Former Miss Russia and hedge fund billionaire George Soros’ ex girlfriend Anna Malova was arrested in New York for forging a prescription on a stolen prescription pad for the narcotic Vicodin. Malova was charged with criminal possession of a controlled substance and forgery. According to the New York Daily News, lawyers for the 1998 beauty queen are asking the Manhattan judge presiding over her case for more time to prove she is a user, not a dealer. For her part, Malova is claiming that she deserves to go to rehab, not jail. The judge has granted her lawyers until August 9 to prepare a defense.

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The SEC is really on it’s game so far this year. I mean, granted, catching the idiots in the case I’m about to write about wasn’t exactly rocket science, but still… mad props (yes, I’m stuck in the early 1990s. It’s cool).

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Billionaire investor George Soros says maybe there might be something to the notion that the banking “oligopoly” formed by the four largest banks in the U.S. needs to be broken up. The so-called Volcker rule, named after Obama adviser and former Chairman of the Federal Reserve Paul Volcker, proposes, among other things, to limit the growth of commercial banks through merger and acquisition, in addition to banning banks from owning and investing in hedge funds and forbidding them from engaging in proprietary trading. The aim of these restrictions is to limit the financial system’s exposure to what many view as excessive risk taking by big commercial banks.

According to a BusinessWeek.com report, Soros said earlier this week at a London event that he was in favor of the Volcker rule.

The article went on to say that financials accounted for 6.6 percent of Soros Fund Management LLC’s stock holdings during the fourth quarter, according to a regulatory filing. Citigroup Inc., one of the large banks likely to be affected if the Volcker rule is passed, was the hedge fund’s fifth-largest stake as of Dec. 31, with 94.7 million shares. Currently, Soros Fund Management has about $25 billion in assets.

Although the Volcker rule is not written into the House bill that was passed, the Senate’s banking panel approved Sen. Christopher Dodd’s financial-rules overhaul, furthering the Obama administration’s efforts to accomplish the largest restructuring of Wall Street in nearly seven decades, according to BusinessWeek. The bill itself would create a consumer protection bureau at the Federal Reserve, if passed, in addition implementing the Volcker rule and establishing a mechanism that enables the government to dismantle failed firms that threaten the financial system.

In the words of the infamous, fictional Gordon Gekko, “Greed is good.” But in this economic climate, the kind of money that hedge fund managers are raking in seems almost… wrong. Especially since many of the top-earning hedge funders pay day has hinged on what the New York Times has quite accurately called a “Lazarus-like recovery of the nation’s big banks”.

We’re not talking millions or even tens of millions or hundreds of millions. We’re talking billions. With a B. In fact, the highest earning 25 hedge funders earned a collective $25.3 billion, according to the survey, beating the old 2007 high by a wide margin. According to the New York Times,

The minimum individual payout on the list was $350 million in 2009, a sign of how richly compensated top hedge fund managers have remained despite public outrage over the pay packages at big banks and brokerage firms.

And when 20% of the population doesn’t have decent paying work, somehow that just seems a little… unseemly. I’m not saying these guys aren’t ridiculously smart and hard working and don’t deserve compensation. But the sheer greed… well. It’s a little much to take.

This year’s top earner (as ranked by AR: Absolute Return+Alpha magazine) was David Tepper, who raked in $4 billion in 2009 by betting big that the government wouldn’t let the big banks fail. His investors didn’t do too shabby either, gaining 130 percent last year. Tepper was quoted in the New York Times as saying, “We bet on the country’s revival. Those who keep their heads while others are panicking usually do well.”

George Soros came in second in terms of earnings with $3.3 billion in fees and investment gains. His fund grew 29 percent in 2009.

Still, the success of these few hedge fund managers is not representative of the entire industry. Big gains were not a constant last year. In fact, industry experts say there is a widening gap between winning and losing funds.

According to the New York Times,

For many of the top 25, the big personal gains in 2009 came after steep losses in 2008. Half of the top 10 managers in 2009 lost money the year before, including Mr. Tepper, whose flagship fund, Appaloosa Investment Fund I, dropped 27 percent in 2008….

Three managers among the top 10 — Mr. Soros (No. 2), James Simons (No. 3) and John Paulson (No. 4) — were back-to-back winners, having profited during the lean times of 2008 as well as in the booming market of 2009.

It remains to be seen if Washington (or any external influences, such as the E.U.’s proposed AIFM directive or this summer’s G20 summit) will seek to limit hedge fund pay days. According to a Washington Post article,

When the Obama administration imposed restrictions on executive pay last year at some of the largest companies the government had bailed out, officials said they were aiming to set a new standard for compensation across corporate America that would discourage risky business practices.

But as firms begin to disclose last year’s bonuses ahead of annual shareholder meetings, it is becoming clear that companies across a wide range of industries are paying executives in ways that officials worry will not discourage the kind of excessive short-term risk-taking that led to the financial crisis.

The Treasury Department said it is not looking to limit the total pay executives receive. Kenneth R. Feinberg, President Obama’s special master for compensation, wants to change pay incentives, giving executives a greater stake in the long-term performance of their firms. That would mean, for example, smaller up-front cash salaries and fewer perks, more compensation in the form of company stock and a longer wait to receive it.

My guess is that little will be done to limit compensation because the rich are powerful. My hope is that those who have more money than god feel a pang of conscience and give some of the money to charity (or just do it for the tax write off at the very least).