Broidy is Guilty – What Does It Mean For Markstone?

This afternoon Attorney General Andrew Cuomo announced the Elliott Broidy, cofounder and chairman of Markstone Capital, pled guilty to one count of rewarding official misconduct in the second degree. Felony, in other words.

It raises the obvious questions about the future of Markstone. We saw what happened to Aldus Equity when Saul Meyer pled guilty—it’s now nonexistent. But Aldus didn’t manage millions of dollars with of buyout funds. Markstone even has up to $69 million in uncalled capital.

Markstone is around the halfway mark for its fund, an $800 million vehicle  which closed in 2005. New York committed $250 million; had been deployed as of March. Investors include Israeli insurance company Clal Insurance Pensions and Finance Group and Oregon Investment Council and of course New York State Common. Investments include a stake in cleantech water company Netafim.

What happens to the remainder of the fund? Broidy’s exit from the firm has to trigger a key man provision, unless he can somehow continue his private equity career from jail.

I’ll update when I hear back from Markstone, but for now, here is Broidy’s official statement:

Mr. Broidy regrets the actions that brought about this course of events, but is pleased to have resolved this matter with the NYAG and will be cooperating in the ongoing investigation. Mr. Broidy, who was a founder of the highy successful investment firm Markstone Partners, has resigned from all operational, supervisory, and other roles at Markstone in order to focus his attention on legal matters.

Sidenote–I’m no PR expert but “pleased” seems an odd choice of words to use in this kind of statement. Kinda hard to make regret sound believable when its immediately followed by pleasure…