The hedge fund industry responded with fierce lobbying. Leon M. Metzger, the president of hedge fund Paloma Partners, testified against the reforms. "Many misperceptions of hedge funds have developed recently," Metzger told the House Banking and Financial Services Committee. "Further regulation of this industry only would result in less-efficient markets."

Metzger's boss, S. Donald Sussman, also weighed in. In the months that followed the hearing, Sussman handed over $320,000 in campaign contributions to the Democrats.

Congress listened. Although the banking committee introduced a bill last March to force large hedge funds to disclose financial risks, unnamed industry sources assured Securities Week that the bill would never make it to the floor of the House. The legislation, along with other proposals opposed by the industry, died a quiet death.

Without the disclosure rules, hedge funds like Paloma Partners are free to keep their clients in the dark. Sussman's fund currently manages an estimated $1.6 billion in assets, including $240 million in pensions and $720 million from endowments, foundations, and insurance companies.

Sussman was an early investor in an investment firm founded by David E. Shaw (No. 43, $512,568). He also sits on the board of governors of the Weizmann Institute of Science, which supports biology, chemistry, mathematics, and physics research in Israel.

Although Sussman backed the Democrats, he decided to hedge his bets as Election Day approached. On November 3, with George W. Bush leading in the polls, Sussman gave an additional $100,000 to the Democrats. On that same day, he wrote a check for $50,000 to the Republican National Committee -- his only contribution to the GOP.