RREEF, the alternative asset management business of Deutsche Bank, has terminated its minority stake in embattled financial advisor Aldus Equity, which is caught up in a growing kick-back scandal.
RREEF Private Equity purchased a “significant minority” stake in Aldus in July 2007. The firms formed a partnership to develop private equity funds of funds and to allow Deutsche Bank’s clients to invest in Aldus’ private equity funds of funds. The stake is in the single digits millions.
None of the products originally envisioned by the partnership have yet been developed, according to a source with knowledge of the situation.
It's not clear if RREEF will be able to get its investment back from Aldus. A source said lawyers for the firms will negotiate and try to reach a fair price.
Saul Meyer, founding partner with Aldus, was indicted Thursday by New York State Attorney General Andrew Cuomo for allegedly paying illegal kick-back fees to Henry Morris, a former political operative with former New York State Comptroller Alan Hevesi. The SEC also charged Aldus in a civil complaint.
Meyer and Aldus are accused of paying Morris about $300,000 in exchange for the creation of an emering managers fund that would be run by Aldus. Meyer also is accused of helping Hevesi’s son, Dan Hevesi, secure a $25 million commitment from the New Mexico State Investment Council while Aldus was employed as a private equity advisor to SIC. Aldus assisted Hevesi’s son at the same time that the firm was looking for business from the Hevesi-controlled New York pension. Hevesi and his son have not been charged in the scheme.
Meyer pondered terminating the relationship between his firm and Morris in 2006 when RREEF was considering buying a stake in Aldus. According to the Attorney General complaint, Morris became angry when he learned of Meyer's doubts. “Tell that little peanut of a man that I can take the business away as easily as I provided it,'” the complaint cites Morris as saying to an associate.
Dallas-based Aldus has served as an advisor with several US-based public pensions, including the New York State Common Retirement Fund and The New York City Employee Retirement System; the LA Fire and Police Retirement Fund; the Louisiana State Employees’ Retirement System; the San Antonio Fire and Police Pension Fund, the City of Fort Worth Pension Fund and the Teachers’ Retirement System of Oklahoma.
The New York state and city pension systems will terminate their relationships with Aldus, New York’s Attorney General Andrew Cuomo said during a press conference Thursday. New Mexico Governor Bill Richardson on Wednesday ordered the state teachers’ pension and $11.5 billion oil and gas endowment to end their relationships with Aldus as well.