Retired Bus Drivers Lose $25 Million

Here’s another disgraceful example of public trust being kicked to the curb. In this case we have the former head of the MBTA pension fund Karl E. White. He left his job running the pension to work for a New York hedge fund. At his new post he was able to persuade his old friends at MBTA to invest $25 million with the hedge fund, Fletcher Asset Management. It turns out it was a Ponzi scheme. The money is gone. What a disgrace. And yet another example of fiduciaries acting in their own self-interest. Beth Healy reports at the Boston Globe:

Nine months after Karl E. White left his job as chief of the MBTA pension fund to join a New York hedge fund, he visited his former colleagues in Boston to pitch them on a new investment idea.

White, in his new job as chief investment officer of Fletcher Asset Management, told the authority’s pension board members in 2007 that he had devised an investment fund just for them, and that it was relatively low risk. They gave their prominent former leader $25 million to invest.

Today, that money is gone — a fact the MBTA has not previously disclosed — and a series of Fletcher hedge funds are bankrupt. The FBI and the Securities and Exchange Commission are investigating what the bankruptcy trustee calls a fraud, one with “many of the characteristics of a Ponzi scheme.” It ensnared the MBTA retirement fund and also three Louisiana public pension funds.