19 March 2010

Madoff fallout and translation

Last fall, investors who had lost money -- lots of it -- in the LuxAlpha Sicav-American Selection fund filed lawsuits against E&Y and UBS in Luxembourg.

The reason they had lost so much money in LuxAlpha was that the geniuses managing same had invested 95% of it with Bernard Madoff. Maybe you've heard of him?

Anyway, investors claimed that they were entitled to be made whole by UBS, which was LuxAlpha's custodian, and/or by Ernst & Young, its auditor. Unfortunately for said investors, a Luxembourg court said in a ruling on March 4 [the only date in the year that is also a command -- "march forth!"] that the investors will have to pursue their claims through the liquidator of the fund, some French-speaking equivalent of Irving Picard. The claims are otherwise "irrecevabilites," a French word that literally translates "inadmissible."

This raises an issue about the nature of translation from one language to another. In Ango-American jurisprudence, of course, "admissibility" is an evidentiary principle. A court that wants to say that it can not "receive" a certain lawsuit will call that lawsuit non-justiciable or speak of the absence of subject matter jurisdiction. So, in a translation of the French-language decision of a Luxembourg court, should "irrecevabilites" be rendered "inadmissible" or something more like "non-justiciable"? And if one opts for the latter, is one in effect smoothing out systemic differences? For example, in translating a Dostoyevsky novel that uses the term "borscht," should one render it "Campbell's soup"?

Anyway: the investors will appeal, but for the moment the defendants have won.

You may ask: what the heck kind of name is LuxAlpha Sicav? That one I can answer.

"Lux" of course refers to the Grand Duchy of Luxembourg, an important center for the domicile and for the administration of hedge funds.

"Alpha" is conventional finance jargon for the difference between a particular actively-managed fund's performance and that of the market. A "positive alpha" means that the investors did better than they would have done had they owned a piece of a passively managed fund that was indexed to, say, the S&P.

"Sicav" is a French-language acronym, from "la société d’investissement à capital variable," an open-ended investment company.

As Governor Duke said to Mac, "I'm glad we've had this little talk."


Henry said...

This is tangential, but it has just been reported that Madoff was severely beaten up in prison in December, in a dispute over -- can you guess? -- money.

Christopher said...


Yes, Madoff was probably up to his old tricks behind bars.

"Pssst, lend me a back of cigarettes -- I'll get you two packs next week." Then borrowing three packs from other people in the intervening week on the basis of the same sort of promise, and using those cigs to pay off the first guy ...

It could not end well.

Henry said...

Speaking of cigarettes in prison, I am reading a diary of a Jewish man imprisoned in the Nazi Theresienstadt Ghetto, which was the Nazi's Potemkin Village concentration camp, which they allowed the Red Cross to inspect, and at which they did not murder Jews, although many died from illness caused by overcrowding, poor diet, and poor sanitary conditions, and most of them were eventually transported to Auschwitz to be murdered. In any case, the diarist wrote, "If the German authorities had decided to repeal the ban on smoking, criminality would have fallen by two-thirds." Does that remind you of another country today? As Santayana said, "Those who cannot remember the past are condemned to repeat it."

Knowledge is warranted belief -- it is the body of belief that we build up because, while living in this world, we've developed good reasons for believing it. What we know, then, is what works -- and it is, necessarily, what has worked for us, each of us individually, as a first approximation. For my other blog, on the struggles for control in the corporate suites, see www.proxypartisans.blogspot.com.