My boss thinks I’m okay…

 SATURDAY, FEBRUARY 25, 2012

In the Footsteps of Clarence Barron

By EDWIN A. FINN JR.  

The senior editor at this magazine has won an investigative-reporting prize for his story on Bruce Berkowitz, who runs the mutual-fund firm Fairholme Capital, which has drastically shrunk in size.

Since Clarence Barron founded this magazine back in 1921, one of its goals has been to warn readers about trouble in the investment world.

Clarence himself exposed Charles Ponzi, the Boston swindler for whom the Ponzi scheme was named. In 2001, Barron’s was the first major publication to question the investment claims of the biggest Ponzi schemer of all time: Bernie Madoff, who made off with $18 billion of his clients’ money.

In that proud tradition, comes Bill Alpert, a senior editor at Barron’s and one of the smartest investigative journalists anywhere. This month, Bill won a “Best in Business” award for investigative reporting in a magazine with circulation between 75,000 and 500,000 from the Society of American Business Editors and Writers.

The award was for Bill’s Oct. 24, 2011, story on Bruce Berkowitz, who runs the mutual-fund firm Fairholme Capital and had ranked as one of America’s most successful fund managers over the previous decade.

But what Bill pointed out was that Berkowitz had decamped from his New Jersey base and moved to Florida, where he soon laid off many of the talented researchers who had helped him build his stock-picking record.

Worse, Berkowitz had begun to rely for advice on his cousin’s husband, Charlie Fernandez, who had no experience in money management, but a long record as a political influence peddler and chief executive of public companies that he ran into the ground. Fernandez resigned his position at Fairholme right after Bill started to ask questions about him.

Whatever Fernandez did for Fairholme, he didn’t stop Berkowitz from posting investment losses of 32% at the Fairholme Fund last year on a highly concentrated portfolio of troubled stocks.

Bill’s story was of paramount importance to the legions of investors who had entrusted their money to Berkowitz. From its peak of $20 billion in assets in early last year, the Fairholme Fund has shrunk to $7.4 billion. Last year, it lost 32%, but this year it’s up 22% versus 8% for its peers, according to Morningstar.

Bill has won plaudits before. A year ago, Sabew presented the same award to Bill and fellow Senior Editor Leslie Norton for being the first to expose the deceptions of many Chinese companies listing their shares on U.S. exchanges through reverse mergers. This technique allowed the Chinese firms to minimize disclosures about their past.

Many of these stocks ran way up in price and then crashed after their frauds were revealed, losing U.S. investors billions of dollars.

Just last week, the Securities and Exchange Commission accused two Chinese executives of looting Puda Coal, a Chinese coal company that listed in the U.S. through a reverse merger.

Bill also wrote a terrific piece late last year that laid out with bank documents how two oligarchs funneled $119 million to Vladimir Putin’s deputy in charge of the Russian economy.

In this week’s issue, Bill explains how some top-performing hedge funds fell victim to a Ponzi scheme.

With such tireless, intelligent and important work, Bill does a great service to this magazine, to its readers and to the memory of Clarence Barron.

Thank you, Bill.

— Edwin A. Finn, Editor and President