Operation Due Diligence

In 2005 investors lost more than $1 billion in hedge fund blowups. Bayou Management, KL Group and others flamed out for largely noninvestment reasons -- including allegations of fraud. In retrospect, the warning signs were there. At Bayou, chief financial officer Daniel Marino, who eventually pleaded guilty to fraud, was also a registered agent at the fund’s obscure auditing firm.

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