Ad­mis­sions scan­dal en­snares giants of fi­nance and law

The Buffalo News - - BUSINESS NEWS - By Matthew Gold­stein, An­drew Ross Sorkin and Emily Flit­ter NEW YORK TIMES

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.”

New York Times

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.

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