AG James Obtains Injunction Against “Self-Dealing” Private Equity Fund Manager Who Committed “Outright Fraud,” According To Court

AG James Obtains Injunction Against “Self-Dealing” Private Equity Fund Manager Who Committed “Outright Fraud,” According to Court

Court Agrees with AG James and Says ACP Was “Utilized as Piggy Bank to Fund a Failing Broker-Dealer, Its Failing Parent, and [Managing Partner] Mr. Allen”

NEW YORK – New York Attorney General Letitia James today announced her office has obtained an injunction protecting investors in private equity fund ACP X, LP (ACP) from further harm at the hands of Laurence G. Allen and the various corporate entities he controls. After a multi-day evidentiary hearing in January, Justice Barry R. Ostrager of the New York State Supreme Court found that the evidence produced by the Office of the Attorney General “revealed a shocking level of self-dealing, breaches of fiduciary duty, misappropriation of enormous sums of ACP capital, and outright fraud.”

“This order makes clear that no New Yorker should be investing a penny with ACP, these entities, or any business run by this individual,” said Attorney General James. “We are gratified that after hearing the evidence the court concluded that the only reasonable outcome was to deny defendants access to the remaining investor assets.”

The court found that if it did not grant the injunction “Mr. Allen [would] remain in control of the assets of ACP, and the wind-down of the fund [would] likely proceed in a manner that furthers Allen's self-interest to the detriment of the Limited Partners.” Additionally, the court displayed confidence in the state’s case against Allen, stating that a receiver was not necessary at this time, explaining that the Office of the Attorney General would likely “establish its entitlement to the relief it seeks, including money damages” by the end of trial. Justice Ostrager ordered the trial against Allen to begin this coming June, at which time the Office of the Attorney General can again seek appointment of a receiver. The court held, “In short, the Court cannot allow Mr. Allen or any of the companies he controls to make any decisions with respect to the remaining and very modest assets of ACP.”

As detailed in the complaint — filed in December 2019 — the action revolves around allegations that Allen misappropriated money from ACP, located in Rye Brook, New York. The court noted that while Mr. Allen offered a “fanciful explanation” to justify his repeated transfers of investor funds, it was not credible, concluding, “The Court does not credit any of this testimony and finds that ACP was essentially utilized as a piggy bank to fund a failing broker-dealer, its failing parent, and Mr. Allen.”

The lawsuit is being handled by Assistant Attorneys General Jaclyn Grodin, Kenneth Haim, and Jonathan Zweig; as well as Senior Enforcement Counsel Shamiso Maswoswe; with assistance from Legal Assistants Renata Bodner, Eddie Aguilar, and Elijah Maksimov and Chief Accountant Margaret Kurta — all of the Investor Protection Bureau — under the supervision of Acting Bureau Chief Kevin Wallace. Information Technology Specialist Matthew Rosenberg also provided assistance at the evidentiary hearing. The Investor Protection Bureau is a bureau of the Division of Economic Justice, which is overseen by Chief Deputy Attorney General Christopher D’Angelo and First Deputy Attorney General Jennifer Levy.