Markstone Capital Group has appointed Dan Gillerman, former Israeli ambassador to the United Nations, as chairman to replace Elliott Broidy, who pleaded guilty yesterday to charges related to a wide-ranging pension kick-back scandal.
Broidy, who co-founded Markstone and was its chairman, pleaded guilty to a felony count of “rewarding official misconduct” in New York Thursday and faces a maximum of four years in prison. He is cooperating with the ongoing pension pay-to-play investigation being led by New York Attorney General Andrew Cuomo.
The New York State Common Retirement Fund committed $250 million to Markstone’s debut fund in 2005, making the pension the firm’s anchor investor. Cuomo charged Broidy with attracting the investment by giving about $1 million in gifts to officials at New York Common.
Markstone’s fund eventually collected $800 million for buyouts of companies in Israel. The California Public Employees’ Retirement System also is an investor in the fund, having committed $50 million to Markstone through two, $25 million investments in 2003 and 2005. For the second commitment, Markstone used an unnamed placement agent.
The US Securities and Exchange Commission has subpoenaed Broidy to produce various documents, including anything related to payments made or paid to Broidy related to the CalPERS’ commitments.
The Los Angeles Times reported Friday CalPERS is reviewing its relationship with Markstone. The pension has asked a Washington legal advisor, who is reviewing CalPERS relationships with investment managers, to investigate Markstone’s interaction with the pension’s board and staff members, the newspaper said.
Markstone does not expect the guilty plea and Broidy resignation to have any effect on the “value of investors’ interests in the partnership”, the firm said in a statement Friday. It’s not clear if Broidy’s resignation has triggered a key-man clause.
Markstone has invested $562 million in 10 companies since its debut fund closed, with an overall gross rate of return of 11 percent, the firm said. The firm has distributed $218 million to investors, primarily from the sale of two investments.