New York State Comptroller Thomas DiNapoli has sued embattled private equity financial advisor Aldus Equity and its principals for wrongful acts, including fraud, bribery, breach of contract and conspiracy.
DiNapoli, who is in charge of the $122 billion New York State Common Retirement Fund, seeks rescission of the pension's contract with Aldus, along with the reimbursement of more than $5 million in fees paid to Aldus as well as other compensatory and punitive damages.
The state pension, the third largest in the US, terminated its relationship with Aldus last week after the firm's founding partner, Saul Meyer, was charged by New York Attorney General Andrew Cuomo for his role in a pension kick-back scandal. The US Securities and Exchange Commission charged Aldus and Meyer in a civil complaint in connection with the kick-back scheme.
“The one million members of the Common Retirement Fund deserve a full accounting of, and full reparations for, the misdeeds and abuses committed against the pension fund,” DiNapoli said in a statement.
The suit names Meyer and other Aldus principals Matthew O'Reilly, Marcellus Taylor and others. Taylor left the firm with other Aldus executives reportedly to start their own firm. O'Reilly, who is still with the firm, was instrumental in winning business from another US public pension, the Oklahoma Teachers Retirement System, which hired Aldus last September to run its new private equity programme.
New York Common refused to fulfill a capital call from Aldus last week, a spokesperson for the pension said. The pension is searching for a new manager to run its emerging managers fund, which has about $500 million of capital to invest in minority and women-owned businesses. Aldus was hired to run the fund in 2004.
Aldus has been bleeding clients since its role in the pension scandal surfaced. The $11.5 billion New Mexico State Investment Council and Connecticut Treasurer Denise Nappier, who oversees the state’s $20 billion public pension, have fired Aldus, and the New York City pension system, with combined assets of about $83 billion, will consider terminating the firm. The Fort Worth city pension fired the firm about two weeks ago for reasons unrelated to the scandal.
Oklahoma, the Los Angeles Fire and Police pension and the Louisiana State Employees Retirement System are reviewing their relationships with Aldus and could choose to fire the firm.
Aldus believes the SEC did not run a full investigation before filing civil charges against the firm, according to Matthew Orwig, an attorney for the firm.
“Aldus' recommendations are always made based on a careful analysis of investment performance. Understandably, clients are concerned, but the charges in the government's public statements and filings are baseless. It's an ambush lawsuit,” Orwig said about the SEC charges.
Five people total have been charged in the kick-back scandal, including Henry Morris, a former political operative with former New York State Comptroller Alan Hevesi. New York Common’s former chief investment officer, David Loglisci, was also charged in the scheme, in which he and Morris collected sham finder’s fees from investment firms in exchange for commitments from the pension.