* Lawyer says investors may ask feeders to refund fees
* Says some feeders may have passed on fees to advisors
* SFO investigates London-based FIM Advisors
* Kingate feeders made millions in fees and commissions
By Martin de Sa'Pinto
ZURICH, April 9 Investors who lost money in the
Bernard Madoff fraud by investing via feeder funds are likely to
demand a fees refund, but locating what may total hundreds of
millions of dollars in fees may be a complex matter, a lawyer
for some of the investors said on Thursday.
Geneva-based lawyer Franco Foglia is advising clients who
lost money in investments channelled through London-based
consultant FIM Advisors to two Madoff feeder funds run by
Kingate Management Ltd of Bermuda.
UK law enforcers are probing the role of FIM in the Kingate
funds. FIM also advises on $2 billion of assets invested in
other funds, some of which had limited exposure to Kingate.
Madoff pleaded guilty last month to orchestrating Wall
Street's biggest-ever fraud, a Ponzi scheme that involved as
much as $65 billion in funds over 20 years.
Foglia said that, in almost 14 years of existence, Kingate
may have collected more than $300 million in fees, but that much
of this may have passed through FIM, which advised Foglia's
clients on their Kingate investments.
Foglia's estimate includes front loads, or introduction
commissions paid to distributors, and other charges, management
and performance fees, he told Reuters in a telephone interview.
November factsheets for both the Kingate funds show they charged
an annual management fee of 1.5 percent.
"Some of the largest feeders made several tens or even
hundreds of millions over the life of these investments, but
many of them may not have done the job they were paid to do,"
"Expenses such as annual management or performance fees that
investors paid to Madoff-related funds constitute part of the
loss suffered by those investors. Many investors are likely to
seek a ruling for the disgorgement of those fees."
Britain's Serious Fraud Office is investigating FIM about
its alleged involvement in the Madoff scandal, a source close to
a law enforcement agency told Reuters. It has been reported that
the SFO is looking at the role of feeder funds more broadly.
Kingate lost $2.7 billion in its Kingate Global Fund and 616
million euros ($833.6 million) in Kingate Euro, both domiciled
in the British Virgin Islands (BVI), both invested almost
entirely in Madoff-related entities.
In a document released earlier this year, FIM played down
its links to Kingate and said it had never been investment
adviser or investment manager to the Kingate Funds.
FIM said it had a non-exclusive deal with Kingate to sell
its funds, and that it lost about $145 million via investments
by its funds of hedge funds in Kingate funds. It also said it
received fees from Kingate for administrative services.
Sources with knowledge of the situation say the association
between Kingate and FIM was a strong one.
FIM is the only consultant named in Kingate fund fact sheets
and offering documents, said Foglia. Federico Ceretti and Carlo
Grosso, FIM founders and respectively chief executive and
executive chairman of Kingate, are specifically named.
Others say FIM and Kingate were almost synonymous.
"FIM's founders Federico Ceretti and Carlo Grosso (chief
executive and executive chairman of FIM respectively) were
Kingate, and everyone knew it," said one investment professional
who met both men several times and who asked not to be named.
Also, a person very close to Kingate confirmed Grosso and
Ceretti were present at the founding of Kingate.
Representatives of Ceretti and Grosso did not reply to
requests for more information.
"It will be harder to compel a Bermuda-based manager or a
British Virgin Islands fund to disgorge fees than a London or
New York firm that brought investors to Madoff via these
feeders," Foglia said.
The location of the assets investors are looking to recover
is also important, said Noel Campbell, commercial litigation
partner at London law firm Holman Fenwick Willan.
"If you are an investor you need to see where you are most
likely to get recovery," said Campbell in a telephone interview.
When contacted at Kingate's Bermuda offices, Christopher
Weatherhill, president and director of Kingate Management and a
director of the Global and Euro funds, declined to discuss who
had received fees paid by Kingate investors.
(Additional reporting by Laurence Fletcher; Editing by Andrew