Thieves of Bay Street by Bruce Livesey

Author:Bruce Livesey [Livesey, Bruce]
Language: eng
Format: epub
ISBN: 978-0-307-35965-0
Publisher: Random House of Canada
Published: 2012-04-16T16:00:00+00:00

ONE PERSON WHO’S TAKEN ADVANTAGE of this parallel financial system is Paul Eustace, an American who lives in Oakville, Ontario, a bedroom community just down the highway from Toronto. He grew up in Connecticut, studied at the University of Pennsylvania, and in 1990 hooked up with a childhood friend, Monroe Trout, who’d founded a Chicago-based hedge fund, Trout Trading Co. In 1994, Trout sent Eustace to Toronto to set up a subsidiary, and Eustace moved to Oakville with his wife and two children.

He soon met a 21-year-old stripper, Denise Nadeau, at a Mississauga, Ontario, strip joint called the Locomotion Cabaret, and Nadeau became his lover. Eustace began buying her expensive gifts, paying for breast implants and taking her on trips to New York and Bermuda, where Trout had an office. The stripper’s presence in the Bermuda office apparently rankled Trout so much that he fired Eustace in 1998.

Eustace eventually set up his own hedge fund, Philadelphia Alternative Asset Management Co., LLC (PAAM), which he ran from an office in Oakville even though the fund had operations in Pennsylvania. The company managed to attract some prominent people to its board, including a vice-chairman of the Philadelphia Stock Exchange and a former president of Drexel Morgan, and lured Canadian and American investors with the promise of trading their money in an offshore fund in the Cayman Islands. PAAM collected nearly US$300 million from investors, which Eustace used to trade mostly in commodity futures and options.

Meanwhile, Eustace’s affair with Nadeau went sour and she threatened to expose their relationship to his wife. Eustace had bought her a house equipped with the latest mod-con appliances and had spent as much as $1 million of investors’ money on his paramour. (He also allegedly gave $87,000 to a man who threatened to kill Nadeau unless she repaid a loan to Eustace.) Overall he used roughly $2 million in cash from his clients to spend it on a host of luxury items.

But in 2005, PAAM hit a snag. A big one. Eustace had gambled incorrectly on American interest rates going up and promptly lost an estimated US$202 million of the $300 million in the hedge fund. Instead of coming clean to investors about the disaster, he covered up the losses and began issuing false monthly statements indicating strong growth, and Eustace continued to pocket investors’ money to pay for his salary and lavish lifestyle. At the same time he was enticing clients to invest in a fund that did not exist.

After PAAM went bust in the summer of 2005, U.S. regulators demanded that he hand over his wealth and issued a restraining order to prevent him from transferring or disposing of any of his personal assets. The regulators claimed Eustace defied the order within two days of it coming into effect, selling his 1988 Porsche 911 Turbo Slantnose convertible for US$48,000 and having the cheque endorsed to one of his Canadian attorneys “in a blatant attempt to hide assets” from a court-appointed bankruptcy receiver. This was the

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