Expat investor helps build case against Goldman Sachs

When Sydney hedge fund Basis Capital bought into Goldman Sachs’ Timberwolf product it had no idea that the fund would collapse in 2007.

Three years on David Mapley, expat CEO of an investment adviser in canton Vaud, is helping US authorities build a case against Goldman.

Timberwolf was a risky billion dollar concoction of sub-prime mortgage debt – a "shitty deal" in the words of US Senator Carl Levin, interrogating Goldman CEO Lloyd Blankfein in a public hearing in April.

Nyon-based Mapley was an independent director of Basis Capital when the fund collapsed. "I’ve been in the market since the mid-80s and people were always very wary of dealing with Goldman Sachs," he said.

Goldman is global finance leader with a market capitalization of more than 80 billion dollars. It has branches in Zurich and Geneva.

Earlier this month the US Securities and Exchange Commission (SEC) agreed a 550 million dollar settlement with Goldman, after suing the company for fraud, a result that Basis Capital clients followed with interest.

The Sydney company invested in the same "asset class" as Timberwolf, according to Mapley, creating the Basis Yield Alpha Fund that collapsed soon after the demise of Timberwolf.

A number of Swiss institutional investors and family offices were amongst those who lost everything when the fund collapsed.

Mapley remains determined to recover money for his former clients, especially now the case against Goldman has gathered momentum from the SEC action.

But he would not tell Swisster which companies had been exposed.

"This is a defensively managed portfolio of CDOs [collateralised debt obligations]," Goldman had told Basis Capital, recalled Mapley.

Timberwolf even boasted the coveted AAA score from ratings agencies.

But the bankers misled investors such as Basis Capital with incorrect marketing information, said Mapley.

"They explicitly withheld information and gave false numbers," he said.

The sizeable settlement with the SEC appears to have backed up Mapley’s claim.

His first trip to the SEC was with Basis Capital colleagues in April 2008.

After stepping down as a director with the liquidation nearing completion, the financier continued to act as an informant on Goldman to the US authorities investigating the Timberwolf affair.

It falls within a company director’s fiduciary duties to try to recover money for Basis investors who have lost out, according to the expat.

The Sydney money manager did not look like achieving this objective, said Mapley, who wants to recover at least 56 million dollars for his former clients – even though he explicitly said to Swisster that he will not gain financially – should Goldman return money.

"I’m helping a number of authorities in clarifying how the market works . . . I’ve been subpoenaed by the US Senate Sub-committee for Investigations," he said.

In addition to Levin’s Senate Permanent Sub-Committee on Investigations, a number of legal authorities, including the FBI, are looking into the matter.

Goldman Sachs reported net income of more than four billion dollars for the first six months of 2010.

The company appears able to afford incurring further losses from the Timberwolf affair.

Employees continue to enjoy some of the highest salaries and bonuses in the business.

In addition to his work in the fund management industry, Mapley has also owned a telecoms security and investigations company, iCard Forensics International since 2004.

He began working in finance in 1986 after studying at the London School of Economics and the University of Chicago.