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Speaker 1: This is a Bloomberg Business Flash from Bloomberg World Handquarters.

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Speaker 1: I'm Charlie Pellot. We are looking at records on Wall

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Speaker 1: Street today. Quarterly numbers out of Microsoft and Morgan Stanley's

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Speaker 1: spurring optimism the corporate earnings can support further gains. Right now,

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Speaker 1: we have got the S and P five hundred index

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Speaker 1: climbing eleven to twenty one seventy four. That is a

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Speaker 1: gain of five tenths of one percent. We are brought

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Speaker 1: to you by Sector Spider ETFs. Why by a single

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Speaker 1: stock when you can invest in the entire sector. Visits

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Speaker 1: Sector sp d r s dot com or call one

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Speaker 1: six Sector e t F Gold down fourteen dollars a

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Speaker 1: ounce to eighteen a drop there of one point one percent,

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Speaker 1: and crude oil higher now by seven tenths of one

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Speaker 1: percent forty four ninety four for a barrel of West

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Speaker 1: Texas Intermediate crude. I'm Charlie Pellet, and that's a Bloomberg

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Speaker 1: business Flash. You're listening to taking stock with pin Box

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Speaker 1: at Kathleen Hayes on Bloomberg Radio, eight billion dollars a

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Speaker 1: hedge fund, lawyers, courts not guilty. Please, Yes, this is

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Speaker 1: the story of Visium, and here to tell it is

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Speaker 1: Cotcha Porican Scheme, hedge fund reporter for Bloomberg News, and

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Speaker 1: Concha joins me in the studio of Concha. For people

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Speaker 1: that have not been following the saga of Visium asset management,

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Speaker 1: why don't you just start off by telling us about

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Speaker 1: this eight billion dollars at one point eight billion dollar

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Speaker 1: hedge fund and what has gone so spectacularly wrong. Thanks

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Speaker 1: very much for having me um well in the hedge

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Speaker 1: fund community, at least in this this summer. This has

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Speaker 1: been kind of one of the biggest scandals of the

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Speaker 1: summer because I mean it involves a lot of drama.

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Speaker 1: They in March they told investors that they were being

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Speaker 1: investigated for two different things um and later on it

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Speaker 1: was revealed kind of the specifics of what they were

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Speaker 1: being investigated for. When one employee, a very high ranking

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Speaker 1: employee UH at Visium, one of the star money managers.

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Speaker 1: He managed one of the biggest books at museum UH

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Speaker 1: he was indicted for insider trading, and two other former

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Speaker 1: employees who worked on the credit portfolio, UH, where one

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Speaker 1: was indicted in well, now both of them have been

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Speaker 1: indicted for UH, one for for insider trading and miss

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Speaker 1: marking the bonds in the fund and the other one

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Speaker 1: for just for miss marking the bonds and the fund

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Speaker 1: which inflates the value of the portfolio. And then shortly

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Speaker 1: after the charges were UM were made public, UH, the

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Speaker 1: VISIOM announced it's it was closing four of its hedge funds.

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Speaker 1: Basically it was all but shutting shutting down, and and

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Speaker 1: then a couple of days later, uh, Sanjay Valvani committed suicide.

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Speaker 1: So it has been a very dramatic unfolding of events UM.

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Speaker 1: And just in kind of reporting that out, UH, you know,

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Speaker 1: talking to lots and lots of people who were either

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Speaker 1: invested in the funds over time or worked there. UH,

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Speaker 1: it appeared that there were several kind of red flags

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Speaker 1: that we thought merited some reporting on UM. This is

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Speaker 1: a fund that was started in two thousand and five

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Speaker 1: by Jacob by Jacob gottlieb And and several of his

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Speaker 1: former colleagues from bally Asney. They managed a healthcare portfolio

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Speaker 1: at Ballyasney. They spun that out, they formed Physium and

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Speaker 1: at first it was just supposed to be it was

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Speaker 1: just a healthcare fund, and then he had aspirations to

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Speaker 1: grow that UM much bigger, and he created this multi

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Speaker 1: manager platform, multi strategy fund UH called Physium Global, which

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Speaker 1: and that that fund is being bought by or at

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Speaker 1: least there and talks to buy be bought by a

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Speaker 1: Liance Bernstein, so that one will survive UM, but the

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Speaker 1: the other ones have all been are all being liquidated. UH.

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Speaker 1: And and yeah, it grew very large, very quickly, and

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Speaker 1: it's you know, there's questions, is too, did you know

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Speaker 1: did they keep up with the growth? Were they behaving

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Speaker 1: UM as they should have been when they were an

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Speaker 1: eight billion dollar fund? I mean, it's one thing when

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Speaker 1: you're a small shop and it's a couple of guys.

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Speaker 1: Matt Levin had a had a piece today that talked

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Speaker 1: kind of like, how should you be behaving when you're

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Speaker 1: a really big fund versus a really small fund. And

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Speaker 1: if it's a couple of guys in a room and

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Speaker 1: you're all sitting around a desk and you're you know,

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Speaker 1: you know what's going on because it's right in front

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Speaker 1: of you, that's one thing. But it's another thing when

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Speaker 1: you balloon to be such a big, big fund and

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Speaker 1: they I mean Jake had his brother as chief compliance.

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Speaker 1: Jacob Gottlieb had his brother as chief chief compliance officer

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Speaker 1: until two thousand and nine, and they had grown. That

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Speaker 1: is considered a conflict of interest. Certainly raises eyebrows. You know,

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Speaker 1: if you have to have this person sign off on

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Speaker 1: everything and he's your brother. Again, it's one thing if

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Speaker 1: everybody's just sitting around a table. It's another thing if

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Speaker 1: you're trying to show that you're really established organization to

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Speaker 1: be taken seriously. Um, we're more family members involved in Visium. Sure.

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Speaker 1: One of the one of the people who has been charged, M.

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Speaker 1: Stefan Lumier is Jacob Gottlieb's um brother in law. Well,

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Speaker 1: he's the brother of Um Gottlieb's strange wife. They're going

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Speaker 1: through divorce proceedings and and Jacob Gottlieb's father was and

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Speaker 1: Mark's father was even had like an office on on

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Speaker 1: the premises the first few years. Uh, he's an accountant.

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Speaker 1: And I mean there's nothing sketchy implied here, but just

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Speaker 1: basically he was there too. It's kind of it started

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Speaker 1: as this kind of family shop and grew. And the

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Speaker 1: question is did they you know, did they really grow

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Speaker 1: in their regulatory aspect as they should have been um

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Speaker 1: so that they have the right controls in place in

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Speaker 1: order to manage this scale of operations. Sure, sure, and

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Speaker 1: certainly with this miss marking scheme. UM. You know, there's

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Speaker 1: a question there is so you know, do they really

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Speaker 1: know what they were doing when it came to valuing

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Speaker 1: bonds um when you know, in the back office or

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Speaker 1: wherever uh this is, you know, they they overrode um

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Speaker 1: prices two hundred and eighty four times in their favor,

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Speaker 1: which is a lot. Uh. So there's a lot of

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Speaker 1: red flags and and even in the SEC you know,

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Speaker 1: buried into in the SEC filing they say, uh, you know,

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Speaker 1: and that the procedures of the institution failed to prevent

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Speaker 1: a lot of this wrongdoing. A feeling. This is a

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Speaker 1: continuing story and we will look to you to cover

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Speaker 1: it for us. Thank you very much, Kacha Porzakanski, head

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Speaker 1: fund hedge fund reporter for a Bloomberg News speaking about

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Speaker 1: Visium asset management. Thank you. All right, Now let's turn

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Speaker 1: our attention to Cleveland and the Republican National Convention. Sahil

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Speaker 1: kap Poor White House correspondent for Bloomberg News, is there

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Speaker 1: and can tell us about what's going on. Soa hello,

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Speaker 1: thanks very much for being with us. So why if

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Speaker 1: you could tell us what the reaction was, if any,

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Speaker 1: to the latest news having to do with a speech writer.

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Speaker 1: A writer who worked for the Trump works for the

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Speaker 1: Trump organization named Meredith mc ivor, and she submitted her

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Speaker 1: resignation that was not accepted by the Trump organization for

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Speaker 1: the lifted passages for Milannia Trump's speech the other night. Right, So,

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Speaker 1: this employee of the Trump organization, Meredith McIvor, submitted her resignation.

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Speaker 1: She took responsibility essentially for the lifted passage, the lifted

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Speaker 1: passages in Milannia Trump speech that bore a lot of

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Speaker 1: resemblance to the two thousand and eight speech that Michelle

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Speaker 1: Obama gave in a similar context, and as you pointed out,

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Speaker 1: the Trump campaign did not accept they um, so, you know,

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Speaker 1: I think what the Trump campaign was doing was at

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Speaker 1: least assigning responsibility for the error that happened. They've gotten

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Speaker 1: a lot of criticism about this over the last day

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Speaker 1: and a half since it happened. It seem to be

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Speaker 1: a pretty clear cut case of plagiarism, given that their

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Speaker 1: extensive passages from Michelle Obama's speech that we're um, you

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Speaker 1: know that we're using Monnia speech. So this is their

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Speaker 1: attempt to do damage control. At the same time, on

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Speaker 1: a on a purely political level, it's it's unlikely that

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Speaker 1: this is going to turn voters away from Donald Trump.

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Speaker 1: What the campaign is trying to do is and that

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Speaker 1: the element of distraction, and it's pretty new. We don't

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Speaker 1: know exactly how it's going to play, um, you know,

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Speaker 1: so we'll see how it pans out. Paul Manaford, who

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Speaker 1: is Trump's campaign chairman, said that the billionaire who said

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Speaker 1: that Trump has changed the face of the Republican Party

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Speaker 1: and promised an all Trump convention, is that really taking place?

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Speaker 1: Yesterday Trump officially won the Republican nomination, and it's a

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Speaker 1: it's a very significant moment for the Republican Party. It

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Speaker 1: marks the fact that the nativist, nationalist wing of the

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Speaker 1: party has essentially taken control from from the you know,

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Speaker 1: the traditional limited government wing of the party and to

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Speaker 1: that to that extent, it is Trump's party. Now. Trump

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Speaker 1: represents this nationalist natives faction. That's always been there, but

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Speaker 1: has not been in control at the at the upper

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Speaker 1: echelons of the party not had a nominique quite like this,

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Speaker 1: So you know, to that extent it is Trump's party.

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Speaker 1: And and also notable there are six people at this

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Speaker 1: convention altogether, all four days of it named Trump, So

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Speaker 1: you know it's it's it's Trump's convention in more ways

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Speaker 1: than one. How speaker Paul Ryan, what was the reaction

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Speaker 1: to his speech because he has been a reluctant supporter

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Speaker 1: of Donald Trump. Right, Paul Ryan ran through the reasons

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Speaker 1: that you know, traditional Republicans, movement conservatives, and and most

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Speaker 1: elected officials in the party um are Republicans. He spoke

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Speaker 1: of limited government, He spoke of an inclusive, welcoming party

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Speaker 1: that you know that you know where where anyone that

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Speaker 1: wants anyone to succeed, regardless of race, gender, and so forth.

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Speaker 1: It's a little different from Trump's message, right, because Trump

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Speaker 1: is not playing to those traditional sentiments. He's making some

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Speaker 1: some fairly overt racial appeals, and he's been criticized as

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Speaker 1: a is a very divisive figure. And unlike Paul Ryan,

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Speaker 1: who is who represents a part of the segment of

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Speaker 1: the party that is pro immigration, that is pro trade,

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Speaker 1: um that that wants to cut entile and programs like

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Speaker 1: security and medicare. Trump is the exact opposite on all

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Speaker 1: those fronds. Trump is an anti immigration, he's anti trade,

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Speaker 1: and he likes these social programs. So there's a lot

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Speaker 1: of tension there and I think, um, you know it,

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Speaker 1: it sort of seeped through in an element of discomfort

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Speaker 1: that people saw in Paul Ryan's speech. Just quickly saw Hill,

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Speaker 1: what should we look for in tonight's Republican National Convention.

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Speaker 1: Keep an eye on Mike Pence. This is the vice

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Speaker 1: presidential nominee introducing himself to the country. He's not very

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Speaker 1: well known. He's going to try to communicate with segments

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Speaker 1: of the Republican based movement, conservatives and evangelicals who have

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Speaker 1: been skeptical of Trump. Thank you very much, saw Hill.

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Speaker 1: Ka Poor white House, correspondent for Bloomberg News, reporting from Cleveland,

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Speaker 1: site of the Republican National Convention, which continues today and tomorrow.

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Speaker 1: You're listening to taking Stock. I'm Pim Fox and this

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Speaker 1: is Bloomberg