EFTA01108769.pdf

Timestamp: 3/142011 12:19:11 PM EST Additions to Epstein/Zwirn Chron Summer $3.6m of firm assets used to pay for the plane 10/30 Q&A for 05 and repaid in 45 days Investors Late DZ discovers the premature payment of 10/30 Q&A for spring management fees. Brought to his attention by 06 Company Controller (?). [it apparently went Investors on for 28 months, so it started at beginning of 04]. At same time discovered the use of fund assets on one occasion 9 months earlier (i.e., summer of 05) to pay non-fund expenses (the plane) 10/11/06 First call to investors simply says that PG is no Talking Points longer with the Firm; if pressed for reasons, disclose that his conduct had no effect on investments or portfolio 10/30/06 Talking Points for Second Investor calls: Talking Points— • Two other issues have come to DZ' attention since PG left • The two that came to attention before PG left are apparently: (1) premature payment of management fees (deprived investors of $5.4m in interest); (2) in '05 $3.6m of the fund's assets was used for 45 days to pay for non-fund expenses [this had to be the plane]. • Two additional issues detected since PG 1 EFTA01108769  Timestamp: 3/142011 12:19:11 PM EST departed: (3) reporting error of $3m in expenses was misapplied in March 06 and reversed in April and May 06; (4) interfund transfers averaging $108m, were made thirteen times over thirteen months from the Offshore to the Onshore Fund. The amts ranged from $4m to $125m. Discovered this when someone (who?) came forward and brought to attention of our compliance officer (who?) Since amts were outstanding for 15 months, this had to have started in June 05. • There have been no redemption requests. (Lie!) • The employees whom we know to be directly responsible are gone (who?) 3/26/07 Memo to Investors: • Independent Review started last Oct. and uncovered additional instances of inappropriate conduct by CFO and several individuals who reported to him [do we know who these are?] • New stuff uncovered: (1) $117,606 from the Onshore Fund was used to cover capital calls for an investment p/s held personally by three senior professionals associated with the fund [who?]; (2) the 2 EFTA01108770  Timestamp: 3/142011 12:19:11 PM EST Management Company failed to return in a timely fashion $1.6m of the Funds' assets that were used to obtain letters of credit; (3) from Jan. 04 to Sep. 06, the Management Company overcharged the Funds $12.2m for certain operational expenses EFTA01108771  Timestamp: 3/142011 12:19:11 PM EST 4 EFTA01108772  Timestamp: 3/142011 12:19:11 PM EST 5 EFTA01108773  Timestamp: 3/142011 12:19:11 PM EST 6 EFTA01108774