As the year draws to a close, many secondaries market professionals are winding down and putting their feet up after an exhausting year.
Others are not so lucky. One of those is Laurence Allen, chief executive of intermediary NYPPEX Private Markets, who is facing charges from the New York attorney-general for alleged fraud. In case you’ve missed it, the NYAG claimed in early December that Allen forged documents; violated the terms of a private placement memorandum and limited partnership agreement for a secondaries fund he managed; made confusing and misleading amendments to the fund’s LPA that hurt investors; and strong-armed employees on an investment committee to certify investments. The alleged fraud amounts to more than $13 million, the NYAG claims.
Allen has consistently denied the NYAG’s claims both to sister publication Private Funds CFO and to Secondaries Investor (we have in-depth coverage on the defence, the charges and Allen’s assertion that an LP was attempting to “greenmail” him). According to Allen, the NYAG’s allegations are false, misleading and deliberately misrepresents “numerous issues”.
Secondaries Investor put several questions to Allen via email this week. While he declined to share how much capital has been returned to LPs in ACP X (the secondaries fund in question), Allen said he estimates the fund’s TVPI ranks “in the first decile” for 2004-vintage private equity secondaries funds.
On the NYAG’s specific claim that employees of ACP Investment Group (the GP of ACP X) were strong-armed into signing certain documents and that the ACP X investment committee held no meetings, followed no agenda, took no minutes and held no votes, Allen said he knew of no current or former employees who have ever stated they were strong-armed into signing anything. “Further, as limited liability companies, we are not required to keep minutes, etc. That is a requirement of corporations,” Allen told Secondaries Investor.
ACP X does have an LPAC which comprises several limited partners, he confirmed.
Allen also confirmed that ACP X “prematurely sold some assets to raise cash to provide ‘a partial’ early withdrawal opportunity” to some LPs who wanted liquidity.
We’re still awaiting answers from Allen on some key questions, including affidavits from LPs in ACP X he says he has that “complain about the NYAG damaging their investment in ACP X”. It’s worth noting that Allen is being much more open than others in the industry who’ve faced similar allegations in the past. His view is that the industry should take note of this case because of the NYAG’s use of the controversial Martin Act, as well as LP ‘greenmailing‘ – a phenomenon he says poses a threat to the private funds industry.
We’ll find out more in due course with hearings scheduled for January. Until then, it will be a tense holiday season for some.
Keep your votes coming for sister publication Private Equity International‘s 2019 Awards, including 17 secondaries categories.