ZURICH/LONDON (Reuters) - Italian police investigating ex-fund manager Alberto Micalizzi after the collapse of a $500 million hedge fund have also begun probes into five other people with links to the fund, a source close to the investigation told Reuters.
Last week police raided the home and offices of Micalizzi, CEO of London-based Dynamic Decisions Capital Management (DDCM), whose hedge fund DD Growth Premium lost hundreds of millions of dollars around the time of the collapse of Lehman Brothers.
The source said Milan finance police had also raided the Italian homes of commodities trader Daniele Palla and Marta Renzetti. Renzetti is a former director of DDCM.
The source said police were also investigating Russian businessman Vladimir Kobzar, American entrepreneur David Spargo and Alex Glenn, who ran companies linked to the hedge fund’s main investment, as part of the same investigation.
“We have seized a copious volume of computer documents,” the source told Reuters.
Glenn, Palla and Spargo did not respond to emailed requests for comment. Renzetti did not immediately respond to a Reuters communication via a social media network. A spokeswoman for Kobzar did not respond to a request for comment.
Italian police have assigned a team of 15, headed by Colonel Alberto Catalano and Warrant Officer Domenico Siravo, to their investigation, the source said.
The team is expected to focus on the purchase of $500 million of highly illiquid bonds -- referred to by Britain’s Financial Services Authority on Tuesday as “a fraudulent instrument” -- in late 2008 by Micalizzi’s Cayman Islands-based hedge fund shortly before its collapse.
A Reuters investigation published in August revealed that the bonds had been issued by a company in a trailer-park suburb of Phoenix, whose head, David Spargo, was on the run from U.S. authorities.
Reuters also found that the bonds were backed by a global network of shell companies that included a Spanish-based charity, the International Charitable Christian Fund, headed by Kobzar, whom Russian newspaper Vremya Novostei reported in 2002 had spent more than a decade in jail for theft.
Glenn was head of a Canberra-based company called Pacific Global Oil Australia Pty Ltd (PGO), a company that commodities trader Palla said he represented. During its investigation, Reuters visited all three of PGO’s offices but found little evidence of the company.
When contacted by Reuters earlier this year, Palla said: “He (Micalizzi) cheated us. He signed the contract, purchased a number of bonds and he didn’t pay for it.”
Milan public prosecutor Alfredo Robledo confirmed the raids in Italy and added that his office was in the process of examining a large number of computer files.
“The context of the investigation is very similar to what was printed in the Reuters piece (in August),” the source added.
News of the investigation comes as Britain’s FSA on Tuesday fined Sandradee Joseph, compliance officer at DDCM, 14,000 pounds and banned her from “performing any significant influence function in regulated financial services”.
The FSA, which has been investigating the bonds bought by DD Growth Premium, said that, despite Joseph being aware of investors’ concerns about the bonds, she “failed to act with due skill and care”.
Last year Britain’s Serious Fraud Office dropped a criminal investigation into DDCM due to a lack of evidence.
Micalizzi’s fund, which had attracted investors such as RMF, part of Man Group (EMG.L), and a subsidiary of the Ontario Teachers’ Pension Plan Board, and whose directors included Michael Nobel, great-grandnephew of the founder of the Nobel Prize, was put into liquidation in spring 2009.
Last year a judge in an Irish civil lawsuit between two investors in one of Micalizzi’s funds ruled the Italian had knowingly given a false picture to investors and set up “a fraudulent scheme” to persuade one to invest to pay off another.
Additional reporting by by Andrey Ostroukh and John Bowker in Moscow, Editing by Sinead Cruise and Will Waterman