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Everyone knows that hedge funds are risky, but a group of investors is claiming there’s a limit to the gambles that fund managers can take. In April, 32 investors in Beacon Hill Asset Management LLC, a Summit, New Jersey�based hedge fund, sued its managers in Manhattan federal court, alleging that the fund deviated from its stated investment philosophy and falsified returns to investors. The plaintiffs had invested $79 million in three funds, which were managed by Beacon Hill, Safe Harbor Asset Management LLC, and their four principals � defendants John Barry, Thomas Daniels, John Irwin, and Mark Miszkiewicz. The investors also sued Beacon Hill’s 50 percent owner, Asset Alliance Corporation, and ATC Fund Services (Cayman) Ltd., the administrator of the three funds at issue. In the suit, the plaintiffs accuse Beacon Hill of describing its investment strategy as low-risk, but then taking high-risk positions on certain securities. For instance, fund managers bet that U.S. Treasury bonds would lose value due to rising interest rates. But then rates dropped, and the fund lost millions of dollars. Instead of reporting those losses to investors, the Beacon Hill defendants allegedly inflated the value of the portfolio and reported fraudulent returns. In the fall of 2002, Bear, Stearns & Co. Inc., the fund’s custodian, contacted the SEC after discovering the discrepancy during an annual review. Several of the defendants’ attorneys are considering filing a motion to dismiss. For the plaintiff investors Brown Rudnick Berlack Israels (Boston): Scott Berman and associate Dana Montone. (Berman and Montone are in the firm’s New York office.) Berman has other cases pending against the Lipper hedge fund and The Lancer Group. The Beacon Hill investors contacted Berman after learning of potential problems at their fund. For defendant Beacon Hill Asset Management LLC (Summit, New Jersey) Miller & Wrubel (New York): Joel Miller and associate Teresa Gonsalves. For defendant ATC Fund Services (Cayman) Ltd. (Cayman Islands) Schulte Roth & Zabel (New York): Harry Davis, Marcy Harris, and associates Mariana Pastore, Mary Morabito Rosewater, Karen Siciliano, and Jess Velona. Schulte Roth has been involved in a number of high-profile hedge fund cases. For defendant Asset Alliance Corporation (New York) Skadden, Arps, Slate, Meagher & Flom (New York): Richard Prins, Seth Schwartz, and associate Jonathan Frank. Asset Alliance has been a long-standing client of the firm. For defendant John Barry Kevin H. Marino, P.C. (Newark): Kevin Marino and associate Wendy Gerstmann. For defendant Thomas Daniels Gibbons, Del Deo, Dolan, Griffinger & Vecchione (Newark): Lawrence Lustberg and Thomas Valen. For defendant John Irwin Greenbaum, Rowe, Smith, Ravin, Davis and Himmel (Woodbridge, New Jersey): Michael Himmel and Christopher Porrino. For defendant Mark Miszkiewicz Michael Critchley & Associates (West Orange, New Jersey): Michael Critchley.

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