short for the United Currency Exchange Ltd., allegedly based in London. Marcus Dalton, one of Field’s associates and a career criminal who was once called a “true pioneer” in wireless cable scams by Forbes, had also agreed to cooperate with prosecutors for leniency, and he and Field enlisted crooked telemarketers to sell shares of the fund. The telemarketers’ prey turned out to be volunteers from the American Association of Retired Persons, who posed as willing investors. On December 15, 1998, FBI agents raided operations in California, Florida, Illinois, New Jersey, New York and South Carolina.

Field’s fall from grace was gradual. In 1976, while serving as a federal attorney in Charleston, W.Va., he attempted to convict former Governor Arch Moore on fraud charges, and accused him of keeping some $200,000 of dirty money in a desk drawer. (Moore was later acquitted.) Field upheld his reputation as a tough prosecutor at the CFTC throughout his tenure. By the 1990s, however, Field’s decent had begun. In 1992, he withdrew his membership with the National Futures Association after the NFA charged that his McLean, Va.-based commodities firm had made “false and deceptive” statements to customers. In March 1998, Field and others were accused by a court-appointed collector of defrauding customers of some $35 million in a wireless cable scam.

“I think what happens is a kind of occupational hazard,” Field’s attorney, Robert Fettweis, told the Washington Post last December. “A lawyer might stretch a bit over the line to help a client. Then he gets used to going over the line, and in order to cover up the fact that he went over the line, he goes a little further. Pretty soon, he looks back and, to his horror, the line is way back behind him.”

Field faces a maximum sentence of 25 years and a $500,000 fine for the New Hampshire conviction, and five years and up to twice the total loss suffered by investors—put at $5 million to $10 million—for the New Jersey conviction, although his cooperation with authorities will likely reduce that penalty.

  • Bayerische Vereinsbank has announced the appointment of Andre Horovitz, former head of risk management at Commerzbank, as head of group risk control.
  • Thomas Ascher, former vice chairman of the Chicago Board Options Exchange, has joined Timber Hill as a senior officer.
  • Seoul Bank has promoted William Smith from senior credit officer to general manager at the bank’s New York office.
  • Paul Matthews has been promoted from deputy head of European arbitrage to head of global bond arbitrage at Salomon Smith Barney.
  • Prudential Portfolio Managers has named Gary McNamara head of securities lending. He was previously manager of transaction, processing and stock lending at Ampam/Henderson.
  • John Heimann, chairman of global financial institutions at Merrill Lynch, has been named chairman of the Financial Stability Institute.
  • The Chicago Board Options Exchange has selected Thomas Bond, an independent market-maker, as vice chairman.
  • Richard Baker, former vice president of clearing and regulatory systems at the Chicago Mercantile Exchange, has joined the Board of Trade Clearing Corp. as director of business product development.
  • MINT Communication Systems has appointed John Cummings as senior vice president for sales. He was previously regional director of financial services sales at Sun Microsystems.
  • Thomas Fischer, former managing director at Landesgirokasse Stuttgart, has been named a director in charge of treasury and market risk management at Deutsche Bank.
  • Rabobank has named Andres Recoder, former head of European investor risk management at UBS, head of European sales in the fixed-income and derivatives group.
  • The Chicago Mercantile Exchange has announced a number of appointments. Terrence Duffy has been named vice chairman, James Oliff has been named second vice chairman, Martin Gepsman has been named secretary and Thomas Kloet has been named treasurer.

Was this information valuable?
Subscribe to Derivatives Strategy by clicking here!