A Bermuda-based investor in the scandal-hit Manhattan Investment Fund has pointed the finger at the Bermuda accountants Deloitte and Touche and Fund Administration Services (Bermuda) and said that they failed to do their duty.

The investor, Oilvest Limited (Bermuda) who through a European Bank put a great deal of money into the venture, said it is of the utmost importance to prove that both companies failed in their responsibilities.

He also urged people who thought that Deloitte and Touche and Fund Administration Services (Bermuda) were not reliable to take their money out in case they lost their investment.

In an open letter to HedgeFund.net, a Net news info service on hedge funds, Olivest charged: "It is clear to us Mr. Berger committed a massive fraud. Yet it appears equally clear that the supporting firms, most importantly Fund Administration Services (Bermuda) and Deloitte & Touche, but probably also Bear Stearns, totally failed to do their duty and that it will become of utmost importance to determine their responsibility.'' Nine cases have been logged at the Supreme Court in Bermuda in connection with the fund. The hedge fund, which was registered in the British Virgin Islands but was administered and audited by Bermuda companies, admitted in January that it had lost $500 million after previously claiming it had made massive profits.

The scandal was unearthed after Deloitte & Touche LLP, the Bermuda auditors of the fund, withdrew approval for the fund's financial statements for 1996, 1997, and 1998. An investigation by fund administrator and local Ernst & Young affiliate Fund Administration Services (Bermuda) Inc. revealed the extent of the losses and accused the fund's managers of misrepresentation. The flurry of writs in connection with the case have included ones against The Bank of Bermuda in a bid to freeze the trust's assets.

The letter went on to say: "If the Manhattan case is not clarified and resolved to the reasonable satisfaction of the investors, and if the supporting firms are not punished for their malfeasance, then their services are not worth a dime.

"Investors in other hedge funds for which these firms provide support should seriously evaluate whether the information they receive from these firms accurately reflects the status of the fund.

"Obviously, if one determines that reports from Fund Administration Services and audit reports from Deloitte & Touche are not reliable, it's better to withdraw from those funds now than risk the loss of virtually all one's investment, as appears to have occurred to the Manhattan investors.'' Ernst & Young spokesperson Leslie Zuke, who is dealing with all matters concerning Fund Administration Services and Manhattan, said the company could not comment in detail.

He said: "Fund Administration Services (Bermuda) Ltd resigned as a result of receiving notice that Manhattan Capital Management had misrepresented its trading results. The SEC's allegations are consistent with our belief that Manhattan Capital Management, the fund manager, took extensive steps to hide the truth from Fund Administration Services (Bda) Ltd and the investors.

"Fund Administration Services (Bermuda) Ltd is an affiliate of Ernst & Young Bermuda, a member firm of Ernst & Young.'' The letter to HedgeNews.com was posted on Sunday and explained that Oilvest Limited (Bermuda) is a substantial investor (through a European Bank) in the Manhattan Investment Fund.

Investor points finger at firm "We were very impressed to see that world renowned companies were the supporting /controlling firms, namely Fund Administration Services (Bermuda) Ltd (an affiliate of Ernst & Young) as administrator, Deloitte & Touche as auditor and Bear Stearns as broker /clearing house and custodian.

"Our European Bankers checked the offering memorandum and subscription documents, among other things, and they proceeded to make an initial investment through the FASB.'' The letter said after receiving reports showing positive results, they met with Mr. Berger again and increased the investment based on Mr. Berger's reported results and the quality of the supporting firms that confirmed his statements.

But in November 1999, Oilvest heard suspicion and rumours about Manhattan and gave immediate orders for half of the investment to be redeemed December 31, 1999.

FASB confirmed the redemption date but did not advise Olivest of any problems with the fund's accounting, NAV calculations, or other matters.

"In all respects it was business as usual, except no funds were transferred back to us after December 31, 1999.'' The writer of the letter said all details of the Manhattan disaster had come to them through HedgeNews.com and HedgeFund.net and they commended HedgeFund.com for their informative reporting.

The letter said: "Investors like us did all they could to protect themselves.

They trusted the name and quality of the supporting /controlling firms, and fully expected that those firms would perform their duties and responsibilities diligently and professionally.

"Investors have now discovered, at least according to the SEC complaint, that these supporting firms did not exercise even the most minimum of care in the conduct of their duties.

"In fact, the complaint indicates that at Berger's direction, the supporting firms ignored what should have been recognized as an obvious fraud.'' The letter added: "The entire hedge fund industry, including the professional hedge fund managers, should take a very strong and active interest in the Manhattan case, not only to ensure that proper clarification and solutions are being found in this case, but to make sure that such an event cannot occur again and that there must be clear duties, obligations and responsibilities of the supporting firms.

"Otherwise, nobody can, nor should they have, any trust in the hedge fund industry.''