Marcellus Taylor, who earlier this year was named in a civil suit filed by the New York State Comptroller, has acquired Chicago-based United Investment Managers, a fund of funds earmarked for commitments to emerging managers.
Until August 2007, Taylor worked as a partner at Aldus Equity, a Dallas-based advisory firm. This spring, New York State Comptroller Thomas DiNapoli, sole trustee of the New York State Common Retirement Fund, filed suit against the firm, as well as principals Taylor, Saul Meyer, Matthew O’Reilly and others, for wrongful conduct, including fraud, bribery, breach of contract and conspiracy.
The suit accuses Aldus Equity and its principals of taking part in a complicated pay-to-play scheme run by Henry Morris, an adviser to former New York State Comptroller Alan Hevesi, and David Loglisci, the pension fund’s former chief investment officer. The two allegedly received kickbacks in return for awarding business to different fund managers and advisory shops, such as Aldus Equity. According to the complaint, in May 2004 Aldus Equity agreed to pay Morris some of the fees it was earning from creating and managing the Aldus/NY Emerging Fund for the pension fund. The complaint states Morris performed no legitimate services, and that the payments were illegal kickbacks to him for his deal with Loglisci to have Aldus Equity selected as the manager of the emerging fund program.
Taylor told Buyouts that his name ended up in the DiNapoli complaint because he was a key man named in the contract with the pension fund. However, he said he never met or spoke with Morris. Taylor added that he believes the complaint is being stayed, but Robert Whalen, spokesperson for DiNapoli, said the state had “no comment regarding this ongoing litigation.” As part of the suit, DiNapoli sought the rescission of its advisory contract with Aldus Equity, reimbursement of more than $5 million in fees, and other damages.
Founded in 2001, United Investment Managers has more than $300 million under management, all of it from six public pension clients including Public School Teachers’ Pension & Retirement Fund of Chicago, Municipal Employees Annuity & Benefit Fund of Chicago and Fulton-DeKalb Hospital Authority.
Prior owner Larry Gray sold his 90 percent interest in the firm to Taylor, with the remaining ownership redistributed to investment staff, including Cheryl Hua and Yolanda Waggoner, who were both promoted to senior vice presidents, and Thomas Zimmerman, who was promoted to chief operating officer. The eight-employee firm has backed some 28 emerging managers in domestic equities, real estate and alternative investments.
Taylor’s resignation from Aldus Equity in August 2007 included a two-year non-compete agreement with Deutsche Bank and Aldus Equity. Deutsche Bank had announced in January 2007 it would make an investment in Aldus Equity, and the deal closed in July 2007. In April 2009, Deutsche Bank exercised an option to terminate its stake in the firm. A consulting agreement was incorporated into the non-compete document, but Taylor said he had no role or responsibilities at Aldus Equity after he resigned.
Since the New York State pension fund scandal broke in March, state and federal officials have taken a number of steps to try to prevent future pay-to-play scandals. In late April, New York State Attorney General Andrew Cuomo unveiled a code of conduct regarding investments with public pension funds that calls for the elimination of the use of placement agents and other finders. The SEC, meantime, unveiled a proposal on August 7 that would eliminate the use of placement agents, and outlines a number of restrictions on political contributions.