America’s #1 Fund Private Eye

Randy Shain, an investigator who specializes in looking at hedge funds, has seen more business as the number of funds increase. He says most managers he screens have clean records. Shain, a private investigator who specializes in looking at hedge funds, was examining the public records of the manager of Wood River Capital Management, a hedge fund that at its peak held $265 million under management.

Shain found records of four state tax liens, ranging from about $45,000 to more than $86,000, against the manager, John H. Whittier, a former analyst with Donaldson Lufkin & Jenrette.

“At the time, I thought either he’s sloppy or he’s always losing money,” Mr. Shain recalled later in an interview.

Shain presented his findings to his client, who took a pass on Wood River. And a good thing, too. Last October, Wood River disclosed that it had placed a disastrous bet on a single speculative stock with no recent history of profitability. The Securities and Exchange Commission sued the fund and Mr. Whittier, accusing him of deceiving investors. Among other troubling details, the commission said that the firm that the fund had described as its auditor did not, in fact, perform audits.

Wood River is but one example of a hedge fund flameout that large investors — funds of funds, pensions and family offices — hire investigators like Mr. Shain to help them avoid.

He runs the investigative unit at First Advantage, a group of nearly 50 investigators clad in T-shirts and jeans who work out of a cubicle-less office in the Flatiron district in Manhattan..

His group pores over court filings and news clippings, checks out criminal records and interviews former business associates. It can produce a comprehensive report on a given individual in about five weeks. By Mr. Shain’s estimates, the group has examined more than 3,000 funds and 4,500 hedge fund managers.

http://www.nytimes.com/2006/08/25/business/25hedge.html?ex=1157083200&en=ba1c7a14642c7b50&ei=5099&partner=TOPIXNEWS