NFL Stars, Charmed by Kirk Wright, Lose Millions in Hedge Fund
NFL Stars, Charmed by Kirk Wright, Lose Millions in Hedge Fund
By Monee Fields-White
Bloomberg, 2006-08-23
When the FBI finally caught up with hedge fund manager Kirk Wright, he was lounging by the pool with his wife, Kilssis, at the Ritz-Carlton hotel in Miami's South Beach neighborhood.
In his room, the Federal Bureau of Investigation agents discovered debit cards and an ID card with a different name -- one of three aliases Wright used while in Florida. They also found $28,000 in cash, a vestige of investors' funds estimated at $185 million, according to a sworn affidavit from FBI Special Agent William Cromer Jr.
Wright, 36, now faces 24 federal charges of mail and securities fraud, each carrying a maximum sentence of 20 years behind bars. He's pleaded not guilty.
He and the hedge fund company he founded, Marietta, Georgia- based International Management Associates LLC, also face a fraud lawsuit by the U.S. Securities and Exchange Commission and at least three separate lawsuits from investors and former business partners.
These include former pro football player Steve Atwater, who was so impressed with Wright and the returns he claimed to make on investments that he asked to join the firm as a client liaison.
Atwater, 39, brought in six other former football players, who invested a total of almost $20 million.
All the money is now gone, Atwater says, shaking his head. ``In my wildest dreams, I never thought he was stealing the money,'' says the former defensive back for the Denver Broncos and New York Jets.
Wright's Mother Invested
The tale is all too familiar to the roughly 500 people who invested with Wright, from a Los Angeles real estate developer to a 74-year-old retired car salesman in Las Vegas, to Wright's own mother, who's not a plaintiff in the suits.
Standing just less than 6 feet (1.8 meters) tall and sporting a trimmed goatee, Harvard-educated Wright told his clients he could bring them annual returns in the region of 27 percent by short selling stocks. He wooed them in seminars in Las Vegas, at the hospitality suite at Atlanta Falcons football games and at parties at his suburban home, which had a pool and three fountains.
``Kirk was a polished, young black man who was trying to do something,'' says Horace Noble, 74, who was the first black station commander of the Cook County, Illinois, sheriff's office in 1963. ``So, I put some money in there to help him, and to get a boost myself.
$1 Million Lost
``In the end, Kirk only cared about one color -- green,'' adds Noble, who lost almost $1 million when Wright's firm collapsed. In fact, most of Wright's clients were not black, Atwater says.
The SEC, in its Feb. 27 fraud lawsuit, alleges that since at least 2003, Wright falsified statements about the amount of the firm's assets and inflated the rates of return for the seven hedge funds under his management.
Nearly all of the money invested with Wright may be lost, according to the SEC suit. William Perkins, the state and federal court-appointed receiver, has recovered $6.3 million so far -- including about $1 million from the sale of Wright's home.
``There was a large amount of money that traveled through these accounts over the years,'' says Perkins, a partner at William G. Hays & Associates LLC, an Atlanta-based consulting firm that specializes in bankruptcy administration and fraud investigation. ``But after all of the expenses, losses and consumption throughout that period, there was never a significant balance.''
Doctors Sue
Wright is also being sued by his two former partners, Nelson Keith Bond and Fitz Harper Jr., both Atlanta-area anesthesiologists. The two doctors met Wright in 1998 when they were running a clinical practice, Axis Anesthesia Associates, and they helped him tap into a network of wealthy physicians in Atlanta.
In their March 31 lawsuit, the pair say they were duped and lost $1.5 million. Bond and Harper decline to comment, says Stephen LaBriola, their attorney. The two doctors haven't been charged with any wrongdoing.
The roster of investors expanded as word about the fund's success spread to include business executives, rich retirees and professional athletes.
``People grow lax in their due diligence,'' says Ivan Thornton, managing partner at New York-based Fiduciary Management Group LLC, which manages money for athletes and entertainers. ``Everything they read about hedge funds talks about them making high returns, and people feel like they are missing out.''
Wright gained some legitimacy by having the two doctors on board, says James Ellner, an Atlanta-based anesthesiologist and IMA investor, who has known Harper since 1992.
`Brilliant Guy'
``Everyone looked up to Wright as this brilliant guy,'' Ellner says. ``He was showy.'' Federal court records show Ellner lost about $100,000. Ellner declined to confirm that figure.
Wright and Bond were also registered as acceptable financial advisers by the National Football League Players Association, the players' union, Atwater says. Atwater and the other players sued the NFL and the players' union on June 23 for recommending unfit financial advisers.
``They fumbled,'' Blaine Bishop, a former Philadelphia Eagles and Tennessee Titans safety who also worked for IMA, said of the NFL and the union at a news conference when the suit was filed.
The players want to be reimbursed for their $20 million in losses and to see the union improve its screening of fund managers.
NFL Comment
NFL spokesman Brian McCarthy says the claims are unfounded and declined to comment further. Dana Hammond, director of the NFLPA's financial advisers program, didn't return phone calls seeking comment.
Wright told his investors that he was achieving phenomenal returns on their investments by short selling a particular stock. That exposed them to extreme risks, according to an order in February by Superior Court Judge Jackson Bedford freezing the assets of IMA and Wright.
A short sale is the sale of borrowed shares that the investor is committed to repurchase eventually. Investors use short sales to capitalize on an expected decline in the security's price.
Wright had $30.5 million in trading losses, Perkins says. The rest he likely used for personal purchases, including more than $6 million in real estate, jewelry and art, all of which is being sold.
``We are going to try and retrace all of the money and recoup those assets as much as possible,'' says Mark Kaufman, partner at McKenna Long & Aldridge LLP in Atlanta, the firm representing the investors' committee in IMA's bankruptcy.
Not Guilty Plea
Wright, who pleaded not guilty at his arraignment on July 13, is in an Atlanta jail awaiting trial. His court-appointed lawyer, Virginia Natasha Perdew-Silas, didn't return repeated calls for comment.
Jacob Frenkel, the attorney for Wright and IMA in the SEC case, says ``the charges are of such seriousness that resolution would be in the interests of all parties.''
It's a long way from the Bronx, New York, where Kirk Wright grew up and was a bright and polite young man, according to a person who knew him then. He earned a bachelor's degree in political science from Binghamton University, which is part of the State University of New York system, in 1993. Two years later, he received a master's degree in public policy from Harvard University's Kennedy School of Government.
Founds IMA
Fresh out of Harvard, Wright joined Kaiser Associates, a Washington-based corporate consulting firm, as a vice president. A year later, while still in his mid-20s, he founded International Management Associates in the basement of his home in Manassas, Virginia, 32 miles southwest of Washington.
Wright shared the home with his first wife, Kasandra Pantoja, with whom he had four sons.
By the time he met Harper and Bond in 1998, Wright had a small group of investors in his three hedge funds -- the Taurus Fund, Growth & Income Fund and Sunset Fund -- totaling less than $15 million, according to the doctors' suit.
Harper and Bond invested and began referring friends and family members to Wright, their lawsuit says. They set up seminars for their doctor friends at which Wright would court potential clients.
Noble, a retired owner of a Lincoln-Mercury dealership, went with a friend to one such seminar in Las Vegas on a September evening in 1999. More than 25 people, mostly physicians, gathered in a hotel conference room, Noble says. Wright praised the success of his company's funds, using charts and graphs on a video screen.
`Silver-Tongued Devil'
``He's a silver-tongued devil,'' Noble says.
In November 1999, Noble made his first investment of $140,000. He deposited an additional $336,000 during the first half of 2000 after receiving statements showing a 3 percent jump each month.
Wright eventually rolled all of Noble's money into the Platinum fund. According to the fund's marketing materials, ``It seeks to capitalize volumetrically on a few select opportunities characterized by moderate to high valuations, compelling business fundamentals and strong management teams.''
That language should have been a red flag for investors, Thornton says. ``If you have jargon-laced speech like this, that usually means you're covering something up,'' he says.
By 2000, Wright had moved to Atlanta, where Harper and Bond were based. The city at the time was a boomtown. From 1990 to 2000, its population grew by 1.15 million to 4.1 million, according to the Metro Atlanta Chamber of Commerce. Almost two- thirds of that growth was due to newcomers.
Atlanta Hawks, Falcons
Wright, who worked from the ground floor of a glass office tower in suburban Marietta, 13 miles north of Atlanta, adopted a high-profile lifestyle. He rented corporate suites at Atlanta Hawks basketball and Falcon football games, bringing along potential clients.
He also bought a vintage 1967 BMW 2000CS, a 2000 Jaguar Coupe XK8 and a gray 2003 Aston Martin two-door coupe.
Wright moved into a four-bedroom, three-bath, stucco and brick home at the end of a cul-de-sac in Marietta. Then he doubled the size of the house, adding a vaulted marble-floor family and entertainment room, with a curved-glass staircase and cathedral- like window that overlooked the pool and backyard fountains.
``He often said it was his dream home,'' says former neighbor Evelyn Kernachan, who has lived in the quiet Turtle Lake Court neighborhood for 27 years. ``He was engaging and personable, but at times he could be inconsiderate of his neighbors.''
She says the vehicles of construction workers blocked her mailbox and driveway.
Harper and Bond officially joined IMA in November 2000, while still practicing medicine on a part-time basis. Harper -- who had no background in finance -- became chief financial officer, while Bond became the chief operating officer.
Las Vegas Office
During the next four years, the doctors helped Wright open offices in Las Vegas, New York and Los Angeles, where they hired Thomas Birk, who previously worked in the marketing department of Lehman Brothers Holdings Inc., as managing director.
Wright began investing in other business ventures outside of IMA, including a Southern-style restaurant in Cleveland, that later failed.
In partnership with GTO Development LLC, a Santa Monica, California-based real estate developer, he entered into a deal to develop condominiums in Los Angeles and Lake Arrowhead, California.
GTO's principal, Roger O'Neal, also invested in IMA. He says he wanted to withdraw money from his IMA accounts to fund the projects. Wright discouraged him from doing so and told O'Neal that IMA would put up $6 million toward the condominiums. ``Kirk said he wanted to diversify some of his high-net-worth clients,'' O'Neal says.
`Just a Scam'
The properties have been seized by Perkins, the liquidator. ``It was just a scam,'' says O'Neal, who lost $13.5 million. ``He wanted to invest my own money in my own company. Not only did I get victimized personally, now I'm becoming a victim in my business.''
During this time, Harper and Bond repeatedly asked Wright to let them see the brokerage statements showing how IMA was investing its money, according to their lawsuit, filed on March 31, in Superior Court in Fulton County, Georgia.
At the start of 2004, Harper and Bond began pushing Wright to start a new company that would offer more transparency, according to their lawsuit.
The new firm, called IMA Advisory Group, hired Lehman Brothers as its prime broker and a certified public accountant, Kenneth Turchin, to manage the company's books. Wright was the principal trader.
A Round of Golf
It was in May 2004 that Atwater, who holds a bachelor's degree in finance and banking from the University of Arkansas, heard about IMA from one of its clients at a conference for entrepreneurs in San Antonio, he says. The investor gave the football player Bond's number.
Atwater invited Bond to his Duluth, Georgia, home, which is located in the Sugarloaf Country Club community, and they played a round of golf and talked about money. ``I didn't hit the ball that good but we did hit it off pretty good,'' Atwater says.
Atwater trolled through information about the funds. He noted that Wright was registered with the players' union. ``We felt comfortable,'' Atwater says.
At the start of August, Atwater invested $1.5 million. His statement for the first month showed a 9.39 percent gain, or $140,000. The jump seemed so unreal to him that he called Bond to make sure the numbers were correct.
Atwater's balance continued to grow, by 4.6 percent in September, 4.4 percent in October, 7.3 percent in November and 2.5 percent in December.
NFL Players Join
Atwater began telling his football buddies about IMA, including Bishop, 36, with whom Atwater competed in the 1995 and 1996 Pro Bowls, the NFL's all-star games. Atwater also spoke to Ray Crockett, 39, who'd played with Atwater in the Denver Broncos backfield for four years, winning the Super Bowl in 1998.
Bishop, who invested in late 2004, and Crockett, who invested in January 2005, declined to comment.
In December 2004, Atwater met Kirk Wright for the first time, when Wright invited Atwater's family to his hospitality suite during a Falcons game.
Atwater recalls Wright making his way around the room, shaking hands and chatting with each guest. Wright talked to Atwater about IMA's future and said that he was thinking about buying an NBA basketball team.
``The first impression I got from him was that he was a really sharp guy,'' Atwater says. ``He really put on a good show that day.''
In early 2005, Atwater approached Bond about working at the firm. Atwater, who owned some commercial properties in Southern California, told Bond he wanted to help other players with their post-career investments.
Studying for License
Bond liked the idea, and in March, Atwater joined as a client liaison at IMA Advisory Group. Bishop followed in May 2005.
In a shared office, the two former football players spent several months studying to become registered investment advisers. Over the summer, the pair recruited more former NFL players as investors.
They added Terrell Davis, 33, a former Denver Broncos all- star running back; Al Smith, 42, a former Houston Oilers all-pro linebacker; and Clyde Simmons, 42, a former defensive end for five teams, including the Philadelphia Eagles. The only active NFL player to invest was Rod Smith, 36, a Broncos wide receiver.
Accountants' Questions
Later that summer, Turchin began asking questions about IMA's books. In an Aug. 23 e-mail message to Harper, a copy of which is included in the SEC court case, the accountant said there were inconsistencies in the brokerage statements produced by Lehman Brothers and Bisys Group Inc., a Roseland, New Jersey-based company that executed and administered trades for Wright, and those sent to investors.
For example, Turchin wrote, Lehman and Bisys reported a 24 percent loss for two funds during the period ended on March 31, 2005. IMA told investors the same two funds gained more than 6 percent in the period.
``There is no validation of fund performance for IMA and IMAAG funds,'' Turchin wrote. ``The portfolio manager is the only person authorized to trade the funds and is the only person receiving broker statements.''
The portfolio manager was Kirk Wright.
Turchin's lawyer, Jason Brown, declined to make his client available for comment.
Shortly after that, the football players called a personal foul. Atwater says Wright, Bond and Harper stopped coming to the office. Rod Smith also spotted errors in the balances on his account statements.
Proprietary Information
Atwater and Bishop wanted more information about the funds and asked to see the broker statements. Wright refused, claiming they were proprietary information.
``I assumed that once I got my license that it wouldn't be an issue, but I was wrong,'' says Atwater, who became a licensed investment adviser in July 2005.
Regulators also began asking questions. In September, the SEC and the New York State attorney general's office requested the company submit account statements for review, the doctors say in their lawsuit.
Wright seemed concerned by the requests, and stood before the staff and warned that they all must cooperate with the SEC, Atwater recalls. ``This just seemed strange because I kept thinking, 'I don't have any part in the documentation,''' Atwater says. ``This was all Kirk.''
William Hicks, SEC Atlanta district trial counsel, wouldn't comment on how long the agency has been investigating the hedge fund. Brad Maione, a spokesman for the New York attorney general's office, declined to comment.
SEC Review
In October, Atwater and Bishop met with Wright, Bond, Harper and Birk, who had come from the Los Angeles office. They talked about the status of the SEC review, and Wright came with a copy of statements for four TD Ameritrade Holding Corp. accounts, showing a total balance of about $155 million. Atwater says seeing the statements alleviated his doubts.
And on Oct. 22, Atwater and Bishop attended Wright's wedding to Kilssis Delos Collado, whom Wright had met in 2002 when she was a part-time hostess at Georgia Brown's restaurant in Washington.
Wright's four sons from his first marriage were at the wedding, held at St. Luke's Episcopal Church in Atlanta. The bride flashed an engagement ring worth more than $50,000, according to Perkins, the liquidator.
The reception was held in the backyard of Wright's home, where the newlyweds shared the traditional first dance on a platform that stretched across the pool, says Calvin Paris, an IMA investor who attended.
'Ostentatious'
Guests feasted on a seafood buffet that included shrimp and lobster and on a dessert buffet. Bartenders served champagne from three bars sculpted from ice.
``It was ostentatious to a fault,'' Paris says. ``I can't understand how anybody can do that, knowing full well they are not only deceiving themselves but their investors and family.''
``Kirk is worse than greed,'' Paris adds. ``He took people's money that didn't belong to him.''
Atwater, who says he didn't know about the Turchin e-mail, began to get uneasy again. He says Bond began avoiding meeting with him.
On Dec. 5, Atwater, Bishop and the other NFL players requested their money back. Wright, Harper and Bond tried to convince them to do otherwise, telling them of future goals of growing into a $300 million company, Atwater says.
On Dec. 27, Atwater says, the players received letters stating they would get their funds in less than 21 days. By Jan. 23, they hadn't received any money.
Wright had long before stopped showing up at the office, and now he didn't return phone calls. Atwater and Bishop drove to Turtle Lake Court and stopped at Wright's house. They spoke with Kilssis, who said she didn't know where he was.
$3.2 Million Transfer
On the morning of Jan. 26, Atwater, who'd been checking the balance of his bank account compulsively, saw something new: a deposit in the amount of $3.2 million. The bank said the funds wouldn't be available for 14 days, so he went there to ask about the long wait and retrieve a copy of the check.
To his surprise, the check had been drawn not from IMA accounts but from one held by a business partnership Wright had with Willie Clay, a former safety for several teams, including the New England Patriots.
Clay's signature was forged on the front of the check and Atwater's signature was forged on the back, the players' lawsuit says. ``When I saw the check, I was sick,'' Atwater says. The check bounced, he says. Clay didn't return phone calls.
Atwater began calling the other football players. Now, he says, he has little hope they'll find any large sum. The SEC lawsuit says IMA's Ameritrade accounts, which Wright told Atwater had held $155 million, in reality held less than $150,000.
``None of us were thinking it would happen this way,'' Atwater says.
At Wright's home in Marietta shortly after his arrest, little was left of the grand life he once led. Clothes were strewn across the bedroom floor, furniture was slashed and a coffee table's glass top had been shattered, scattering diamond-shaped shards across the marble floor.
By Monee Fields-White
Bloomberg, 2006-08-23
When the FBI finally caught up with hedge fund manager Kirk Wright, he was lounging by the pool with his wife, Kilssis, at the Ritz-Carlton hotel in Miami's South Beach neighborhood.
In his room, the Federal Bureau of Investigation agents discovered debit cards and an ID card with a different name -- one of three aliases Wright used while in Florida. They also found $28,000 in cash, a vestige of investors' funds estimated at $185 million, according to a sworn affidavit from FBI Special Agent William Cromer Jr.
Wright, 36, now faces 24 federal charges of mail and securities fraud, each carrying a maximum sentence of 20 years behind bars. He's pleaded not guilty.
He and the hedge fund company he founded, Marietta, Georgia- based International Management Associates LLC, also face a fraud lawsuit by the U.S. Securities and Exchange Commission and at least three separate lawsuits from investors and former business partners.
These include former pro football player Steve Atwater, who was so impressed with Wright and the returns he claimed to make on investments that he asked to join the firm as a client liaison.
Atwater, 39, brought in six other former football players, who invested a total of almost $20 million.
All the money is now gone, Atwater says, shaking his head. ``In my wildest dreams, I never thought he was stealing the money,'' says the former defensive back for the Denver Broncos and New York Jets.
Wright's Mother Invested
The tale is all too familiar to the roughly 500 people who invested with Wright, from a Los Angeles real estate developer to a 74-year-old retired car salesman in Las Vegas, to Wright's own mother, who's not a plaintiff in the suits.
Standing just less than 6 feet (1.8 meters) tall and sporting a trimmed goatee, Harvard-educated Wright told his clients he could bring them annual returns in the region of 27 percent by short selling stocks. He wooed them in seminars in Las Vegas, at the hospitality suite at Atlanta Falcons football games and at parties at his suburban home, which had a pool and three fountains.
``Kirk was a polished, young black man who was trying to do something,'' says Horace Noble, 74, who was the first black station commander of the Cook County, Illinois, sheriff's office in 1963. ``So, I put some money in there to help him, and to get a boost myself.
$1 Million Lost
``In the end, Kirk only cared about one color -- green,'' adds Noble, who lost almost $1 million when Wright's firm collapsed. In fact, most of Wright's clients were not black, Atwater says.
The SEC, in its Feb. 27 fraud lawsuit, alleges that since at least 2003, Wright falsified statements about the amount of the firm's assets and inflated the rates of return for the seven hedge funds under his management.
Nearly all of the money invested with Wright may be lost, according to the SEC suit. William Perkins, the state and federal court-appointed receiver, has recovered $6.3 million so far -- including about $1 million from the sale of Wright's home.
``There was a large amount of money that traveled through these accounts over the years,'' says Perkins, a partner at William G. Hays & Associates LLC, an Atlanta-based consulting firm that specializes in bankruptcy administration and fraud investigation. ``But after all of the expenses, losses and consumption throughout that period, there was never a significant balance.''
Doctors Sue
Wright is also being sued by his two former partners, Nelson Keith Bond and Fitz Harper Jr., both Atlanta-area anesthesiologists. The two doctors met Wright in 1998 when they were running a clinical practice, Axis Anesthesia Associates, and they helped him tap into a network of wealthy physicians in Atlanta.
In their March 31 lawsuit, the pair say they were duped and lost $1.5 million. Bond and Harper decline to comment, says Stephen LaBriola, their attorney. The two doctors haven't been charged with any wrongdoing.
The roster of investors expanded as word about the fund's success spread to include business executives, rich retirees and professional athletes.
``People grow lax in their due diligence,'' says Ivan Thornton, managing partner at New York-based Fiduciary Management Group LLC, which manages money for athletes and entertainers. ``Everything they read about hedge funds talks about them making high returns, and people feel like they are missing out.''
Wright gained some legitimacy by having the two doctors on board, says James Ellner, an Atlanta-based anesthesiologist and IMA investor, who has known Harper since 1992.
`Brilliant Guy'
``Everyone looked up to Wright as this brilliant guy,'' Ellner says. ``He was showy.'' Federal court records show Ellner lost about $100,000. Ellner declined to confirm that figure.
Wright and Bond were also registered as acceptable financial advisers by the National Football League Players Association, the players' union, Atwater says. Atwater and the other players sued the NFL and the players' union on June 23 for recommending unfit financial advisers.
``They fumbled,'' Blaine Bishop, a former Philadelphia Eagles and Tennessee Titans safety who also worked for IMA, said of the NFL and the union at a news conference when the suit was filed.
The players want to be reimbursed for their $20 million in losses and to see the union improve its screening of fund managers.
NFL Comment
NFL spokesman Brian McCarthy says the claims are unfounded and declined to comment further. Dana Hammond, director of the NFLPA's financial advisers program, didn't return phone calls seeking comment.
Wright told his investors that he was achieving phenomenal returns on their investments by short selling a particular stock. That exposed them to extreme risks, according to an order in February by Superior Court Judge Jackson Bedford freezing the assets of IMA and Wright.
A short sale is the sale of borrowed shares that the investor is committed to repurchase eventually. Investors use short sales to capitalize on an expected decline in the security's price.
Wright had $30.5 million in trading losses, Perkins says. The rest he likely used for personal purchases, including more than $6 million in real estate, jewelry and art, all of which is being sold.
``We are going to try and retrace all of the money and recoup those assets as much as possible,'' says Mark Kaufman, partner at McKenna Long & Aldridge LLP in Atlanta, the firm representing the investors' committee in IMA's bankruptcy.
Not Guilty Plea
Wright, who pleaded not guilty at his arraignment on July 13, is in an Atlanta jail awaiting trial. His court-appointed lawyer, Virginia Natasha Perdew-Silas, didn't return repeated calls for comment.
Jacob Frenkel, the attorney for Wright and IMA in the SEC case, says ``the charges are of such seriousness that resolution would be in the interests of all parties.''
It's a long way from the Bronx, New York, where Kirk Wright grew up and was a bright and polite young man, according to a person who knew him then. He earned a bachelor's degree in political science from Binghamton University, which is part of the State University of New York system, in 1993. Two years later, he received a master's degree in public policy from Harvard University's Kennedy School of Government.
Founds IMA
Fresh out of Harvard, Wright joined Kaiser Associates, a Washington-based corporate consulting firm, as a vice president. A year later, while still in his mid-20s, he founded International Management Associates in the basement of his home in Manassas, Virginia, 32 miles southwest of Washington.
Wright shared the home with his first wife, Kasandra Pantoja, with whom he had four sons.
By the time he met Harper and Bond in 1998, Wright had a small group of investors in his three hedge funds -- the Taurus Fund, Growth & Income Fund and Sunset Fund -- totaling less than $15 million, according to the doctors' suit.
Harper and Bond invested and began referring friends and family members to Wright, their lawsuit says. They set up seminars for their doctor friends at which Wright would court potential clients.
Noble, a retired owner of a Lincoln-Mercury dealership, went with a friend to one such seminar in Las Vegas on a September evening in 1999. More than 25 people, mostly physicians, gathered in a hotel conference room, Noble says. Wright praised the success of his company's funds, using charts and graphs on a video screen.
`Silver-Tongued Devil'
``He's a silver-tongued devil,'' Noble says.
In November 1999, Noble made his first investment of $140,000. He deposited an additional $336,000 during the first half of 2000 after receiving statements showing a 3 percent jump each month.
Wright eventually rolled all of Noble's money into the Platinum fund. According to the fund's marketing materials, ``It seeks to capitalize volumetrically on a few select opportunities characterized by moderate to high valuations, compelling business fundamentals and strong management teams.''
That language should have been a red flag for investors, Thornton says. ``If you have jargon-laced speech like this, that usually means you're covering something up,'' he says.
By 2000, Wright had moved to Atlanta, where Harper and Bond were based. The city at the time was a boomtown. From 1990 to 2000, its population grew by 1.15 million to 4.1 million, according to the Metro Atlanta Chamber of Commerce. Almost two- thirds of that growth was due to newcomers.
Atlanta Hawks, Falcons
Wright, who worked from the ground floor of a glass office tower in suburban Marietta, 13 miles north of Atlanta, adopted a high-profile lifestyle. He rented corporate suites at Atlanta Hawks basketball and Falcon football games, bringing along potential clients.
He also bought a vintage 1967 BMW 2000CS, a 2000 Jaguar Coupe XK8 and a gray 2003 Aston Martin two-door coupe.
Wright moved into a four-bedroom, three-bath, stucco and brick home at the end of a cul-de-sac in Marietta. Then he doubled the size of the house, adding a vaulted marble-floor family and entertainment room, with a curved-glass staircase and cathedral- like window that overlooked the pool and backyard fountains.
``He often said it was his dream home,'' says former neighbor Evelyn Kernachan, who has lived in the quiet Turtle Lake Court neighborhood for 27 years. ``He was engaging and personable, but at times he could be inconsiderate of his neighbors.''
She says the vehicles of construction workers blocked her mailbox and driveway.
Harper and Bond officially joined IMA in November 2000, while still practicing medicine on a part-time basis. Harper -- who had no background in finance -- became chief financial officer, while Bond became the chief operating officer.
Las Vegas Office
During the next four years, the doctors helped Wright open offices in Las Vegas, New York and Los Angeles, where they hired Thomas Birk, who previously worked in the marketing department of Lehman Brothers Holdings Inc., as managing director.
Wright began investing in other business ventures outside of IMA, including a Southern-style restaurant in Cleveland, that later failed.
In partnership with GTO Development LLC, a Santa Monica, California-based real estate developer, he entered into a deal to develop condominiums in Los Angeles and Lake Arrowhead, California.
GTO's principal, Roger O'Neal, also invested in IMA. He says he wanted to withdraw money from his IMA accounts to fund the projects. Wright discouraged him from doing so and told O'Neal that IMA would put up $6 million toward the condominiums. ``Kirk said he wanted to diversify some of his high-net-worth clients,'' O'Neal says.
`Just a Scam'
The properties have been seized by Perkins, the liquidator. ``It was just a scam,'' says O'Neal, who lost $13.5 million. ``He wanted to invest my own money in my own company. Not only did I get victimized personally, now I'm becoming a victim in my business.''
During this time, Harper and Bond repeatedly asked Wright to let them see the brokerage statements showing how IMA was investing its money, according to their lawsuit, filed on March 31, in Superior Court in Fulton County, Georgia.
At the start of 2004, Harper and Bond began pushing Wright to start a new company that would offer more transparency, according to their lawsuit.
The new firm, called IMA Advisory Group, hired Lehman Brothers as its prime broker and a certified public accountant, Kenneth Turchin, to manage the company's books. Wright was the principal trader.
A Round of Golf
It was in May 2004 that Atwater, who holds a bachelor's degree in finance and banking from the University of Arkansas, heard about IMA from one of its clients at a conference for entrepreneurs in San Antonio, he says. The investor gave the football player Bond's number.
Atwater invited Bond to his Duluth, Georgia, home, which is located in the Sugarloaf Country Club community, and they played a round of golf and talked about money. ``I didn't hit the ball that good but we did hit it off pretty good,'' Atwater says.
Atwater trolled through information about the funds. He noted that Wright was registered with the players' union. ``We felt comfortable,'' Atwater says.
At the start of August, Atwater invested $1.5 million. His statement for the first month showed a 9.39 percent gain, or $140,000. The jump seemed so unreal to him that he called Bond to make sure the numbers were correct.
Atwater's balance continued to grow, by 4.6 percent in September, 4.4 percent in October, 7.3 percent in November and 2.5 percent in December.
NFL Players Join
Atwater began telling his football buddies about IMA, including Bishop, 36, with whom Atwater competed in the 1995 and 1996 Pro Bowls, the NFL's all-star games. Atwater also spoke to Ray Crockett, 39, who'd played with Atwater in the Denver Broncos backfield for four years, winning the Super Bowl in 1998.
Bishop, who invested in late 2004, and Crockett, who invested in January 2005, declined to comment.
In December 2004, Atwater met Kirk Wright for the first time, when Wright invited Atwater's family to his hospitality suite during a Falcons game.
Atwater recalls Wright making his way around the room, shaking hands and chatting with each guest. Wright talked to Atwater about IMA's future and said that he was thinking about buying an NBA basketball team.
``The first impression I got from him was that he was a really sharp guy,'' Atwater says. ``He really put on a good show that day.''
In early 2005, Atwater approached Bond about working at the firm. Atwater, who owned some commercial properties in Southern California, told Bond he wanted to help other players with their post-career investments.
Studying for License
Bond liked the idea, and in March, Atwater joined as a client liaison at IMA Advisory Group. Bishop followed in May 2005.
In a shared office, the two former football players spent several months studying to become registered investment advisers. Over the summer, the pair recruited more former NFL players as investors.
They added Terrell Davis, 33, a former Denver Broncos all- star running back; Al Smith, 42, a former Houston Oilers all-pro linebacker; and Clyde Simmons, 42, a former defensive end for five teams, including the Philadelphia Eagles. The only active NFL player to invest was Rod Smith, 36, a Broncos wide receiver.
Accountants' Questions
Later that summer, Turchin began asking questions about IMA's books. In an Aug. 23 e-mail message to Harper, a copy of which is included in the SEC court case, the accountant said there were inconsistencies in the brokerage statements produced by Lehman Brothers and Bisys Group Inc., a Roseland, New Jersey-based company that executed and administered trades for Wright, and those sent to investors.
For example, Turchin wrote, Lehman and Bisys reported a 24 percent loss for two funds during the period ended on March 31, 2005. IMA told investors the same two funds gained more than 6 percent in the period.
``There is no validation of fund performance for IMA and IMAAG funds,'' Turchin wrote. ``The portfolio manager is the only person authorized to trade the funds and is the only person receiving broker statements.''
The portfolio manager was Kirk Wright.
Turchin's lawyer, Jason Brown, declined to make his client available for comment.
Shortly after that, the football players called a personal foul. Atwater says Wright, Bond and Harper stopped coming to the office. Rod Smith also spotted errors in the balances on his account statements.
Proprietary Information
Atwater and Bishop wanted more information about the funds and asked to see the broker statements. Wright refused, claiming they were proprietary information.
``I assumed that once I got my license that it wouldn't be an issue, but I was wrong,'' says Atwater, who became a licensed investment adviser in July 2005.
Regulators also began asking questions. In September, the SEC and the New York State attorney general's office requested the company submit account statements for review, the doctors say in their lawsuit.
Wright seemed concerned by the requests, and stood before the staff and warned that they all must cooperate with the SEC, Atwater recalls. ``This just seemed strange because I kept thinking, 'I don't have any part in the documentation,''' Atwater says. ``This was all Kirk.''
William Hicks, SEC Atlanta district trial counsel, wouldn't comment on how long the agency has been investigating the hedge fund. Brad Maione, a spokesman for the New York attorney general's office, declined to comment.
SEC Review
In October, Atwater and Bishop met with Wright, Bond, Harper and Birk, who had come from the Los Angeles office. They talked about the status of the SEC review, and Wright came with a copy of statements for four TD Ameritrade Holding Corp. accounts, showing a total balance of about $155 million. Atwater says seeing the statements alleviated his doubts.
And on Oct. 22, Atwater and Bishop attended Wright's wedding to Kilssis Delos Collado, whom Wright had met in 2002 when she was a part-time hostess at Georgia Brown's restaurant in Washington.
Wright's four sons from his first marriage were at the wedding, held at St. Luke's Episcopal Church in Atlanta. The bride flashed an engagement ring worth more than $50,000, according to Perkins, the liquidator.
The reception was held in the backyard of Wright's home, where the newlyweds shared the traditional first dance on a platform that stretched across the pool, says Calvin Paris, an IMA investor who attended.
'Ostentatious'
Guests feasted on a seafood buffet that included shrimp and lobster and on a dessert buffet. Bartenders served champagne from three bars sculpted from ice.
``It was ostentatious to a fault,'' Paris says. ``I can't understand how anybody can do that, knowing full well they are not only deceiving themselves but their investors and family.''
``Kirk is worse than greed,'' Paris adds. ``He took people's money that didn't belong to him.''
Atwater, who says he didn't know about the Turchin e-mail, began to get uneasy again. He says Bond began avoiding meeting with him.
On Dec. 5, Atwater, Bishop and the other NFL players requested their money back. Wright, Harper and Bond tried to convince them to do otherwise, telling them of future goals of growing into a $300 million company, Atwater says.
On Dec. 27, Atwater says, the players received letters stating they would get their funds in less than 21 days. By Jan. 23, they hadn't received any money.
Wright had long before stopped showing up at the office, and now he didn't return phone calls. Atwater and Bishop drove to Turtle Lake Court and stopped at Wright's house. They spoke with Kilssis, who said she didn't know where he was.
$3.2 Million Transfer
On the morning of Jan. 26, Atwater, who'd been checking the balance of his bank account compulsively, saw something new: a deposit in the amount of $3.2 million. The bank said the funds wouldn't be available for 14 days, so he went there to ask about the long wait and retrieve a copy of the check.
To his surprise, the check had been drawn not from IMA accounts but from one held by a business partnership Wright had with Willie Clay, a former safety for several teams, including the New England Patriots.
Clay's signature was forged on the front of the check and Atwater's signature was forged on the back, the players' lawsuit says. ``When I saw the check, I was sick,'' Atwater says. The check bounced, he says. Clay didn't return phone calls.
Atwater began calling the other football players. Now, he says, he has little hope they'll find any large sum. The SEC lawsuit says IMA's Ameritrade accounts, which Wright told Atwater had held $155 million, in reality held less than $150,000.
``None of us were thinking it would happen this way,'' Atwater says.
At Wright's home in Marietta shortly after his arrest, little was left of the grand life he once led. Clothes were strewn across the bedroom floor, furniture was slashed and a coffee table's glass top had been shattered, scattering diamond-shaped shards across the marble floor.
posted by The Poster at 8:22 PM
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Corruption in Sustainable Community Associates
Oberlin Review (April 21, 2006):
In a June 23, 2003, e-mail to Oberlin City Manager Rob Dispirito, Sustainable Community Associates (SCA) President Josh Rosen extolled the virtues of "a very successful minority-owned business in Cleveland" identified as Phil the Fire. Relating SCA’s bilateral negotiations, Rosen drooled:
"They are interested in opening up a location in our building. This would become a real destination point for folks in Lorain County and be a major score for Oberlin. He asked me what programs or incentives Oberlin offers given he is looking at other locations in Lorain County. I was wondering if either the City or OCIC had a low interest loan pool or some other incentive program that can be explored. I was also curious as to what if any programs existed for minority businesses and minority business recruitment. We expect to meet with the owner sometime next week, and I think it would greatly improve Oberlin’s prospects of landing this business if we could discuss potential incentives with him."
On March 14 and March 29, 2003, Ben & Jerry’s co-founder Jerry Greenfield, Oberlin College class of ‘73, executed two $20,000 promissory notes to Phil B. Davis, Phil the Fire’s flamboyant proprietor, at prime plus 200 basis points, collateralized by an equity stake in Phil the Fire. Mr. Davis, a former deodorant salesman, failed to make a single payment on the bargain-rate loans. On October 31, 2003, the well-heeled ice cream czar and the wannabe waffle king consummated a Halloween wing-and-a-prayer loan consolidation through a $100,000 line of credit issued by Shore Bank. Mr. Davis subsequently defaulted on every facet of the original loans.
According to Cuyahoga County Court records, Phil the Fire’s tax returns, prepared by leading public accounting firm SS & G, show a loss of nearly $50,000 in 2002. In an amended July 19, 2004, brief attached to the extensive litigation spawned by Phil the Fire’s demise, Phil B. Davis declares on line #93, "Defendant never claimed that the operations of Phil the Fire on Shaker Square had yielded a profit after its first year of operations." The Ohio Department of Taxation affixed eight liens totaling $69,555.63 to Phil the Fire’s Shaker Square carcass. The Ohio Bureau of Workers Compensation weighed in with unpaid claims of $7,265.37.
Mr. Davis’ Shaker Square operation inherited the retail storefront formerly occupied by Hungarian strudel purveyor Lucy’s Sweet Surrender, a 49-year Buckeye neighborhood fixture employing a bevy of elderly, veteran strudel kneaders. On assuming the balance of Lucy’s ten-year lease, Mr. Davis seized $75,000 in specialized bakery equipment belonging to Lucy’s proprietor Michael Feigenbaum. Lucy’s never fully recovered and, according to Mr. Feigenbaum’s Hotel Bruce web posting, is "living on fumes."
On Sunday, March 26, 2006, the Cleveland Plain Dealer ran a front-page expose detailing the implosion of both the Shaker Square and downtown Phil the Fire and Waterhouse Restaurants, established with the financial backing of fugitive Atlanta hedge fund manager Kirk Wright. I, not any member of this body [Oberlin City Council], was the original source for that story.
Wanted on state and federal mail and securities fraud warrants for allegedly absconding with $185 million in investor assets, Wright targeted novice minority investors, particularly professional athletes with significant discretionary income. Equipped, according to the New York Post, with "a materialistic streak that would make Madonna blush," Wright’s illicitly acquired auto collection included a Bentley, a Jaguar, an Aston Martin, a BMW and a Lamborghini. A March 9, 2006, Wall Street Journal article reported Mr. Wright’s financial seductions occurred in "suites he rented at Atlanta Falcon football games." Since February 2002, SCA’s financial patron, Home Depot co-founder Arthur Blank, has owned the Atlanta Falcons. According to Phil B. Davis’ Cuyahoga County court filings, Davis "met twice with Wright in Plaintiff’s Atlanta office."
In a short, tumultuous five-month life-span, Phil the Fire’s illiquid downtown Cleveland gravy train racked up well in excess of a million dollars in unpaid debts and forfeitures — including over $15,000 in Ohio workers compensation liens — was on a C.O.D. basis with vendors and, according to Phil Davis’ July 28, 2004, court filings, had a chronic negative cash flow. Channel 19 reporter Scott Taylor ran an investigative piece broadcast March 14, 2004, on Phil the Fire Gateway’s imminent meltdown. On March 23, 2004, the IRS slapped a $226,259 tax lien on Phil the Fire for failure to pay federal withholding taxes. On April 15, 2004, Phil the Fire employees picketed outside the swank downtown eatery to protest their untendered paychecks. Although Phil Davis’ initial capital contribution to the Gateway Phil the Fire restaurant was a nominal $100, as set forth in the operating agreement, Mr. Davis retained a 60% ownership stake. On March 31, 2004, as the downtown Phil the Fire hemorrhaged cash and the chickens came home to roost, Mr. Davis borrowed $20,000, via a promissory note, from Phil the Fire’s talented chef, Alexander Daniels. Despite receiving $50,000 from Mr. Wright on April 26, 2004, in an impetuous, global out-of-court settlement, Mr. Davis defaulted on the bulk ($15,000) of Mr. Daniels’ unsecured loan and a contracted $11,000 culinary consultant’s fee.
SCA’s failure to properly vet potential vendors is a classic example of the inevitable pitfalls of delegating substantial operational control of a major development project to irresponsible, inept neophytes. This is the Rubicon where the insufficient rubber check meets the incandescent yellow brick road. Last time I inquired, despite legions of tree-huggers, Oberlin wasn’t blessed with a biodegradable bond rating. SCA’s profligate, pedigreed opportunists treat Oberlin’s municipal reserves like Paris Hilton’s trust fund. Since March 25, 2005, these insufferable mendicants have squandered over $154,000 in HUD EDI Special Projects Funds — in addition to cannibalizing the city’s legal budget to the tune of $67,300 and inflicting economic development costs of $8,800 — on a poorly designed, fiscally untenable, perennially altered boondoggle that has yet to be formally submitted to the city planning board. This convoluted "reverse brain drain" Wrong Way Corrigan albatross deserves rapid embalmment, a cryogenic freeze or serious Freudian analysis.
-Mark Chesler
Oberlin, OH
__________________________________________
Investors burned as project flames out
Cleveland Plain Dealer (Sunday, March 26, 2006):
By Alison Grant
The entertainment district around Cleveland's Gund Arena and Jacobs Field looked like a sure bet in 2003 for someone wanting to open a restaurant near star-power athletes.
The Cavaliers had just landed the biggest basketball talent in decades, LeBron James, and the Indians were starting to rebuild with a roster of young and promising baseball players.
For Atlanta hedge fund manager Kirk Wright, the neighborhood's proximity to two sports venues was a beacon.
The building that housed Wright's two restaurants in succession -- Phil the Fire Downtown and The Waterhouse -- still looks primed for customers.
Tables with crisp white tablecloths, dinner settings and glasses suggest the dining room closed with full intent to open the next day. But it didn't.
The Waterhouse's last day of business was in late February, about the time Wright became a national story.
He disappeared from his Atlanta hedge fund office amid claims by the Securities and Exchange Commission that he fraudulently operated International Management Associates LLC and several other funds.
Wright almost totally dissipated the funds' assets -- an estimated $115 million to $185 million, the SEC said in a lawsuit.
Seven current and former National Football League players and other investors also sued, claiming Wright fleeced them of tens of millions of dollars.
Besides pro athletes, Wright's business grew by focusing on affluent black doctors and other professionals.
Former NFL players Terrell Davis and Steve Atwater, and current Denver Bronco Rod Smith, are among the plaintiffs in one suit against Wright.
Wright is in hiding, and his lawyer, Jacob Frenkel, says he fears for his life because of threats from two former NFL players. Frenkel said he doesn't believe Wright has confided to anyone when he intends to present himself to the court.
The 36-year-old Harvard-educated money manager had emerged on the Cleveland business scene in 2003 as the charismatic financier of Phil the Fire Down town. He teamed up on the Gateway restaurant with Phil Davis, who had popularized a chicken-and-waffles combo - the first Phil the Fire - two years earlier at a location on Shaker Square.
In 2005, Wright opened a second, fancier restaurant at the same location downtown with former New England Patriots safety Willie Clay as an investor. Like its predecessor, The Waterhouse hoped to cater to fans pouring into Gateway and the athletes they came to see.
But Phil the Fire Downtown and The Waterhouse were brief and troubled enterprises. Both closed within months of their launches. And both left a trail of angry business associates in their wake.
Now, Cleveland has approved hiring a special prosecutor to look into allegations by Davis that Kirk Wright forced him out of Phil the Fire Downtown with a false claim that Davis diverted money from it to his failing restaurant on Shaker Square.
The investigation is the latest in a barrage of lawsuits, counterclaims, tax liens, judgments and finger-pointing spawned by the two shuttered eateries.
"We all just got taken for a ride," Clay said in a telephone call from Atlanta. "I lost money, a lot of money."
Davis said vendors and contractors left in the lurch are after him for more than $100,000. Wright's suit alleging Davis siphoned money from the restaurant "was one of the lowest points in my life," he said.
It's a different picture than Davis expected the day he heard about a Georgia hedge fund manager making fabulous money for his clients. Back then, Kirk Wright sounded like just the financial angel Davis needed.
An investor at the right time
Davis said he was introduced to Wright by Earl Patton, the Cavs' director of player development. Patton was a regular customer at Phil the Fire on Shaker Square, sometimes arriving with Cavs players or a coach in tow. Davis loved it.
Excitement over the team in 2003 was intense because the Cavs had landed 18-year-old phenom LeBron James. Lots of people wanted a piece of the No. 1 pick in the NBA draft, who had just signed a $90 million sneaker endorsement deal.
Patton visited Phil the Fire with James' mother not long after the Cavs drafted LeBron on June 26. They were big on the sweet-and-salty cuisine that Davis boasted was the best soul food in town.
The two men got talking about the restaurant business. Davis said he was looking to branch into downtown Cleveland. He had a place in mind.
"You need to talk to my buddy, Kirk Wright," Davis recalled Patton saying. "He said, 'One of my boys is looking to do the same thing. He wants to build part of his business in Cleveland.' "
Patton, who left the Cavs at the end of the 2004-2005 season, declined comment. Davis said Patton told him he had grown up with Wright in New York City.
Both Davis and the Atlanta hedge fund manager, it turned out, were eyeing the same spot on the triangular wedge between Prospect Avenue and Huron Road - the former site of the Diamondback Brewery, a minute's stroll from Gund Arena (now called The Q).
Davis lit up. Here was a potential Phil the Fire backer who appeared to be rolling in money.
Davis thought he had hit the lottery.
After that, things moved fast.
Wright visited Phil the Fire on Shaker Square in mid-July 2003, Davis said. The restaurateur showed off a Silver Spoon award for best soul food and another from the Catfish Institute as one of the country's best fried catfish purveyors.
"How much do you think you'll need?" Wright asked.
Davis figured $1 million, given how he pictured rehabbing the former microbrewery and pub.
On July 31 that year, Wright signed a letter that said International Management Associates intended to commit $1 million for development of Phil the Fire Downtown, according to court records and a copy of the letter.
Phil Davis said Wright told him he already had Cavs star shooter Ricky Davis as a hedge fund investor. Ricky Davis, now with the Minnesota Timberwolves, declined comment.
Wright bought Cavs season tickets and made no bones about his hope of expanding on a connection with Ricky Davis to cultivate National Basketball Association players in Cleveland, Phil Davis said.
Phil Davis, though, had his eye on the Cavs' new franchise player. He had first approached landlord Jerry Schmelzer about the vacant brewery in May. LeBron James hadn't yet signed with the Cavs. But Davis knew that if he did, his restaurant would be in a part of town that sizzled.
The hurry-up renovation of the brewery entailed tearing out the beer-making equipment, knocking down walls, yanking a long bar and overhauling the kitchen.
It was a frenzied pace, but the job got done for the start of the NBA season and LeBron's Nov. 5 home court debut.
Within weeks, rumors flew that Cavs management was talking about trading Ricky Davis. On Dec. 15, he was gone to the Boston Celtics. (He was traded to the Timberwolves two months ago.)
To Phil Davis' knowledge, Kirk Wright never scored another client among the Cavaliers. LeBron James said he had never heard of Wright
"Kirk hadn't counted on Ricky getting traded," Phil Davis said.
Whether it was that unexpected development or for some other reason, Wright soon stopped wiring money to the restaurant, Davis contends in court records.
Bills piled up, topped by a $960,000 tab from Darden Co., general contractor on the renovation.
Wright's company had agreed to provide $1 million to capitalize Phil the Fire Downtown, lend up to $250,000 more and pay a $200,000 licensing fee to Davis, Darden said in a lawsuit. The contractor concluded that some or all of the money was never transferred. Darden settled out of court for 35 cents on the dollar, Darden attorney Steven Patton said.
Davis forced out of downtown operation
By spring 2004, Phil Davis and Wright had turned on each other.
Wright sued his former partner, saying Davis fraudulently diverted money from the Gateway restaurant to Phil the Fire on Shaker Square.
He won a restraining order that forced Davis out of the downtown operation.
Davis countered that Wright perjured himself by using fake evidence to persuade a judge to issue the restraining order - the charge the Cleveland special prosecutor, Anthony Jordan, said he is investigating.
"It does not appear to me, after having reviewed the claims and the documents, that Kirk Wright's allegations were true," Jordan said, "and as a result, Phil Davis has basically been ruined."
Phil the Fire Downtown had gone out of business in six months. Wright reopened on the same site about a year later with The Waterhouse. He got financial backing from retired NFL player Willie Clay.
But that business, too, failed in less than a year.
Schmelzer, the landlord, attributed the collapse to erratic oversight by Wright from afar. He said Wright also dismissed two experienced restaurant consultants too quickly.
"You don't have to be [famous chef] Wolfgang Puck to operate a restaurant there," Schmelzer said. A twin Waterhouse restaurant on Peachtree Street in Atlanta was built and ready for a planned December launch, but it never opened.
"They just didn't have the funding to get the job finished," said William Perkins, a court-appointed receiver in Atlanta who is adding up what's left of Wright's far-flung, depleted holdings. Any equity left in the Cleveland and Atlanta restaurants will become part of Wright's remaining assets, frozen by court order in Georgia.
Clay, who went to the Super Bowl with the Patriots in 1997, would not disclose what he lost in Cleveland.
Court records show he's out $1.8 million from Wright's Taurus hedge fund.
Wright left behind real estate worth potentially millions of dollars, investments of about $6 million in development projects, and at least five cars, including a Jaguar, Bentley and Aston Martin, a court record shows.
But a bankruptcy petition filed on behalf of Wright's company also lists debts of more than $100 million.
Schmelzer laughed at the idea of pursuing Wright for back rent at his Gateway property.
"You can't squeeze blood out of a turnip," he said.
Plain Dealer reporter Branson Wright and news researcher Cheryl Diamond contributed to this story.
________________________________________
Troubles at hedge fund snare doctors, football players
Wall Street Journal (March 9, 2006):
By Ian McDonald and Valerie Bauerlein
ATLANTA -- Kirk S. Wright, a 35-year-old hedge-fund manager, celebrated his second marriage last October with a lavish reception at his sprawling brick-and-stucco home in this city's northern suburbs.
Former professional football players, joined by many of Atlanta's top African-American doctors and entrepreneurs, crowded his home, admiring its white-granite floors, elevator, and chic interior glass walls. They nibbled sushi and lobster, danced on a platform over the swimming pool and toasted the newlyweds at three outdoor bars sculpted from ice. The bride flashed an engagement ring that Mr. Wright has said cost $55,000. A life-size portrait of the bride and groom on a Caribbean beach sat on the patio.
Many of Mr. Wright's guests had an extra reason to be impressed. Along with other investors, they had allocated at least $115 million to Mr. Wright's hedge-fund firm, International Management Associates LLC. Over the prior seven years, which included the worst bear market since the Great Depression, Mr. Wright had reported average annual returns of more than 27 percent.
Now, state and federal authorities believe that Mr. Wright was far less successful than he seemed. Two months before the party, the firm's internal accountant informed one of Mr. Wright's partners by email about a variety of irregularities, including the apparent falsification of investment returns. Mounting internal concerns, coupled with growing suspicions by some investors and regulators, overtook Mr. Wright in February. The Securities and Exchange Commission and International Management investors filed separate lawsuits against Mr. Wright, accusing him of fraud.
The SEC estimates that Mr. Wright, who handled International Management's investments, managed somewhere between $115 million and $185 million of client money. After more than two weeks of searching, the hedge fund's court-appointed receiver and the SEC have found only about $150,000 of it, according to a sworn statement by the SEC investigator overseeing the probe. About 500 investors fear they have lost everything. They include successful black professionals from Atlanta, and football players such as current and former Denver Broncos Terrell Davis, Steve Atwater and Rod Smith and former Tennessee Titan Blaine Bishop.
Mr. Wright's two partners, Atlanta anesthesiologists turned hedge-fund executives, claim in sworn statements filed in federal court that they invested about $1.5 million in the funds and were also duped by Mr. Wright. They are cooperating with authorities.
Some of Atlanta's African-American business leaders express anger that the city's biggest black-owned hedge fund may have taken advantage of the city's black professionals to gain legitimacy early on, letting the fund build a broad client base later. "In all candor, what he did was say, 'I can wine and dine African-Americans who are not sophisticated in the investment field and get their money,' " says Reuben R. McDaniel III, the African-American co-chairman and president of Jackson Securities Inc., an investment bank founded by former Atlanta Mayor Maynard H. Jackson, who died in 2003.
The SEC lawsuit accuses Mr. Wright of giving investors "blatantly false" information, and says the firm's account statements appear to be inaccurate going back to at least 2003. The Federal Bureau of Investigation, the U.S. attorney's office for the Northern District of Georgia and authorities in Massachusetts, where some disgruntled investors live, are also trying to unravel the mess.
Mr. Wright is missing -- although he says he's reachable by phone. On Feb. 24, Judge T. Jackson Bedford Jr., of Georgia's Fulton County Superior Court, issued a bench warrant for his arrest after the court was unable to serve him with papers notifying him of various suits and hearings. Mr. Wright's lawyer in the SEC action, Jacob Frenkel of Rockville, Md., has told the Georgia court that he doesn't know where his client is, but that he speaks to him regularly by cellphone.
In a series of telephone conversations with a Wall Street Journal reporter over the past three weeks, arranged by his lawyer, Mr. Wright declined to discuss his whereabouts or respond to the fraud allegations in the lawsuits. "I'm not aware of anyone looking for me," he said earlier this month. "I haven't made myself scarce," he said. "I'm just very concerned about my movements and whereabouts." He has said a former client had threatened his life via voice mail.
International Management first focused on attracting money from doctors, then on retired professional athletes, Mr. Wright says. The former anesthesiologists who are his partners, Nelson Keith Bond and Fitz Harper Jr., are African-American. They marketed first to their peers, including many black doctors, Mr. Wright says. Most of the firm's clients, he says, aren't African-American.
The rise and fall of Mr. Wright and his firm highlights the risks run by hedge-fund investors who take reports of high returns by little-known managers at face value. In hindsight, there were many red flags at International Management: unusually consistent high returns, vague descriptions of investment strategies, aggressive marketing, no auditing, and secretive behavior by the manager. The firm's demise comes as hedge funds, which are lightly regulated investment vehicles for institutions and wealthy investors, face new SEC registration requirements that have stirred a debate about how much oversight is necessary.
Mr. Wright, a Bronx, N.Y., native, opened International Management in his house in Manassas, Va., in 1996, after earning a bachelor's degree from Binghamton University, State University of New York, and a master's degree in public administration from Harvard University. He says he started investing in earnest using a financial settlement he received in connection with injuries he suffered at age 19 in a car wreck.
Mr. Wright says he met Drs. Bond and Harper through a mutual acquaintance in 1998. The two Atlanta anesthesiologists, who were close friends, had an entrepreneurial bent, having previously been involved in several for-profit companies separate from their medical practices. They invested with him in 1999, and soon began setting up meetings where Mr. Wright would solicit business from doctors in the Atlanta area, who were viewed as wealthy but with little time to manage their portfolios, Mr. Wright says.
In 2000, Mr. Wright moved International Management to Atlanta, and later that year, the two doctors went to work full time for the firm. Dr. Harper became the firm's chief compliance officer and Dr. Bond took over marketing, according to Mr. Wright. Both doctors declined through their lawyers to comment.
Mr. Wright made presentations to groups of doctors rounded up by Drs. Bond and Harper, clients of the firm recall. Descriptions of his investment strategy were vague and jargon-filled, clients say. Marketing materials for the flagship Taurus fund said its "objectives are achieved through a top-down, bottom-up process that identifies disparities in the economy or security sectors creating +/- changes in market perception."
Investors say they were attracted by the fund's reported high returns and low volatility. The Taurus fund reported a 27 percent average annual gain from 1998 through the end of 2004, compared with less than 5 percent for the Standard & Poor's 500-stock index, according to marketing materials.
"The percentages, most of them, seemed outrageous," says Willie Clay, a former football player for the New England Patriots and two other teams who helped lead Georgia Institute of Technology to a national title in 1990. He invested in Mr. Wright's fund more than six years ago, and later invested separately with him in strip malls and car washes.
The firm's rise coincided with a blossoming of black affluence in Atlanta. The city's once close-knit community of middle-class African-Americans -- many of whom banked at the city's one major black-owned bank -- began expanding dramatically in the 1980s, as metro Atlanta became a magnet for young black professionals seeking business opportunities and a cultural comfort zone.
In 1999, the year before Mr. Wright moved to Atlanta, IMA's assets under management were less than $7 million, according to marketing materials. In Atlanta, that number jumped to nearly $84.2 million at the end of 2003. Mr. Wright entertained investors in corporate suites he rented at Atlanta Falcon football games, Atlanta Hawk basketball games, and concerts. Neighbors say Mr. Wright doubled the size of his house. He bought a Bentley, a Jaguar, an Aston Martin, a BMW and a Lamborghini. He invested in two restaurants in Cleveland, which ultimately failed. In 2003, his first wife and college sweetheart filed for divorce.
Some in Atlanta were skeptical. Mr. McDaniel of Jackson Securities says he met with Mr. Wright several years ago after clients expressed interest. Mr. Wright had no business cards, and as proof of his investment returns, presented only photocopied spreadsheets, Mr. McDaniel recalls. "The word 'slick' comes to mind," he says. Mr. McDaniel says he told his clients that Mr. Wright couldn't articulate why his returns were so good. They didn't invest.
Mr. Frenkel, Mr. Wright's lawyer, says he is unaware of the meeting, but that it's "not uncommon for rivalry" to cause one financial adviser to recommend against investment with another.
Between 2000 and 2004, the firm opened offices in Las Vegas, Los Angeles and New York, and began drawing substantial money from outside of Atlanta. In 2004, it hired Thomas H. Birk, a Los Angeles-based salesman who previously raised money for several major brokerage firms. Mr. Birk, who is white, would troll Western golf courses talking up Mr. Wright's investment record, according to clients who invested through him. Mr. Birk eventually raised more than $10 million, his lawyer says.
In early 2004, Drs. Bond and Harper started a new unit of the firm, through which Mr. Wright was to manage two new funds, according to a sworn statement by Dr. Harper in the SEC litigation. In mid-2004, Dr. Bond persuaded Mr. Atwater, the former Denver Bronco, and Mr. Bishop, the former Tennessee Titan, to invest, the two investors say in affidavits. Mr. Atwater became an employee of the firm, and together with Mr. Bishop, brought in several other football players, including Mr. Davis, the former star Bronco running back, and Mr. Smith, a current wide receiver. The players and their friends invested some $15 million, according to a lawsuit they later filed against the firm and its principals.
Messrs. Atwater and Bishop chose to invest in a so-called House Account, for which Mr. Wright provided no prospectus, both men said in affidavits. Mr. Wright told Mr. Bishop the account could post returns as high as 10 percent in as little as a month, Mr. Bishop said. In his affidavit, Mr. Atwater said he became uncomfortable with the firm's promises, and with the fact that "Mr. Wright was in the office far less often than I would expect." Mr. Frenkel, Mr. Wright's lawyer, has said that Mr. Wright often managed money while outside the office.
Drs. Bond and Harper had hired an accountant, Kenneth Turchin, for the new unit. On Aug. 23 of last year, Mr. Turchin informed Dr. Harper by email that the firm appeared to have violated various securities and tax laws. He wrote that two new International Management funds hadn't done any trading since May and had posted losses, but had reported gains to investors. The email was attached to Dr. Harper's sworn statement in the SEC case. "I can't comment on the allegations in that email," Mr. Wright said in a recent interview.
On Sept. 20, Dr. Harper forwarded the email to C. Gladwyn Goins, a former lawyer for the SEC who until January served as International Management's lawyer. That same month, the SEC received a tip and began an inquiry, according to one person close to the investigation. Mr. Goins didn't return calls seeking comment, and the SEC's lead investigator declined to comment.
In October, Dr. Harper, the salesman Mr. Birk, and the two former players, Messrs. Atwater and Bishop, met with Mr. Wright. Mr. Wright showed them a handful of account statements from Ameritrade, an online brokerage service owned by TD Ameritrade Holding Corp., which listed total assets of roughly $155 million, but he wouldn't let anyone touch them, according to Mr. Harper's declaration. Mr. Atwater was concerned by Mr. Wright's "evasive and ambiguous" answers, according to his affidavit. The statements with the Ameritrade logo were fake, according to a sworn statement by an SEC investigator. Mr. Wright declines to comment on allegations contained in the suit.
Salespeople such as Messrs. Atwater and Birk were finding it increasingly difficult to answer questions, investors say, and redemption requests began piling up.
Jim Stevens, a 43-year-old auto wholesaler and real-estate investor in La Quinta, Calif., says he had invested $50,000 with Mr. Wright about 18 months ago, after meeting Mr. Birk on a golf course. It seemed odd, he recalls, that returns always seemed to be positive and that portfolio holdings and strategy were never discussed. He asked to withdraw his money more than four months ago, but Mr. Birk told him he would have to wait for a year-end accounting, Mr. Stevens says. "He said, 'Don't worry, the money is there, it's not a problem,' " Mr. Stevens says. Mr. Birk's lawyer says his client was simply passing on information from the firm.
Mr. Atwater and several other current and former players, including Messrs. Bishop, Davis, and Smith, requested their money back on Dec. 5, but Mr. Wright missed two deadlines to deliver it, according to Mr. Atwater's affidavit. In their lawsuit against Mr. Wright and the firm, Messrs. Atwater and Bishop say that on Jan. 26, Mr. Wright paid them with a check drawn on a separate partnership he had with another football player, Mr. Clay. That check included Mr. Clay's forged signature, and bounced, the lawsuit alleges. Mr. Wright declined to comment on the matter, citing the litigation.
In mid-February, Mr. Stevens recalls, he received a check for $67,000, along with a warning from Mr. Birk not to cash it. "He said they wrote it out of the wrong account and that it might not be good," Mr. Stevens says. Mr. Birk's lawyer says his client, once again, was passing on information from the firm.
Drs. Bond and Harper began telling clients they were leaving the firm to start a new money-management firm, but didn't indicate anything was amiss, clients say. In early February, Mr. Wright removed several files from his office between 4 a.m. and 6 a.m., according people close to the investigation and to a former employee who reviewed a security videotape of the incident. At the same time, some bank records were deleted, though back-ups were recovered, according to this employee. Mr. Wright denies deleting any bank records and says he was only removing personal papers because he was having conflicts with his partners.
In a Feb. 15 telephone interview, Mr. Wright said he wasn't aware of "irregularities" with the firm's accounts, and that the firm had about $150 million in client assets. Two days later, Mr. Atwater and several other pro athletes filed suit in Georgia state court alleging fraud, forgery and theft. The court froze accounts held by the firm and its principals.
The $150,000 discovered thus far was held in two Ameritrade accounts, according to court declarations in the SEC's suit against Mr. Wright and his firm. The suit says regulators believe "virtually all of the assets of the funds have been dissipated," although it offers no explanation of what happened to them.
Mr. Wright's older brother, Charles Wright, a researcher in Washington, D.C., who directs medical trials, says he has urged his brother to turn himself in. He says their mother, Joyce Wright, is concerned about her son's safety, as well as the retirement money she invested with him. Charles Wright says he has told his mother that Kirk "may not be guilty of everything, but he's going to be guilty of something." Kirk Wright declined to comment about any clients, including his mother. Mrs. Wright didn't return calls.
Last month, Mr. Wright left $30,000 in cash at an address in Brooklyn, N.Y., for his ex-wife for alimony and child support, according to his ex-wife's lawyer. Asked in a telephone interview whether he had funded his lifestyle with client money, Mr. Wright responded: "I challenge you to find where I spent $185 million."
Mr. Wright said that if required to answer questions from the SEC, he is considering exercising his Fifth Amendment rights.
http://www.post-gazette.com/pg/06068/667773.stm
_________________________________________
Risky dealings smash nest egg
Atlanta Journal-Constitution (March 19, 2006):
By Mike Tierney
On a day that should have been stuffed with scrapbook memories for Calvin Paris, he met the man who has turned his life into a cautionary tale.
Among the guests at his son's wedding was Kirk Wright, a former classmate of the groom at Harvard University's Kennedy School of Government.
Paris was a South Florida retiree with a healthy nest egg, Wright a personable young investment manager trolling for clients. Wright persuaded the former business executive to pony up $100,000, for starters.
Wright steered him toward the high-speed lane of investments. Hedge funds, which delve into arcane areas such as arbitrage and short selling, are not for the faint of heart. They make dabbling in the mainstream stock market seem as tame as opening a passbook savings account.
And, because hedge funds functioned until recently with almost no oversight by the Securities and Exchange Commission, the industry has been more susceptible than regulated investment vehicles to attracting the less principled or trained managers. Such funds have been captained by former cops, athletes and, commonly, exiles from the medical profession. Wright's two lieutenants were longtime Atlanta anesthesiologists.
Paris was no kidnap victim. He knew the risks. His newlywed son had an account. So he took the plunge, ultimately handing over about $1 million to Wright's International Management Associates, based in Marietta.
In time, Paris grew suspicious but not enough to retrieve his money.
"It's like the frog when you put him in a pot of water to cook him," said Paris, 73, of Delray Beach. "He jumps around for a while when the water is cold, then he gets comfortable when it turns warm.
"I'd get comfortable when I saw the monthly reports.... It was always those beautiful numbers."
The latest figures were knockouts. Paris says his statement for 2005 listed $2.32 million in assets.
Now those dollars have disappeared — temporarily, at least — along with as much as $185 million belonging to more than 500 other investors with IMA.
A lawsuit filed last month by seven current or former National Football League players, who claimed Wright rebuffed their attempts to withdraw funds, provoked a storm of legal action against him and his fund. About two dozen other investors are suing, along with the SEC, which is alleging five counts of fraud.
On Thursday, the court-appointed receiver in that case filed for Chapter 11 bankruptcy protection for IMA.The filing in federal court in Atlanta indicates there could be more than $100 million in debts owed to as many as 999 creditors. It lists assets as "to be determined."
Also to be determined is Wright's whereabouts. He went underground when a Fulton County judge ordered a lockdown of IMA offices and a freeze on assets.
Wright's lawyer has not been available for interviews, requested several times. Attempts to reach Wright over the past month have been unsuccessful.
'Concern and caring'
Paris admits to a fondness for Wright during the honeymoon years of their association. "He demonstrated a personality of concern and caring," the retiree said.
They socialized, even exchanged gifts. Paris says he took Wright, 36, and family to the Everglades. Wright sent another of Paris' sons a computer. When it didn't work, he dispatched a more expensive one.
When Paris hit him up for a contribution for an endowed chair at Howard University's medical school, Wright kicked in $100,000.
Paris held sufficient trust in Wright to recruit fellow churchgoers to put retirement savings in IMA.
Paris absorbed the depth of Wright's wealth in visits to Atlanta.
He watched Super Bowl XXXIV in 2000 from Wright's 28-person suite at the Georgia Dome, still leased today to IMA. He attended Wright's lavish second wedding at his Marietta home of nearly 7,000 square feet, assessed by Cobb County at $882,800. He saw Wright's collection of luxury cars, among them a Jaguar, a Bentley, a Mercedes-Benz and a Ferrari.
Paris grew concerned — for Wright, not himself.
"I just thought he was wasting all of his personal asset appreciation. It seemed foolish that he was being so ostentatious," he said. But Paris wrote off the trappings as spoils from legitimate investment transactions by Wright.
Perhaps Wright could have afforded it all. According to court documents related to his 2003 divorce from Kasandra Pantoja, whom he had met during their undergraduate days at the State University of New York at Binghamton, Wright's assets were reported at $11 million with a gross annual income of $1.2 million. Possessions included three Atlanta condos and two time-shares in the Bahamas, six high-end vehicles and $60,000 in jewelry.
His assets were sufficient for Pantoja to be awarded $1 million over the first year after the divorce, monthly alimony of $12,000 and child support of $8,000, plus property, a Cadillac Escalade and $50,000 to buy another vehicle.
Suspicious sales pitch
Wright's interest in youth extended beyond his and Pantoja's four sons, now ages 3 to 9. He and Pantoja, an IMA director, founded Stock Market Schools, a program in some Atlanta city high schools where students invested and traded with a hypothetical $20,000.
But all the while, some of Wright's investment ideas were shaky, according to Paris. He recalled pressure to purchase annuities, an investment vehicle generally geared toward active wage-earners to build income for retirement.
Paris says his son who was Wright's classmate — an investment manager himself — told him, "If anybody tried to sell annuities to a 73-year-old person, I'd fire him."
Paris claims he discovered a forged bank document traced to IMA. Forgery is among the accusations made against Wright in the lawsuit filed by his football player clients.
Paris says he handled his matter face-to-face: He flew to Atlanta for an airport talking-to with Wright, who allegedly impugned a worker.
"He always blames other people," Paris said. "He's a slicker."
Of lesser significance, he asserted that Wright's correspondence was often unclear or littered with improper figures. "I consistently got on him about that."
Once, he contended, Wright chafed at the criticism and offered to return his entire investment. No, Paris responded — just clearer, more accurate reports.
Their last exchange involved Paris' recent divorce. He needed Wright to testify about his IMA investments as part of the financial settlement but could not reach him.
Frustrated, Paris said he left a message for Wright to expect a subpoena. That prompted Wright to call back, in a panic. Paris explained the subpoena was intended simply to obtain the account records to complete the divorce.
"I guess," Paris said, "he thought I had learned what was going on."
If his funds have vanished, Paris will not starve. Yet the divorce settlement was based on the assets in his IMA account. Plans to expand his home are on hold. And considerable money in the account was targeted to refurbish a bed-and-breakfast he owns on Martha's Vineyard. That, too, is postponed.
One investor who pulled out for business reasons before IMA's disintegration was Paris' son, the one who was wed on the fateful day of the introduction to Kirk Wright. A few days ago, the son called his father and apologized.
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