Radnor firm struggles with alleged S. Fla Ponzi scheme

Barry R. Bekkedam, best known as a basketball star at Archbishop Carroll and Villanova University in the 1980s, later built his Main Line investment firm into one of the largest of its kind in the country, thanks to a knack for attracting money from extremely wealthy families.

But since last fall, Bekkedam's Ballamor Capital Management L.L.C., of Radnor, has been struggling with the loss of $30 million of client money to an alleged massive Ponzi scheme in South Florida, where Bekkedam, a flashy dresser and a compelling figure with his 6-foot-10 frame, spends much of his time.

Bekkedam, 42, was too busy last week to be interviewed about Ballamor and the losses to Fort Lauderdale lawyer Scott Rothstein's alleged $1.2 billion fraud, Ballamor's general counsel, Lawrence D. Rovin, said.

"It's not the kind of thing you ever want to have happen," said Rovin, referring to the investments in the Banyon Income Fund L.P., a big supplier of money to Rothstein, who is expected to plead guilty Jan. 27 to federal charges of racketeering, fraud, and money laundering.

"It's embarrassing to say the least. We pride ourselves in doing a good job and vetting the investments," said Rovin, who joined Ballamor two years ago from the Philadelphia law firm Klehr, Harrison, Harvey, Branzburg L.L.P.

Rovin said Thursday that he knew of no lawsuits filed against Ballamor related to the alleged Rothstein fraud. Ballamor has a $2 million arbitration claim against it on an unrelated matter. Rovin said that was the only such claim he knew about in Ballamor's history.

One Ballamor client who invested in Banyon said he did not doubt Bekkedam's honesty or that proper due diligence had been done, but he said he was still very unhappy.

Bekkedam founded Ballamor in 1997, and the firm grew astonishingly fast, reaching $2.54 billion in assets in 2008 before falling back to $1.82 billion in September, according to public data.

"I admired the fact that he was able to raise so much money so quickly," said Alvin A. Clay III, chief executive officer of Davidson Trust Co., of Devon, and a 30-year veteran of the industry. "I wasn't quite sure how he did it, but it's quite an accomplishment," said Clay, who writes an occasional business ethics column for The Inquirer.

A teenage Bekkedam came to the Main Line from Ontario in 1984 to play basketball at Archbishop Carroll High School in Radnor, where he gained a spot on the McDonald's All-American High School team. He then played at Villanova, where he earned a degree in accounting in 1990, but failed to meet sky-high expectations on the basketball court.

Bekkedam's industry background is a mystery to some local competitors. A longtime associate, Christopher M. Wolfington, said that after graduation, Bekkedam began working in investment management, but felt stifled in the firm that employed him and eventually launched out on his own.

His stature as a former basketball star and his skills as a salesman have helped Ballamor to its success. The firm, which employs 15, is a registered investment adviser. That means it does not pick specific investments, such as particular stocks, for its clients' money. Instead, it picks investment managers.

Ballamor stands out among its peers for its large average account size, which was $15.7 million in September, according its registration with the Securities and Exchange Commission. By contrast, the average account at Veritable L.P., a registered investment adviser in Newtown Square with client assets of $7.6 billion, was $3.15 million at the end of March.

Ballamor is not required to publicly disclose its investments. About 30 percent of them are in private companies or private funds, such as those organized by prominent Philadelphia-area investor Ira Lubert, Rovin said.

Some have not done well.

Ballamor clients, for example, were in a partnership that in 2002 bought what became Berwyn's Nova Bank. The bank has lost a total of $13.4 million since then and is one of the region's most troubled financially.

Despite its chronic losses, Nova bought the money-losing Pennsylvania Business Bank in November 2008 for a reported $11 million.

Nova Bank illustrates other links between Bekkedam, the Main Line, and South Florida. Fort Lauderdale investor George G. Levin, who operated the Banyon Fund, agreed to invest $18 million in Nova. Levin invested $5 million in Nova in June, but needed Federal Reserve approval for the rest, Rovin said. The approval was granted in October, but by then Levin was unable to complete the investment because Rothstein's alleged scheme was collapsing, Rovin said.

Brian M. Hartline, Nova's chief executive, did not respond to calls last week seeking clarification of what the loss of that $13 million means to the bank.

A Florida lawsuit against Levin alleges that Bekkedam steered client money into Banyon in exchange for a loan to Ballamor and the investment in Nova.

Wolfington, a King of Prussia businessman, called that "some kind of joke," adding that he had been at meetings where people tried unsuccessfully to get Bekkedam "to sell his character" for substantially more money.

Wolfington, whose family wealth is rooted in a Philadelphia carriage builder founded in 1876, has close ties with Bekkedam, but he said Bekkedam did not handle money for him or his family.

Bekkedam was on the board of Wolfington's Money Centers of America Inc., from 2004 through 2006, when the company lost $12.6 million. Ballamor clients provided a line of credit through Mercantile Capital L.P. during that period that Money Centers used to supply casinos with cash. The debt peaked at $8 million, but it has been paid down to $750,000, Wolfington said.

Mercantile Capital, still backed by Ballamor clients, has a controlling interest in a small-business lender, Preferred Capital Bidco Inc., which lent Bekkedam $1.5 million in 2005 and $980,000 in 2008 and sold part of its business to Nova in 2008.

Preferred Capital stopped lending last year, according to an October statement on the firm's Web site, because its senior lender cut off its line of credit.

In all, Ballamor's clients are invested through debt or equity in 20 to 25 private companies, including a fire truck manufacturer and a real estate partnership that owns Norristown property, where a film studio was planned.

Bekkedam, who recently got engaged in Florida, has had his own tough luck in real estate. His house on Hothorpe Lane in Radnor Township, bought for $3.92 million in June 2006 while waiting for a divorce, has been on the market since April 2007. The asking price for the French manor home started at $4.88 million, but has fallen to $3.4 million.