Why Forbes Got Its Facts Wrong!
An Open Letter from Gorm Klungervik. Investor
in Millennium Capital Hedge Fund and continuing investor
with Andreas F. Zybell...
In these times of instant messaging, twittering and
an unprecedented urgency to get the story out before
anyone else, it is often difficult to discern what on
the internet is accurate and complete and what is not.
In the case of the 2003 Forbes article relating to
Andreas F. Zybell, it is the omissions of material fact
more than the sophomoric reference to "crook", that
damage the credibility of the Forbes writer and renders
the article little more than meaningless nonsense.
As an investor who continues to entrust my wealth to
the judgment and management of Andreas F. Zybell and who
has great respect for his integrity, honesty and
intelligence, I feel compelled to share the facts that
Forbes chose not to disclose.
First and foremost,
it is important to understand that not a single investor
in the hedge fund managed by Andreas F. Zybell ever
complained to any regulatory agency concerning the
performance of the fund and/or the conduct of Andreas F.
Zybell. In fact, shortly after the Government decided to
take regulatory action against our hedge fund and
Andreas F. Zybell, we, as investors, retained separate
legal counsel and did file what is commonly known as an
"amicus curiae" brief. An "amicus curiae" brief
(literally, "friend of the court") is a legal writing or
document that is filed by an interested non-party to the
litigation expressing their position, in terms of facts
and law, on the issues of the lawsuit. A copy of the
investors' brief is available for you to review on this
site. I would point out that the filing of an "amicus
curiae" brief by investors in favor of their money
manager and against the Government is highly unusual,
but in this instance we, as investors, felt compelled to
share with the Court, what we believed to be a clearly
misguided effort on the part of the Government. A review
of the investors' "amicus curiae" brief reveals that the
Forbes article fails to state the following facts:
1. The fund was profitable (the Government
admitted as much in its complaint) and an outside
independent CPA in his "Accountant's Review Report"
concluded "the performance record of the Partnership was
calculated in accordance with the Partnership accounting
methodology described above, which was fully disclosed
in the Partnership's Private Placement Memorandum";
2. "The investors did not complain about the
Defendants' conduct, nor ask the SEC to take action on
3. "The investors have not felt misled or hurt
by the Defendants, as stated in their Declarations";
4. The investors
stated in their brief, "the investors find it
inconceivable that earning nothing on their capital and
subjecting their capital to the risks and whims of the
market while unmanaged for a period of ten months, as
opposed to earning at least the 14% return that the SEC
admits in their complaint was earned by the Defendants,
is advancing the interests of the investors";
5. The investors
also stated in their brief, "the investors respectfully
submit that the rate of return as stated by the
Defendants was understood, and it is the SEC's
allegation that the Fund earned 14% rather than 46% that
6. One hundred percent (100%) of the
investors signed Declarations/Affidavits in which each
of them made the following statement: "I do not believe
that I have been misled and/or the victim of any fraud.
Therefore, I do not support either a civil penalty or
any disgorgement against any of the Defendants by the
View Investor's Brief
end of the day, the Government's regulatory civil action
against the hedge fund and Andreas F. Zybell came down
primarily to a dispute over the timing of the
recognition of cash received by the hedge fund from the
sale of call option contracts. Andreas F. Zybell's
position, which was fully disclosed to us as investors,
was that cash received was fully earned and became
profit when received, since legal title to the cash
passed to the hedge fund when received, and there was no
event or contingency that could force the return of this
cash previously received. Similarly, any cash spent to
buy back previously sold options was treated as an
expense. In essence, the accounting for options was on a
cash rather than accrual basis.
The case brought
by the Government naming the hedge fund and Andreas F.
Zybell as defendants was ultimately settled. Andreas F.
Zybell was not required to make any admissions, nor was
he allowed to make any denials¹; and he was permitted to
continue investing client funds. Eventually, the
investors' funds were returned to us. At that point,
many if not most of the investors, simply handed their
money back to Andreas F. Zybell since he was permitted
to continue in the investment business as a money
manager. While I cannot speak for others, Andreas F.
Zybell has nearly doubled the average equity value of my
account during 4 1/2 years beginning in November of
2005, net of fees. And these last 4 plus years have
included the worst bear market since the Great
Depression. His talent with respect to money management
is, in my opinion, quite obvious. In addition,
throughout my several year relationship with Andreas F.
Zybell, he has represented me as an attorney on other
matters. In a nutshell, I have found him to be
consistently ethical, forthright and a careful steward
of both my money and my best interests.
didn't Forbes disclose these facts? Only Forbes can
answer that question. But the cynic in me suggests that
it was probably because it was simply too inconvenient!
Maybe, just maybe, the urgency to get the story out
precluded a thorough and honest review of the court
records. In addition, often times the allegations are
far more salacious than the truth. Take the ongoing case
of Mark Cuban, billionaire founder of Microsolutions and
owner of the Dallas Mavericks.
complaint against Mark Cuban painted him as an evil
billionaire insider-trader whose ill-gotten gains must
be disgorged. The result? A federal judge dismissed the
Government's case for insider trading! Mark Cuban has
since responded with a motion seeking sanctions against
the Government in the form of reimbursement of defense
fees and expenses incurred. The allegations of Mark
Cuban speak for themselves.
Click Here to Read
Finally, Forbes would be well served to
consider in advance the fact that occasionally the
Government is caught engaging in seriously wrongful
conduct. In the recent case of United States vs. William
J. Ruehle, the Honorable Cormac J. Carney stated in his
opinion; "Based on the complete record now before me, I
find that the Government has intimidated and improperly
influenced the three witnesses critical to Mr. Ruehle's
defense. The cumulative effect of that misconduct has
distorted the truth-finding process and compromised the
integrity of the trial."
Federal Judge Carney's opinion
View Investor's Brief
should consider the statement made by Louis Nizer, the
famous American trial lawyer, "when a man points a
finger at someone else, he should remember that four of
his fingers are pointing at himself."
Should anyone wish to contact me
regarding the statements made by me they can do so by
emailing me at firstname.lastname@example.org.
Gorm Klungervik, Investor in Millennium
Capital Hedge Fund and continuing investor with Andreas
¹ A standard requirement in SEC civil settlements is that the settlement agreement contain language that the defendants neither admit nor deny the allegations. Indeed, Mary
Shapiro, director of the SEC stated, "If we take away this tool [of "neither admit nor deny"], companies would have little reason to settle, and many more cases would end up in