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Guaranteed Returns: John Paulson and the 92nd Street Y

Submitted by rcwhalen on 01/30/2012 09:49 -0400

AN OPEN LETTER TO THE SEC AND FINRA

Back at the end of November, Peter Lattman and Jenny Anderson reported in The New York Times that John A. Paulson, the billionaire hedge fund manager and member of the board of the 92nd Street Y, "has guaranteed he will cover the Y for any losses it incurs in his funds."

The Times reported further: ''This is a very uncommon arrangement,'' said Andrew M. Grumet, a lawyer specializing in philanthropy. ''But the 92nd Street Y isn't your average nonprofit, and John Paulson isn't your average money manager.'' Indeed.

As a member of FINRA and a 30-year veteran of the securities industry, I found the report troubling and called the 92nd Street Y for an explanation. No call back from the 92nd Street Y as yet.

Aside from the apparent conflict of interest involved with having a financial adviser sit as a director on the 92nd Street Y board, the situation also struck me as conflicted because of the explict guarantee made by Paulson.

Indeed,under US securities law and FINRA rules, it is unlawful and a violation of professional ethics for a registered person or investment advisor to guarantee investment results for any client.

So here are my questions for the 92nd Street Y,the State of New York, the SEC, FINRA and other interested parties:

1) Why is it OK for any investment adviser to sit on the board of any NY charity and lose money for that client with no professional repercussions?

2) Why is it OK for an investment adviser to guarantee the investment results of the 92nd Street Y in apparent violation of FINRA and SEC rules?

I look forward to your replies.

Best,

Chris

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Mon, 01/30/2012 - 15:29 | 2110474 battle axe

FINRA is a joke, and has been for years....

Mon, 01/30/2012 - 15:02 | 2110393 AccreditedEYE

This is exactly the same sort of thing where Johhny Corzine got to have his securities licenses back without having to re-take the exams. There is a set of rules for the many and an entirely different set of rules for the few. Total bullshit and a mockery of the supposed “democracy” we live in.

Mon, 01/30/2012 - 14:44 | 2110349 heavy_metals

Follow the money.....What a scam our elected officials & financial elites that control our government have exacted on the US taxpayer.

Like most of the non-profit 501(c)(3)s, Youong Men and Young Women's Hebrew Association dba 92nd St Y is getting 96% of their funding from US taxpayers. Latest public tax filings available on Guidestar.org show that we taxpayers give roughly $12 million per year to this organization, which we now know is investing in a hedge fund run by Paulson.

According to public filings from 2010, US taxpayers have given $76 million over the previous 4 years prior.

So, now we learn Paulson, who sits on the board and is conflicted, has given a guarantee for their losses.

This is just the tip of the iceberg regarding how 501(c)(3)s are being abused at the taxpayer expense. From the thousands of non-profits setup, I've uncovered NP's setup to train Sri Lankan people to program to outsource jobs, NP's setup for vote fraud and community activism such as Acorn (back with a new name after previous scandal).

One of the most outrageous was huge grants given to LaRaza. I was wondering who was funding all the activism and protests after US citizens worked tirelessly to get states laws on immigration enforcement in southern states only to discover that there's a network of Hispanic 501(c)(3)s receiving US taxpayer dollars to file legal challenges to the states laws, while our corrupt DOJ uses US tax dollars to challenge the laws in federal courts. So, US taxpayers are paying triple.

Recent news headlines about Egypt's "following the money" re: NGO's exposing IRI and NDI as sucking up half billion of US taxpayer dollars each over the previous 4 years to meddle in Egypt's revolution.

It's time the US taxpayers clamp down on the misuse and abuses by 501(c)(3)s or shut them down entirely. It looks like we not only have a corrupt government but it's funding corruption in foreign lands under the guise of training, foreign aid, and charity.

Mon, 01/30/2012 - 14:24 | 2110292 killedbyshortvol

It depends on when the guarantees were made - before or at the time The Y made the investment in the fund(s).

Mon, 01/30/2012 - 13:18 | 2110064 TooBearish

Silly Chris - any FNRIA action against anyone involved with the Y is prohibited - eg a certain Citigroup stock analist and Sandy Weill...C1998

Mon, 01/30/2012 - 12:37 | 2109865 JW n FL

Ban Whalen up arrow.

You wanna suck Newt's dick down arrow.

Mon, 01/30/2012 - 14:28 | 2110309 JW n FL

To the Gay Members (I siad Member, LOL!) of Fight Club... you can do WAYYYYYYYYYYYYYYYYYYY! better than Noot!

Mon, 01/30/2012 - 12:33 | 2109839 MrBoompi

Thje question is not "Why is it OK?", the question is "Who's going to do something about it?" Unenforced laws are the same as no laws at all.

Mon, 01/30/2012 - 12:31 | 2109834 Screwball

From the same guy who told us to vote for Noot. I can't believe a word you say Whalen - so go fuck yourself.

Mon, 01/30/2012 - 12:36 | 2109860 JW n FL

you understand that someone who would vote for Noot.. would as well be against any form of donation to help the needy.. and would go out of thier way to stop someone from helping the needy ala' Report Paulson to the SEC and / or other..

You can't fix stupid and Whalen is not only stupid.. but special as well..

one of those Republicans with the big fat hairy wife that like to suck as much dick on the weekend as possible.. before, after and even during Church services!

Whalen right now has a male hooker and crystal meth in a hotel.. with the National Republican Leadership.. and they are getting their YMCA song on!

Mon, 01/30/2012 - 12:12 | 2109751 I am a Man I am...

banks have principal protected products, what's the difference?

Mon, 01/30/2012 - 15:05 | 2110398 AccreditedEYE

I know you know this.... There's a huge difference between buying derivatives to wrap an investment and offering to make whole any losses out of your own wallet. Chris is right...most advisors would get hung for this.

Mon, 01/30/2012 - 13:42 | 2110143 Willzyx

Because they are bank (or insurance) products and not securities. Glass Steagall was supposed to keep these product lines seperate. We see how that has turned out.

Mon, 01/30/2012 - 13:37 | 2110136 gckings19

you have to pay for it and the returns are usually capped. there is a big difference.

Mon, 01/30/2012 - 11:56 | 2109677 bankruptcylawyer

i have 3 extra tickets to this thurs feb 2nd larry summers speec & q&a at the 92nd street y. im not going as a heckler but i will be asking questions.

if you care to join me ill offer the tickets free. meet out front of the y. at 745.
write back on this article list your email and ill email you. a confirmation i only have 3 spare tix.
z

Mon, 01/30/2012 - 11:49 | 2109646 Clowns on Acid

rc - if you have ever lived in NYC you must know that there are certain tribal priveleges enjoyed by those that worship at the altar of certain gods.

Proving that Paulsen said those words, try to get by the 10 deep lawyering team of the 92 St Y, and then of course try and have the SEC or FINRA go after a bilionaire and his flock of left wing facsists...then of course you would have Mayor BBG impeding every step.

Get the picture...?

Mon, 01/30/2012 - 11:45 | 2109590 NuYawkFrankie

Since he doesn't look the type that'd be interested in "eating at the Y", I'm sure Paulson probably gets some very discrete"sauna-room privileges" in return for his largesse.

Mon, 01/30/2012 - 11:21 | 2109549 Confused

Thanks for sharing. Amazingly brash on the part of JP. I look forward to you sharing the response, should they have the balls to provide you with one.

But as we all know, when you are a member of the club, you play based on a different (ie- none) set of rules.

Nicely done. Hope you get an answer. Sufficient or not.

Mon, 01/30/2012 - 11:33 | 2109586 LawsofPhysics