At least three clients of Aldus Equity Partners are expressing concerns about the Dallas-based advisory firm’s connection to the alleged kickback scheme stemming from the emerging manager program it runs for the $120 billion New York State Common Retirement Fund.
The concerns center around why the firm allegedly hired a finder and paid millions in fees, even though it already served as a consultant to the state pension fund.
The complaint, filed by the Securities and Exchange Commission on March 19, alleges that Henry Morris, chief fund-raiser for Alan Hevesi, the former New York state comptroller, and David Loglisci, the former CIO of New York Common, recruited Aldus Equity to manage the limited partner’s emerging manager portfolio and then informed an unnamed Aldus Equity managing partner that the firm must first retain Morris as a finder, before receiving commitments from the state.
The partner allegedly agreed that Aldus Equity would pay Morris after it became clear that the firm would not be hired by the LP unless it did so, according to the complaint.
The complaint also alleges that “Morris and Loglisci also used their leverage with Aldus to extract kickbacks in connection with investment opportunities that fell below the minimum amount required for the Retirement Fund to make a direct investment.”
Aldus Equity noted the allegations center around the conduct of Morris, an independent placement agent it terminated in 2006, and that the firm itself isn’t facing any charges.
James Wilbanks, executive secretary of the $9 billion Teachers’ Retirement System of Oklahoma, said that that the board is concerned and has elevated Aldus Equity on its watch list from “on alert,” where it was placed when a partner left a few months ago, to “on notice.” The board told Wilbanks, their counsel and their consultant, to examine the information in the filings and to bring the board a recommendation within six months on what should be done about the relationship with Aldus Equity.
“The range of outcomes could be anything from the conclusion that Aldus was an innocent bystander that happened to get caught up in this [kickbakc scandal],” said Wilbanks. “Or they were a willing participant in this and knew what was going on and we recommend termination.”
In addition, the New Mexico State Investment Council is also monitoring the situation as Aldus Equity serves as its private equity consultant. Charles Wollmann, spokesperson, said New Mexico is taking steps to determine the facts about the allegations, and it will act appropriately based on what is learned. The state pension fund has already requested additional information from Aldus Equity and its general partners, which it plans to discuss at the next council meeting at the end of April.
The Los Angeles Fire and Police Pensions has also worked with Aldus Equity as one of its private equity advisers. In an April 2 board document, LA Fire noted five GPs and 10 funds in its private equity portfolio that are alleged to have made payments to win business from New York Common. —Nancy Gordon