Hennessee Group, a New York-based investment adviser is facing a $800,000 fine from the SEC due to the firm's failure to perform promised due diligence of the Bayou Group hedge fund, once run by eventual death-faking, scooter-riding fugitive from justice, Sam Israel.

Bayou, of course, was one of the biggest hedge fund flame-outs of all time, with many of the fund's major players doing jail time. The SEC complaint details about 40 Hennessee clients who altogether has about $56 million invested inthe Bayou fund.

Hennssee head, Charles Gradante has neither confirmed or denied wrongdoing in the matter. While he hasn't commented on the specifics of his own case, Gradante has submitted a letter to the SEC with a variety of recommendations for how other migh avoid Hennessee's fate.

Amongst Gradante's recommendations - increased reguation of hedge fund borrowing and requiring that third parties, such has Kroll, be hired to conductforencic audits of hedge fund financial statements. More here, via Bloomberg.

-- MDT

Labels: Bayou Group, Fraud, hedge fund, Hennessee, Kroll, Sam Israel

A Bayou-related investor suit filed against Hennessee Group, a financial advisory firm has been dismissed. Hennessee was being sued for breach of fiduciary duty by South Cherry Street, LLC, which on Hennessee's say-so had invested $1.5 million with Bayou.

While proprietors of Hennessee, Lee and her husband Charles Gradante claim to have a thorough five-step due diligence process, the folks at South Cherry Street claimed that this was never conducted in the case of Bayou.

The judge found differently, deciding that Hennessee was just another sucker in a group that included the IRS and the SEC. Ouch...

Also, it appears that Bayou badguys Sam Israel and Daniel Marino will be sentenced for their roll in the hedge fund fraud as soon as September.

Further details on Bayou via Reuters.

-- MDT

Labels: Bayou Group, Fraud, hedge fund, Hennessee, South Cherry Street