Coyote Blog

Ellen Pao has had some career problems of late, but as I wrote yesterday, if she takes some responsibility for her own mis-steps and stops blaming it all on misogyny, she might learn something useful and build positive things on the experience.

A very loyal reader gives me a heads up that her husband, who is never mentioned in recent stories, actually faces a LOT more serious trouble (it is probably journalistically appropriate to leave her husband out of the recent stories, but one wonders if the New York Times would show the same scruples on a story about the CEO of Exxon if, say, his wife were independently in the midst of some sort of scandal).

Ellen Pao's husband is Buddy Fletcher, former Wall Street Wunderkind and now subject of a LOT of regulator scrutiny and pension fund lawsuits.  Here is one:

The firefighters’ system eventually said yes, and along with two other pension funds — the Municipal Employees’ Retirement System and the New Orleans Firefighters’ Pension and Relief Fund — invested a combined $100 million in one of Mr. Fletcher’s funds, FIA Leveraged. As they understood it, the fund would invest in liquid securities that could be sold in a matter of weeks.

The details sounded, as one board member put it, “too good to be true.”

In fact, they were.

Mr. Fletcher’s hedge fund has since been described by a court-appointed bankruptcy trustee as having elements of a Ponzi scheme, and four retirement systems are fighting to recover their money. A federal judge is scheduled to rule in March on a plan to liquidate the fund’s assets, which the trustee deemed “virtually worthless” in a report last November.

And another:

New York investment manager Alphonse “Buddy” Fletcher Jr. is being sued by the MBTA Retirement Fund and some of his own hedge funds on accusations that he defrauded them of more than $50 million.

The lawsuit, filed Monday in New York, accuses Fletcher and his firm, Fletcher Asset Management , and other parties of conducting a “long-running fraud” in which they misused money for their own benefit, inappropriately took inflated management fees, and overstated the value of assets.

As previously reported, the MBTA pension fund invested $25 million with Fletcher in 2007 on the advice of the fund’s former executive director, Karl White.

White pitched the investment to the pension fund just nine months after he had resigned to work for Fletcher.

The pension fund’s holding is now worthless, and the bankruptcy trustee investigating the case has alleged that Fletcher never invested the money as promised.

And here is an older, in-depth look at Fletcher.

It is starting to look like most of the money went to his family (e.g. $8 to his brother to fund a film), to buffing his image (e.g. $4+ million donation to Harvard), and to an incredibly opulent lifestyle (e.g. 4!! apartments in the Dakota).

Despite the fact that he seems to have grossly overstated income and assets of his funds, no one -- regulators, clients, auditors -- figured it out.  The most interesting part to me was the first group to detect the potential fraud was, of all groups, the governing board of the Dakota.  This group, full of successful Wall Streeters, looked at his financial statements and turned down his application to buy yet another apartment, coming to the conclusion he not only did not have the funds to buy this apartment but they were unsure how he was paying the vig on the $20 million loan securitized by his existing apartments.

One thing Fletcher apparently has in common with his wife is that he seems to respond to every negative business decision with a discrimination lawsuit.  This one backfired, however, and only served to point public attention to the fact that a group of savvy financiers thought Fletcher's wealth was potentially imaginary.  Government investigations and lawsuits have followed.

He still has a chance to escape, though.  Despite Jon Corzine's outright theft of funds from MF Global commodity investor accounts, he got off scott-free due to his close ties to the Democratic Party.  Time for Fletcher to start giving any free assets he still holds (if there are any) to Hillary's campaign.