Admissions scandal ensnares giants of finance and law
William E. McGlashan Jr. was sitting on Richard Branson’s private island several years ago when the idea first struck him: He would create a new venture capital fund focused on ethical investing.
He had been inspired during a conference on the island also attended by Laurene Powell Jobs, the widow of Apple founder Steve Jobs, and Jeff Skoll, the first president of eBay. Soon after, he would recruit them and the U2 singer Bono to the Rise Fund on the promise of doing good.
Yet Tuesday, McGlashan was one of 50 people caught up in a federal investigation into college admissions fraud, a scandal that has ensnared prominent parents who stand accused of paying bribes to give their children an edge.
While two Hollywood actresses were the most recognizable figures to face charges, they were outnumbered by business titans who are not household names.
McGlashan is widely seen as one of Silicon Valley’s most powerful investors, a partner at the $70 billion investment firm TPG. The fund he oversaw there invested in prominent brands including Airbnb, Spotify and Uber. He has been placed on leave from TPG and Rise.
Also charged were Gordon Caplan, a top mergers and acquisitions attorney who was a co-chairman of the law firm Willkie Farr, and Doug Hodge, the retired chief executive of PIMCO, one of the world’s biggest bond fund managers. Caplan was placed on leave Wednesday, and Hodge’s name was stripped from the website of Sway Ventures, an investment firm where he was a venture partner.
Hodge is also listed as a board member for two wealthy private schools in California: Sage Hill School and the Thacher School. Blossom Beatty Pidduck, Thacher’s head of school, said Wednesday that Hodge had been on the board since 2011 and the board was discussing whether to let him continue serving. Messages left with Sage Hill were not returned Wednesday.
Actresses Felicity Huffman and Lori Loughlin were the boldface names in the charges announced Tuesday by federal prosecutors in Boston, but such celebrities may still be able to find work after their cases are resolved. That won’t necessarily be the case for the high-powered lawyers and money managers on the list.
“Professionals, their stock in trade has to be their integrity,” said Laurie Levenson, a former federal prosecutor and a professor at Loyola Law School in Los Angeles. “Celebrities have a different stock in trade.”
Caplan, who worked on complex deals for Hudson Bay Group including the sale of Lord & Taylor’s former flagship store on Fifth Avenue in Manhattan, would lose his law license in New York if convicted of a felony.
McGlashan, whose reputation drew star power to a fund with the idea of positive social change, may have a hard time raising money if he has a felony conviction on his record. And Hodge, who told Harvard Business Review last year that he was surprised “how quickly opportunity came my way” after his retirement, could see those chances to do something new dry up.
After the charges were announced, the firms quickly sought to distance themselves from the accused. TPG’s announcement noted that the charges against McGlashan were for “personal misconduct,” and Willkie Farr pointed out that the case against Caplan was “a personal matter and does not involve Willkie or any of its clients.” Willkie also removed Caplan’s biography from the firm’s website.
A lawyer for Caplan and a spokesman for McGlashan declined to comment Wednesday. Hodge could not be reached for comment.
Neither TPG nor Willkie is likely to be undone by the charges against a leadership figure, but both firms may face uncomfortable questions from clients and investors. TPG, for example, has long cultivated an image as a progressive and trustworthy institution. It moved quickly to install Jim Coulter, its chief executive and a co-founder, as acting chief of the Rise Fund.
McGlashan is listed as one of several “key men” in agreements with investors who committed money to TPG, but his suspension – or potential permanent exit – would not unwind those agreements unless several more of TPG’s top managers departed, according to a person familiar with the firm’s operations, who was not authorized to speak publicly. Investors in the fund have committed money for several years, and the case is unlikely to have a direct financial impact on the fund.
On Wednesday, McGlashan stepped down from the board of STX Entertainment, the film studio he helped found with producer Robert Simonds. The news was shared in an internal memo sent to STX employees and reviewed by the New York Times. STX is funded in large part by TPG, which said in the memo that it remained committed to the studio, whose movies include the teen comedy “The Edge of Seventeen.”
William Singer, founder of The Edge College & Career Network, leaves federal court after pleading guilty to charges related to college admission schemes, in Boston on Tuesday.