Securities Fraud Attorney Blog

Below is a profile of Ross Intelisano from the Spring 2010 edition of the Brooklyn Law School Magazine BLSLaw Notes.

BLSLawNotes
The Magazine of Brooklyn Law School | Spring 2010
Alumni Update
Ross Intelisano ’94: Fighting Fraud from Bear Stearns to Bernie Madoff and Beyond

In 2006, Ross Intelisano made a prediction. A seasoned securities arbitration lawyer with a reputation as one of the leading authorities on securities fraud and Ponzi schemes, Intelisano looked into the future and saw a financial crisis of unimaginable proportion. He put his vision on paper and published an article in Bloomberg Law Reports entitled “Hedge Fund Fraud — The Future of Securities Arbitration?” in which he predicted, one year prior to the Bear Stearns High Grade Funds implosion, that broker-dealers would roll out proprietary hedge funds that were bound to unleash havoc on the financial system. Unfortunately for the market, and for the countless number of investors hurt by Bear Stearns, Intelisano was right.

In 2007, as predicted, Bear Stearns’ High Grade hedge funds crashed, with $1.6 billion in losses. Intelisano was there to pick up the pieces, taking on Bear Stearns on behalf of Racetrac, a multi-billion dollar private company that had lost $5 million in Stearns’ High Grade Structured Credit Strategies Hedge Fund. In December 2009, after a 16-day arbitration in Atlanta, Intelisano won a $3.4 million arbitration award on their behalf. The award was groundbreaking for two reasons: It was the first verdict in any forum relating to the High Grade Funds, and it was rendered after portfolio managers Ralph Cioffi and Matthew Tannin were acquitted in a federal criminal trial.

While the Racetrac arbitration was an historic case, it was not the first time Intelisano had been on the pioneering end of an arbitration. He has long been a crusader for defrauded investors.

After graduating from the Law School in 1994, Intelisano joined Pressman & Associates, a one-man shop where he began to practice securities and employment law. Three years later, he was recruited by Eppenstein & Eppenstein, a premier securities arbitration firm, where he served as co-trial counsel on Engel et. al. v. Refco, the legendary commodities fraud case. The 100-day arbitration, on behalf of 13 individuals and family-run businesses, generated a $43 million judgment in 2001. It remains the largest collected arbitration award ever rendered on behalf of retail investors against a brokerage firm.

In 2003, he joined forces with Eppenstein colleague John G. Rich to form Rich & Intelisano where he continued to try landmark cases, most notably working on behalf of investors who lost over $25 million in the $300 million Bayou hedge fund Ponzi scheme run by convicted fraudster Sam Israel. In Bayou, Intelisano once again did the unprecedented, filing a group arbitration case not against Israel, but against the registered investment advisor who had recommended Bayou to investors, for failure to perform adequate due diligence. The case, which was settled in mediation, was the first time in the world of secu¬rities arbitration that anyone had implicated an investment advisor in a Ponzi scheme.

And then came Bernie Madoff and a Ponzi scheme so large that it dwarfed anything the securities world had ever seen ($18 billion is the latest estimate). Intelisano’s phone started ringing. “I spent hours consoling investors, listening to all of these tragic stories of middle class people who had lost every dime they had saved over a lifetime,” he recalled. “I knew they would never get it back. It was the lowest point of my career as a lawyer.”

While he knew he would not be able to help investors sue Madoff (their restitution is being handled by a court-appointed trustee), he brought back the “investment advisor theory” he advanced in Bayou, and is currently representing a group of 12 victims in claims against investment advisors to Madoff feeder funds. The hearings begin in June.

With the Madoff cases ahead of him, and the victories in Racetrac and Bayou behind him, Intelisano has become one of the country’s most well respected experts in the world of hedge fund fraud. He has appeared on The Today Show, Anderson Cooper 360, Dateline NBC, PBS’s Frontline, Closing Bell with Maria Bartiromo, and is regularly quoted in The New York Times and The Wall Street Journal.

Looking into the future, Intelisano believes the horizon remains clouded over with the potential for serious fraud. “Over-the-counter derivatives, credit default swaps, oil futures, all of these products that the government is worried about regulating are very complex and are improperly being sold to retail and institutional investors. Firms aren’t watching the shop. No one is.”

Prediction noted.

62 • BLSLawNotes

I’m often asked what I read on a regular basis regarding securities and investment fraud. Back in the day (say, pre-Enron), there was limited print and online coverage of investment misconduct. In fact, when I told people what I did for a living, some would actually question whether our niche practice was even viable, “you mean there’s fraud going on on Wall Street?” Ah, how the world has changed. First Sam Israel, then the Bear Stearns High Grade Funds, and finally, the big whale of the Bernie Madoff affair.

Now, financial fraud news is general business news. Just look how Vanity Fair has scored huge every month with one strong financial story after another (Madoff, Fairfield Greenwich, Marc Dreier, Goldman Sachs and Morgan Stanley survival, etc.). Here is a little a look at what I’m presently reading, for better or worse. Today, I’ll focus on newspapers.

I start with the Financial Times. Worldly, smart, a cut above the rest for global coverage of finance. I particularly like Gillian Tett’s column and Greg Farrell’s Street coverage. I read the NY Times business section (mostly because it’s attached to the Sports section, but that’s a whole other issue). Gretchen Morgenson, Jenny Anderson, and newly appointed wonder kid Andrew Ross Sorkin, are all strong. No one covers investor protection better than Gretchen. And I love Ben Stein. However, it’s too bad the Times won’t throw more resources at its Street coverage. I also read the Wall Street Journal daily, especially on breaking finance news issues. Kate Kelley’s coverage of Bear Stearns collapse was award winning stuff. When the Journal sends its entire squadron on a topic, no one can top its finance coverage. I used to read the Post’s coverage but since Roddy Boyd left, it’s not as interesting.

Since The Economist calls itself a newspaper, I’ll include it in this section. The most intelligent weekly by far. Their in depth, forward looking analysis is unparalleled. It’s a bit daunting however on a weekly basis (like The New Yorker).