Bond broker Jay Nolan arrested after big-time trading career

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    Bond broker Jay Nolan arrested after big-time trading career,0,5076380.column

    As one of the original big-time brokers in the Chicago Board of Trade's Treasury bond pit of the 1980s, Jay Nolan had it made.

    Filling orders for fast-moving Salomon Brothers, he raked in a fortune until computers took over the business almost a decade ago. As with many of his fellow overnight millionaires from the Chicago financial-futures floors, good times gave way to bad.

    On Nov. 24, Nolan was arrested on charges of defrauding investors who had hired him to trade on their behalf. Working out of an unmarked one-room office in suburban Northfield, Nolan lost most of the money, fabricated documents to show phony profits and collected undeserved "management" fees every month for years, the complaint alleges.

    Last week, Nolan waived a preliminary examination before a federal magistrate. "We're continuing to learn more about the case and if need be, we're not opposed to negotiating if that's the best thing to do," said his attorney, veteran Chicago criminal lawyer Tom Breen. Nolan, a 56-year-old Wilmette resident, did not respond to a message left at his office.

    "Some of these people have a hard time coming down. They can't scale down their lifestyles," said Patrick Arbor, a former Board of Trade chairman who has known Nolan for years. "There's a lot of depression."

    It's a big change from the early 1980s, when the dawn of Treasury futures held out the prospect of riches to anyone in the right place at that time. The opportunity drew eager young traders, clerks and the sons of successful members -- Nolan's family had a rich history at the Board of Trade, Arbor recalled.

    Salomon in those days didn't care about the price as much as getting its orders filled promptly, said Michael Manning, a veteran futures-firm executive who oversaw the trading. For brokers like Nolan who held big "decks" of orders, "It was kind of a turkey shoot," he said. "A lot of people made a lot of money at a young age. A lot of people had a hard time handling that money."

    So much money came so suddenly that an "anything goes" philosophy reigned. While many traders were "straight shooters and family men who were serious about making a career," others found the temptations irresistible, said filmmaker James Allen Smith of "Floored," a documentary on Chicago's dwindling open-outcry trading pits that will be showing next month at the Gene Siskel Film Center.

    "You were given a long leash and the onus was on you to handle it," Smith said. "You could go really far before somebody said, 'Whoa!' "

    In the late 1990s, Nolan was living with his wife and five school-age children in a spectacular lakefront mansion, but the couple reportedly were divorcing.

    On a January morning, Nolan's wife pulled on her beaver-fur coat and drove her late-model SUV to a hotel in Lincolnshire, where she was found dead in a guest room. Police ruled out foul play. Nolan sold the mansion in 1999 and moved into a smaller Wilmette home.

    Three years later, he launched his Lodge Capital Group hedge fund and at the end of 2004 opened a trading account in its name. He found an investor from Northbrook who had met him in 2003 or 2004 -- long after the ex-broker's glory days in the bond pit. The unidentified "Investor A" gave him $720,000 to trade in 2005, $1.5 million in 2006 and $750,000 in 2007, according to the complaint. Six others supposedly invested lesser amounts as well.

    On Nov. 17, "Investor A" called ADM Investor Services, a big trading firm that handled Nolan's hedge fund account, and learned that instead of a $6.3 million balance, the Lodge Diversified Fund had a market value of $177,239.67, according to the complaint.

    Three days later, the complaint says, Nolan met with "Investor A" and another client at a Northfield Starbucks. He admitted that he had sent false statements to cover up his losses, the complaint alleges. The three went to Nolan's office, where he showed how he would tape ADM's letterhead over fictitious reports, the complaint says.

    Later that day, "Investor A" phoned Nolan, who agreed to a recording of the conversation, then admitted that he had been trying to earn back his massive losses, the complaint states. There is "a paper trail on everything," but he didn't have "any of the money" left, he is accused of saying. "It's been my own personal nightmare since '06."

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