Sentinel May Owe Up to $491 Million, Trustee Says By Andrew Harris Sept. 24 (Bloomberg) -- Sentinel Management Group Inc., the bankrupt Chicago-area cash management firm, may owe $491 million because of its accounting and trading practices, the firm's court-appointed trustee said. Frederick Grede, the former Hong Kong Futures Exchange chief appointed by U.S. Bankruptcy Judge John Squires to run Sentinel, told a meeting of creditors today that the firm also borrowed heavily against its securities portfolio without disclosing those loans to its clients. ``The whole thing began to implode,'' with the tightening of credit markets last month, Grede told more than 20 creditors listening in person and by conference call at the U.S. Trustee's office in Chicago. Sentinel, based in Northbrook, Illinois, filed for bankruptcy protection Aug. 17 in Chicago federal court. The firm has about $861.5 million in assets and at least $1.15 billion in debt, Grede said. Sentinel's debt could be as much as $200 million higher, he said. The U.S. Securities and Exchange Commission has sued the firm, accusing it of co-mingling client assets with each other and with the firm's assets. No attorney appeared at the creditors' meeting on Sentinel's behalf. Reached by phone at his office, Sentinel bankruptcy attorney Ronald Barliant declined to comment. Principal Asset The firm valued the securities it held, which Grede claimed were its principal asset, at their cost plus accrued interest, rather than at their market value, the trustee said. Discrepancies in the results yielded by each methodology account for the wide range of potential liability, he said. ``We do not think this is a case of missing securities,'' Grede told the creditors. The trustee, who was appointed Aug. 29, said his preliminary review has matched most of Sentinel's creditors with the assets held by the firm. Capital Fund Management, a Paris-based hedge fund manager, has said its Discus Master Fund could lose as much as $407 million in the Sentinel bankruptcy. Its lawyer, Arthur Hahn of Chicago-based Katten Muchin Rosenman, attended today's meeting. He declined to comment on Grede's report. The case is In re Sentinel Management Group Inc., 07-14987, in the U.S. Bankruptcy Court for the Northern District of Illinois at Chicago. To contact the reporter on this story: Andrew Harris at the federal courthouse in Chicago aharris16@bloomberg.net . http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aj0X9Xiz1g0Q
Bankruptcy trustee sues Sentinel Management for âmassive fraudâ October 12, 2007 By The Associated Press (AP) â The trustee overseeing the bankruptcy of Sentinel Management Group Inc. accuses its leaders of ââlong-term, massive fraudââ in a lawsuit seeking $350 million plus punitive damages. The suit, filed Thursday in U.S. Bankruptcy Court, alleges executives of Northbrook-based Sentinel operated through ââa pattern of criminal conduct.ââ Sentinel, which mainly manages short-term investments for hedge funds, financial institutions, pension funds and individuals, filed for bankruptcy protection from its creditors Aug. 17 amid financial turmoil. It had frozen a $1.5 billion fund four days earlier and told clients it could not meet investorsâ requests to withdraw their money. The lawsuit, filed by bankruptcy trustee Fred Grede, says Sentinel officials improperly transferred at least $20 million in ââill-gottenââ gains to themselves in the form of bogus fees, bonuses, dividends, account withdrawals, salaries and false payments. It also alleges breach of fiduciary duty and knowing participation in breach of fiduciary duty and unjust enrichment. The suit names Sentinel founder and chairman Philip Bloom, his son, Eric Bloom, who was chief executive, and former trader Charles Mosley along with trusts and companies controlled by Sentinel insiders. Mosleyâs attorney declined to comment. Philip Bloom and Eric Bloom, who have previously declined comment in the case, could not be reached. Gredeâs lawyer, Chris Gair of Jenner & Block, declined comment. The company has blamed its troubles on the worldwide credit crunch. But the U.S. Securities and Exchange Commission has accused it of fraud and misappropriation of clientsâ assets. Copyright 2007 Associated Press. All rights reserved.
Official Committee of Unsecured Creditors for Sentinel Management Group, Inc. www.sentinelcommittee.com/keydates.html