Central to the charges just unveiled against Saul Meyer, founder of Dallas investment advisor Aldus Equity, is the relationship he developed with political operative Henry “Hank” Morris – a relationship that court records indicate he grew to bitterly regret.
Having struck a deal in 2004 to share the upside in a fund of funds for “emerging” managers, Meyer allegedly attempted to unwind the deal two years later, prompting Morris to refer derisively to Meyer as a “little peanut of a man”. For his part, Meyer told the attorney general’s office he came to regard Morris as a greedy “scumbag”.
Meyer was arrested yesterday and charged with “fraud, deception, concealment, suppressions, false pretense and fictitious and pretend purchase and sale” in connection with the Aldus/NY Emerging Fund, a fund of funds Aldus managed on behalf of the New York State Common Retirement Fund. A complaint unveiled by New York attorney general Andrew Cuomo alleges Meyer, who counts several other major state pensions among his clients, agreed to pay fees and share economics with Morris in conjunction with the formation of the fund, knowing full well that the deal amounted to “ill-gotten gains” for Morris.
Morris is a longstanding Democratic party operative with ties to disgraced former New York state comptroller, Alan Hevesi, who had until 2006 managed the New York Common pension. Hevesi’s deputy comptroller was David Loglisci, who now stands accused of participating in the scheme to direct sham payments to Morris’ consulting companies in exchange for pension capital commitments.
According to the complaint, Meyer first met Morris in 2004. At the time, New York Common was searching for an advisor to manage a programme that would commit capital to funds managed by women and ethnic minorities. An unnamed “leading candidate” to manage this programme had already refused to pay a fee to Morris in order to win the deal, and subsequently was not awarded the mandate.
Then an “unlicensed” placement agent, unnamed in the complaint, allegedly approached Meyer with an offer: Morris would “secure the emerging managers mandate” if Aldus would structure the vehicle such that a Morris front company would receive 35 percent of the management fees and 35 percent of the carried interest. Meyer signed a letter agreement in May 2004 confirming this arrangement. The fund originally raised $175 million, and a Morris shell entity called Pantigo received some $300,000 in fee-sharing from Aldus. The complaint alleges that Aldus did not properly disclose this economic arrangement to the staff of New York CRF.
In an earlier statement to the attorney general’s office, Meyer acknowledged asking Morris to help secure the emerging managers mandate. He said the relationship soured when Morris introduced Aldus to an executive from another public pension who was seeking an advisor to manage a co-investment fund. At this point, Morris allegedly demanded that he receive 60 percent of Aldus’ gross fees from the programme. “Meyer claimed to be shocked by this, refused to meet Morris’s demands, and now considered Morris to be a ‘scumbag’”, according to the complaint.
The complaint paints Morris as having no shortage of hubris. It reads: “Morris told Meyer, directly or indirectly, that Morris had the power to make decisions, while Aldus was just a vehicle to execute them.”