The civil fraud charges against Landmark Capital Partners and its chairman, Stanley Alfeld, filed by the Securities & Exchange Commission (SEC) in October came to a conclusion Dec. 18. The Simsbury, Conn.-based private equity firm agreed to pay $100,000 in civil penalties and Alfeld agreed to pay $50,000 in a settlement where neither party admitted nor denied the charges, according to a release from the SEC.
Landmark Capital and Alfeld were two of 11 parties named in SEC charges for their alleged involvement in the acceptance of commitments from the State of Connecticut pension fund in 1998 – then controlled by former State Treasurer Paul Silvester – with the quid pro quo that the firm would pay $1.5 million in finder’s fees to Silvester’s associates. Alfeld allegedly agreed to pay Landmark’s fees to hire consultants Ben Andrews Jr. and KCATS, a consulting firm run by Christopher Stack and arranged for the payments to be funneled through Rogers & Wells LLP, a New York-based law firm, according to the complaint.
Following the SEC release regarding the settlement, Francisco Borges, Landmark’s president and former Connecticut Treasurer, said, “We are pleased to bring this matter to a close and move forward. We do not anticipate that it will have any adverse effect on the conduct of our business, and we will continue to focus our attention on the ongoing success of Landmark and its funds.”
When the charges originally surfaced the firm devised a strategy to prevent interruption to their investing by appointing Borges to damage control while the other investment staff forged ahead with business as usual. “This gave me an opportunity to really have appreciation for the quality of the people, the character of the people,” said Borges. “We organized ourselves early on in this issue at Landmark . . . and I am just so pleased that within the organization, everyone rose to the occasion.”
The Sunshine Policy
Throughout the controversy Borges made it his policy to be open with the media and, more importantly, with Landmark’s limited partners, emphasizing the importance of being “open and candid” with the firm’s investors. Returning the favor, all the firm’s investors have stuck with Landmark through the thick and thin. “We have enjoyed tremendous support and confidence from our investors,” said Borges. “A very large number or our investors are in multiple funds and they have experienced our performance, which has been very consistent [with returns of 34% net to investors for over a decade]. And so I think that has served us well during this period of time. And during this period of time, our investors have demonstrated their confidence. We haven’t lost any and our organization has not lost a single person.”
Restricted by the SEC, Borges was unable to comment on specific events alleged in the complaint.
Following the SEC charges, Borges – who joined the firm after the alleged events – issued a letter to the firm’s investors and industry consultants that confirmed that Landmark did receive $150 million from the pension fund in 1998 and did retain Andrews during the marketing of Landmark Private Equity Fund VIII for which it paid Rogers & Wells in accordance with the retainer agreement, but denied allegations of any wrongdoing.
Civil charges were also filed against Triumph Capital Group, a Connecticut venture capital firm, Triumph officials Charles Spadoni and Frederick McCarthy, Silvester; Jerome Wilson, an attorney at Rogers & Wells, Andrews, Stack, KCATS and Lisa Thiesfeld, a former aide to Silvester. The U.S. District Attorney’s office filed criminal charges against Triumph, McCarthy and Spadoni the same day.
Triumph released a statement on its Web site