Q&A with Aldus Equity on Kickback Scandal

Nancy Gordon reports in the latest issue of Buyouts magazine that at least three Aldus Equity clients have expressed concern over Aldus’ proximity to the New York pay-to-play scandal. They are the the Teachers’ Retirement System of Oklahoma (which placed Aldus on a “watch list”), the New Mexico State Investment Council and the Los Angeles Fire and Police Pensions.

Alongside the story ran a Q&A with Aldus, which answered the questions via email and without specific partner attribution. Here’s that Q&A:

What is Aldus Equity saying to its advisory clients to alleviate any concerns?

We stand ready to answer every question from current, prospective or past clients on these issues. There are a lot of misconceptions in the marketplace. The allegations are against a former independent placement agent whom we terminated in 2006; the charges are not against our firm. In fact, when we read the indictment against Henry Morris, we were angered because if the allegations are true, we were lied to, and the behavior described is totally unacceptable.

What is the status of Aldus Equity’s relationships with its advisory clients ?

Because of the confusion, we have had calls from our clients and others. That’s not surprising. Some twenty firms were mentioned in the charges, and we are sure they have all received questions. In New Mexico, specifically, we did not use a placement agent. We believe that the New York State system is in need of reform, and possibly the industry is in need of reform. It should not be possible for such events to occur.

Did Aldus Equity do what the SEC complaint alleges on pages 16-18 and 23?

Morris was referred to us as someone who excelled in his business, had strong relationships in New York, and had a top-tier list of clients. We hired him of our own accord. We terminated Morris three years ago before any investigation began. Placement agents are common in New York. Aldus had no knowledge of any back-dealing or double-representation by Morris or his associates. If that occurred, it is appalling. The first time we knew about the specifics of the government’s case was on March 19. If you read the complaint, you will see that the issue is about Morris working behind the scenes not Aldus.

Has Aldus made, or is it planning to make, any personnel changes in reaction to these allegations?

No. This is not an issue about Aldus’ personnel. Aldus is re-examining its relationship with placement agents and believes that the issue of placement agents needs to be addressed industry-wide.

Buyouts would like to note partners at Aldus Equity responded to the preceding questions by e-mail. The answers were edited for length and clarity. Read the full article on Aldus Equity’s LPs here.


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