* Justice Department looking into euro trades by funds
* Dinner discussion on euro said to be brief
* Dinners with managers are commonplace (Adds comments from hedge fund manager Jim Chanos, Soros)
By Matthew Goldstein and Svea Herbst-Bayliss
NEW YORK, March 3 (Reuters) - Little-known brokerage firmMonness, Crespi, Hardt Co has long toiled in the shadows ofWall Street, but the boutique suddenly has been thrust into thelimelight because of an "ideas dinner" it sponsored last monthfor a group of about 18 hedge fund traders.
Monness Crespi sponsors unscripted dinners from time totime, said people familiar with the get-togethers. They providea chance for managers to swap trading ideas, network with theirpeers and meet some of Monness Crespi"s largely equity-focusedanalysts.
A Feb. 8 dinner is sparking controversy because one of thenearly two dozen topics discussed during the program was howhedge funds could profit from a decline in the euro, one of theworld"s most heavily traded currencies.
The portion of the program, at the Park Avenue Townhouserestaurant on Manhattan"s Upper East Side, devoted to tradingthe euro took up no more than five minutes, according to peoplefamiliar with the event.
But ever since the Wall Street Journal wrote about thedinner and the discussion about the euro in a Feb. 25 article,a shadow has been cast over much of the $1.5 trillion hedgefund industry.
The dinner adds to the growing perception among the generalpublic and some political leaders that many hedge funds prosperby making money off misery -- whether it is betting on thedecline of a stock, a bond, a currency or even a country"sdebt.
The U.S. Department of Justice"s antitrust division hassent letters to a number of hedge funds that attended the Feb.8 dinner, asking the funds not to destroy any trading recordsinvolving market bets on the euro, said people familiar withthe situation.
Prominent short seller Jim Chanos said he did not attendthe dinner and did not receive a letter from the JusticeDepartment.
CNBC and Bloomberg first reported on the letters from theJustice Department. The Wall Street Journal subsequentlyreported that the Justice Department sent out those letters onthe same day that its story about the dinner was published.ID:nN03198738
"I don"t believe that it is illegal to discuss inconceptual terms whether the euro should be trading lower,"said Paul Roth, a founding partner of law firm Schulte Roth Zabel, which represents some prominent hedge funds.
"But given the crisis in Europe and considering the viewmany Europeans have of hedge funds and private equity funds,there may well be a political component to all of this."
The Justice Department"s interest in euro trading comesamid widespread criticism of hedge funds for betting on adecline in Greece"s sovereign debt.
During the depths of the financial crisis, hedge funds alsocame under fire for betting against shares of Lehman Brothersand Bear Stearns as those investment firms were collapsing.
But it is not clear just how central the discussion of theeuro was to the Feb. 8 dinner now drawing so much scrutiny.
Neil Crespi, president of Monness Crespi, said as a generalrule his firm doesn"t talk to reporters. But before he ended abrief phone conversation, Crespi said the dinner has beenmischaracterized in the media.
"Everything is wrong," he said. "We trade only equities. Iam not saying we didn"t have an ideas dinner, but we aren"t amacro firm."
In fact, people familiar with the dinner said much of thediscussion focused on stocks. The dinner was tape recorded andtranscribed into a research report that was circulated byMonness Crespi after the event.
The suggestion to bet against the euro was raised by AaronCowen, a portfolio manager with Steven A. Cohen"s SAC CapitalAdvisors LP. People familiar with the dinner said there waslittle discussion about the euro after Cowen raised it.
A SAC spokesman declined to comment.
"If only the poor fellow had couched it in terms of goinglong the dollar instead of shorting the euro, I dare say hewould have been called patriotic," Chanos said.
Other guests at the dinner, according to the Journal andsources, included David Einhorn, head of Greenlight CapitalLLC, and a representative from Soros Fund Management LLC, thefirm founded by George Soros.
A Greenlight spokesman declined to comment.
Soros" fund is still well known for having made $1 billionin a day by betting against the British pound in 1992.
A spokesman for Soros said that is has become commonplaceto direct attention toward George Soros whenever currencymarkets are in the news. "Any suggestion of wrongdoing by SorosFund Management LLC implied in those articles is withoutmerit," the spokesman said, adding that the firm intends tocooperate fully with any governmental requests.
It is not clear exactly why the Justice Department hasasked the hedge fund to save trading records.
Some lawyers pointed out that federal authorities mightnever actually request the documents and all of this could be apreliminary measure.
In an antitrust investigation, regulators generally lookfor a pattern of collusion by a group of traders, or a commonagreement to make the same trades to manipulate a market.
However, there is nothing to suggest any of that occurredat the Feb. 8 dinner.
Indeed, investment managers have long talked shop oversteaks and wine or during a round of golf, and industryinsiders are puzzled at why this long-standing practice issuddenly drawing such scrutiny.
The focus by the news media on whether hedge funds gottogether to jointly bet against the euro strikes some managersand lawyers as particularly odd considering that the currencymarkets are among the world"s largest and most liquid.
Ron Resnick, co-founder of regulatory consulting firmCounselWorks and a former managing partner at hedge fund firmHighbridge Capital Management, said: "Not even God alone couldmove the euro market."
Still, the dinner investigation could result in somechanged behavior, at least in the short-term. Some managerssaid social gatherings will continue, but the venues formeeting may be different and more structured.
"Since the line of what you can and can"t do is so unclearright now, people are going to try to stay further away fromit," CounselWorks" Resnick said. (Editing by Gerald E. McCormick and Steve Orlofsky)
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