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Retired Bus Drivers Lose $25 Million

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mbtaHere’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.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.
E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.

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