Products November 14, 2008

Nuveen Introduces Alternative Investments Unit

Nuveen Investments announced the creation of Nuveen Alternative Investments, a new unit designed to serve the needs of institutional investors seeking alternative forms of alpha and uncorrelated returns.
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According to the announcement, the new unit will be led by Nuveen Investments President Mark Anson, and Managing Director Jamshaud Zovein. Anson previously served as CEO of Hermes Pensions Management Ltd., the British Telecom Pension Scheme, and prior to that, the Chief Investment Officer of the $245 billion California Employees’ Retirement System (CalPERS).

Zovein currently heads Nuveen Investments’ Institutional Product Development and Management team.

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The announcement said one of the key objectives of Nuveen Alternative Investments is the creation of a suite of alternative investments as well as the development of Nuveen’s Global Endowment Model. The Global Endowment Model will draw upon the expertise and strengths of Nuveen Investment Solutions to employ asset allocation, global manager search and selection, and risk management strategies similar to those used by the largest pension and endowment programs.

“Our focus will be to leverage the investment approach of the more sophisticated endowment and pension programs, to bring to investors actively managed multi-manager, multi-asset, and multi-strategy funds that achieve consistent, long-term absolute returns while taking on significantly less risk than the traditional market,” said Zovein, in the announcement.

Compliance November 14, 2008

Calif. Firm Charged with Misusing ESOP Assets

The U.S. Department of Labor has sued the board of directors of The Employee Ownership Holding Co. of Stockton, California, and Fife, Washington, for alleged violations of the Employee Retirement Income Security Act (ERISA).
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According to a DoL news release, also being sued are trustees of the company’s employee stock ownership plan (ESOP), its attorney, certified public accountant, and valuation adviser. The lawsuit alleges that the defendants imprudently used ESOP assets to purchase company stock from President and Chief Executive Officer Clair R. Couturier Jr. at an inflated price, and engaged in transactions that caused millions of dollars of harm to the ESOP and its participants while enriching themselves.

The suit alleges that in 2004, ESOP trustee Robert E. Eddy approved the stock purchase from Couturier without a financial valuation supporting the amount paid to Couturier. As part of that transaction, Couturier received approximately $34.4 million in cash and property from the ESOP in exchange for stock he owned in the ESOP (valued by the ESOP at less than $500,000 at the time) and other non-ESOP compensation worth millions of dollars less than the amount Couturier received, the news release said. Couturier received $26 million in cash, a $5.5 million property in Palm Desert, California, $2.7 million in cash to pay taxes on that property, a $200,000 car, and a country club membership.

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Eddy and David R. Johanson of Johanson Berenson LLP hired convicted felon Matthew Donnelly and his firm Business Appraisal Institute to justify the overpayment to Couturier. In addition, the defendants engineered a way to funnel the $26 million in cash into Couturier’s individual retirement account as a rollover from his ESOP account. Eddy and James Roorda, with the assistance of Johanson, convinced Couturier to hire them to manage a portion of the millions in gains paid to Couturier.

Finally, the DoL alleges that in 2007, David L. Heald and his firm Consulting Fiduciaries Inc., along with Eddy, allegedly approved the sale of the company under an arrangement in which the ESOP and its participants would receive distributions only after millions in improper indemnification claims were paid to defendants Johanson, Eddy, and Couturier. As part of this arrangement, Eddy also received a personal bonus of more than $1.3 million.

According to the announcement, the suit seeks a court order requiring the defendants to restore to the plan all losses with interest, as well as return all fees and amounts illegally received by them, and also asks the court to require Eddy to return $1,382,724 in kickbacks, remove Heald and Eddy as plan fiduciaries, and permanently bar all the defendants from serving in a fiduciary or service provider capacity to any plan governed by ERISA in the future.

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