Manhattan’s fancy Dakota building might’ve found something the SEC missed.
Hedge fund Fletcher Asset Management is now being investigated by the SEC.
You’ll remember that investor Alphonse “Buddy” Fletcher began to make headlines in early 2011, when he was rejected from the building. He accused the famed Upper West Side Dakota co-op of racism.
The board of The Dakota, one of Manhattan’s most well-known residential buildings, responded that it had not rejected Fletcher’s application because of his race, but because after having looked into his finances, they decided he was a liability and could not afford a new apartment.
Tthe WSJ figured out why Fletcher couldn’t afford a new apartment last week. The hedge fund manager has said that he manages more than $500 million is assets, but the fund’s assets are actually closer to $200 million.
The Dakota suspects he arrived at the higher figure “by counting some assets more than once” and using an “unorthodox” method to calculate the fund’s returns, according to the WSJ.
Now, according to Dealbook, Fletcher’s hedge fund is being investigated by the SEC.
“It isn’t clear what the regulator is looking at,” according to the WSJ.
On top of all that, three Louisiana pension boards that invested with the hedge fund want their money back. But they were told they can’t get it. Two of the boards tried to redeem in March, but Fletcher issued promissory notes in response to the redemption request, that promised a payment within two years.
So meanwhile, the three separate Louisiana pension funds, which all invested $100 million with Fletcher, and which were issued the promissory notes, are conducting their own investigation of the firm.
In a joint statement (embedded below), the pension funds said they’ve assembled accountants, consultants and will perhaps recruit a forensic economist, because “the distribution of a promissory note in lieu of immediate cash has raised concerns with each of the systems’ respective boards… It gives rise to questions regarding the liquidity of the FIA fund and the accuracy of financial statements.”
The letter said that Fletcher has “fully cooperated” so far, but fired this warning shot: “If information is discovered that relates to FIA’s solvency or if Fletcher’s cooperation becomes less than forthcoming, then the retirement systems are poised ti act quickly and decisively.”
Another red flag for the pension funds include Fletcher’s admission that an audit from 2009 was delayed because the fund needs to “finalise the valuation of one of the fund’s investments,” according to the WSJ.
John Broussard, “who oversees investments for the Louisiana state treasurer… said he is particularly concerned about the delayed audit.”
The Dakota Battle
Meanwhile, Fletcher’s battle with the Dakota is still going. The hearing for a motion to dismiss the case is scheduled for next Thursday. Several of Fletcher’s motions already having been rejected.
Fletcher has lived in the famed Upper West Side apartment building, The Dakota, since 1992. After having his application to buy another apartment in the building turned down, he filed a lawsuit against its board alleging he had been rejected because of racial discrimination.
At the time, we spoke exclusively to a board member of the Dakota who rejected Fletcher’s accusations, . The co-op later released the financial documents that had made them wary of granting his application: he was a financial liability.
That wasn’t the first time Fletcher had filed a lawsuit. After a stint trading at Bear Stearns, he landed a gig at Kidder Peabody & Company and sued them because he says they paid him only half of the $5 million to $6.5 million in compensation he was owed.