More Defect From PCG –

Pacific Corporate Group is one of the private equity market’s best-known consultants, but its notoriety is as much for personnel turmoil as it is for investment advice. Last fall, for example, firm President Scott Tuck left after less than two years on the job. More recently, Managing Director Craig White stunned PCG by resigning just three months after being hired away from Callan Associates.

“It’s something that everybody there talks about and is aware of,” says a former PCG employee who declined to be named. “I don’t think there’s much significant impact on day-to-day work, but it definitely gets raised when [PCG] is competing for RFPs (request for proposals).”

The latest example of managing director musical chairs involves Scott Vollmer, who joined PCG in 2003 to raise a special situations fund-of-funds. The vehicle secured over $346 million in limited partner commitments, including a $150 million nut from the Florida State Board of Administration. It also featured a couple of key-man provisions, including one that could be triggered if Vollmer no longer was involved.

That provision could now be in play, as multiple sources say that Vollmer is in the midst of negotiations to leave PCG. Moreover, Buyouts has obtained a confidential letter sent from Vollmer’s attorneys to PCG’s attorneys. The letter proposes a carefully-worded exit strategy whereby Vollmer would continue to manage the fund, and to share both management fee and carried interest revenue with PCG.

The letter is dated March 9, 2005, and reads, in part: “You [PCG] have directly stated that your goal is to achieve an outcome in which Scott stays with PCG. That is not possible in my opinion…There are very substantial disagreements over what actually happened in the past. Further, Scott is unwilling to continue to be pressured to invest the Fund’s money in obviously inappropriate investments, both because of his obligation to have freedom of judgment’ in selecting investments and because of the failure to disclose to the client that PCG is benefiting in some material way from some undisclosed material way from the placement.”

Chris Bower, founder and CEO of PCG, would only say that Vollmer continues to be an employee of PCG, without confirming or denying that any negotiations were underway.

Vollmer initially declined to comment, but after parts of the aforementioned correspondence were published in the daily PE Week Wire (a sister publication to Buyouts), Vollmer sent a letter to PE Week, in which he reiterated Bower’s assertion that he is a current PCG employee, and that no settlement had yet been reached. Like Bower, he did not confirm or deny his ongoing attempt to leave.

He concluded by writing that he is “proud of the decision making processes followed to select and manage the Fund’s investments, and those processes have never been compromised.”

Buyouts responded by asking for a clarification of the seeming discrepancy between that last statement and his attorney’s letter, but did not receive a reply by press time.