MBTA pension fund sues Fletcher Asset Management

Retirement board alleges $50m fraud

New York investment manager Alphonse “Buddy” Fletcher Jr. is being sued by the MBTA Retirement Fund and some of his own hedge funds on accusations that he defrauded them of more than $50 million.

The lawsuit, filed Monday in New York, accuses Fletcher and his firm, Fletcher Asset Management , and other parties of conducting a “long-running fraud” in which they misused money for their own benefit, inappropriately took inflated management fees, and overstated the value of assets.

As previously reported, the MBTA pension fund invested $25 million with Fletcher in 2007 on the advice of the fund’s former executive director, Karl White.


White pitched the investment to the pension fund just nine months after he had resigned to work for Fletcher.

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The pension fund’s holding is now worthless, and the bankruptcy trustee investigating the case has alleged that Fletcher never invested the money as promised.

According to the lawsuit, Fletcher once told regulators his firm managed assets of $550 million. But the true figure “was always far less, as can be seen now, when honest and accurate valuations are applied,’’ according to the lawsuit.

Fletcher did not return a call to his office. The other defendants named in the case, Quantal International Ltd., a San Francisco valuation firm, and a former Fletcher employee, Stewart Turner, also did not returns calls.

The plaintiffs — which include the $1.6 billion MBTA fund, the Fletcher Fixed Income Alpha Fund, and three other Fletcher entities — are seeking $50 million, according to the complaint, as well as management and attorney’s fees and interest.


The lawsuit is being pursued by the bankruptcy trustee, Richard Davis, the person responsible for managing claims by creditors. “We do anticipate additional cases in the coming months,’’ Davis said.

The funds suing Fletcher are considered separate legal entities. They are suing to recoup money for their investors.

Most of Fletcher’s hedge funds have been in bankruptcy since 2012. Last Friday, the US Bankruptcy Court for the Southern District of New York confirmed a plan to liquidate one of the entities, Fletcher International Ltd. Monday’s lawsuit followed from that plan.

Though the MBTA and three Louisiana pension funds are all pursuing Fletcher to recoup funds, it is unclear how much money he has. The troubles of Fletcher, a flamboyant figure in New York, came to light in 2011, when he sued fellow owners at the Dakota building in Manhattan for discrimination when they refused to let him buy a fifth apartment there.

The Securities and Exchange Commission and the FBI have been investigating Fletcher Asset Management. Massachusetts Attorney General Martha Coakley is investigating the MBTA pension fund over the transaction. She also urged the fund’s board to be more transparent in its dealings.


The fund operates as a private trust by law, though it is funded with money from the MBTA, a public agency whose revenues come from taxpayers and T riders. The board does not hold public meetings and does not make most of its records available to the public.

In a statement, the MBTA pension fund acknowledged the lawsuit Monday but declined to comment further. In January, the pension fund also sued the auditor Grant Thornton in Chicago, Quantal, and another auditor, EisnerAmper of New York, in the Fletcher matter. Grant Thornton has denied wrongdoing.

Beth Healy can be reached at Follow her on Twitter @HealyBeth.