Riley: Providences Wainwright Caught in Renaissance Hedge Fund Lie

Tuesday, November 04, 2014

 

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Renaissance Institutional Equity Fund is currently the largest holding of Providence Pension fund. The original investment decision was made in 2006 by the Investment commission headed by Mayor David Cicilline. The pitch was made By Eric Bertonazzi of Wainwright investment Counsel. Wainwright Investment Counsel was hired in 1995 by Buddy Cianci. There appears to have never been an RFP or open bidding process for the Adviser. It's not even clear who can hire the adviser of if there is any cap on fees or a process to audit this position. Providence and Treasurer Lombardi are non responsive to questions.

The job of the investment commission is to prudently manage all aspects of the retirement plan. As such, commission members rely on suggestions from the Investment adviser. Few have focused on the process of how an adviser is hired and how he is paid. Can Providence pay their adviser any amount they want? Can the adviser receive pay from providence and also get paid by his recommended fund for example, Renaissance Technologies. We may never know because Providence does not audit this. The State does not allow their adviser, Cliffwater, to receive payments from investment managers Cliffwater recommends. Providence officials won’t answer that question. As far as we know, they have no policy.

                                                                               Renaissance and Wainwright pitch 2006

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Wainwright and Bertonazi have been advising Providence pensions and investment commissioners for 20 years. In 2006 Wainwright enthusiastically recommended that Providence step up their hedge fund allocation and specifically invest in a fund that promised to earn 600 basis points (6%) above the return of the Standard and Poors 500 index. They proposed to achieve these returns at half to 2/3 the risk (volatility) of the well know diversified index. So as an example if the Market (S&P500) rose 7% in a year with a volatility of returns of 18% Renaissance promised 13% returns (7+6) and the returns would vary by only 12%. This is the holy grail of investment higher returns that the market with less risk. What’s not to like. Here’s the pitch made to Cicilline, Myrth York et al as they “bought in” hook line and sinker. The “pitch” is a must read especially when you consider Wainwrights role in promoting Bernie Madoff investments to pension funds and other clients. Wainwright ultimately paid millions in out of court settlements and lost most of their municipal pension advisory roles in Massachusetts where they are based.

 

“the Fund has achieved its goals during the time of Providence‘s investment”

                                                       Wainwright Investment Counsel , Eric Bertonazzi

                                                                             September, 2014

I’ve written quite a bit about the odd happenings in Providence pensions specifically the role of a huge investment in Renaissance. They received national attention in July and were forced to appear before a Senate Panel investigating their role in $ 8 billion dollars in Tax evasion. Apparently some board members wanted some answers and the last Investment commission meeting Wainwright spent some time reviewing the investment in Renaissance. (Remember, we still don’t know if Eric is paid by both Renaissance and the pension plan). Here is the review just presented to the board and Angel Taveras. Read as Eric lies through his teeth to the hapless commission. Did the city look into what was promised in 2006 or just take tainted Wainwrights word for it? The discussion can be found in the minutes of September 25, 2014. Amazingly, Wainwright presented the performance results for Renaissance to the commission with the Following statement “the Fund has achieved its goals during the time of Providence‘s investment” he then proceeds to show conclusively they have not achieved what they promised when hired by Cicilline in 2006.

 

Facts reveal another Providence lie

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Wainwright and Renaissance promised S&P 500 plus 600 basis points.

Clearly Wainwright s choice as  hedgefund hasn't even come close to its  2006 promise, yet remains Providence largest investment and last month Wainwright had the gall to say Renaissance  has performed as promised. AN OUTRIGHT LIE. Grounds for firing Wainwright and liquidating Renaissance. It is also grounds for liquidating the Investment Commission and Treasurer Lombardi.

 

http://providenceri.iqm2.com/Citizens/Default.aspx  September 25 report click audio/video

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Michael G. Riley is vice chair at Rhode Island Center for Freedom and Prosperity, and is managing member and founder of Coastal Management Group, LLC. Riley has 35 years of experience in the financial industry, having managed divisions of PaineWebber, LETCO, and TD Securities (TD Bank). He has been quoted in Barron’s, Wall Street Transcript, NY Post, and various other print media and also appeared on NBC news, Yahoo TV, and CNBC.

 

Related Slideshow: Rhode Island Biggest Political Scandals

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Buddy Cianci, 1984

Vincent A. "Buddy" Cianci resigned as Providence Mayor in 1984 after pleading nolo contendere to charges of assaulting a Bristol man with a lit cigarette, ashtray, and fireplace log. Cianci believed the man to be involved in an affair with his wife. 

Cianci did not serve time in prison, but received a 5-year suspended sentence. He was replaced by Joseph R. Paolino, Jr. in a special election. 

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Brian J. Sarault

Former Pawtucket Mayor Brian J. Sarault was sentenced in 1992 to more than 5 years in prison, after pleading guilty to a charge of racketeering.  

Sarault was arrested by state police and FBI agents at Pawtucket City Hall in 1991, who alleged that the mayor had attempted to extort $3,000 from former RI State Rep. Robert Weygand as a kickback from awarding city contracts.

Weygand, after alerting federal authorities to the extortion attempt, wore a concealed recording device to a meeting where he delivered $1,750 to Sarault.

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Thomas Fay

Thomas Fay, the successor to Bevilacqua as Chief Justice of the Supreme Court, resigned in 1993, and was later found guilty on three misdemeanor counts of directing arbitration work to a partner in his real estate firm, Lincoln Center Properties.  

Fay was also alleged to use court employees, offices, and other resources for the purposes of the real estate firm.  Fay, along with court administrator and former Speaker of the House, Matthew "Mattie" Smith were alleged to have used court secretaries to conduct business for Lincoln, for which Fay and Smith were business partners. 

Fay was fined $3,000 and placed on one year probation. He could have been sentenced for up to three years in prison. 

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Edward DiPrete

Edward DiPrete became the first Rhode Island Governor to be serve time in prison after pleading guilty in 1998 to multiple charges of corruption.

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DiPrete served as Governor from 1985-1991, losing his 1990 re-election campaign to Bruce Sundlun.

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Buddy Cianci, 2002

Cianci was forced to resign from the Mayor’s office a second time in 2002 after being convicted on one several charges levied against him in the scandal popularly known as “Operation Plunder Dome.” 

The one guilty charge—racketeering conspiracy--led to a five-year sentence in federal prison. Cianci was acquitted on all other charges, which included bribery, extortion, and mail fraud.

While it was alleged that City Hall had been soliciting bribes since Cianci’s 1991 return to office, much of the case revolved around a video showing a Cianci aide, Frank Corrente, accepting a $1,000 bribe from businessman Antonio Freitas. Freitas had also recorded more than 100 conversations with city officials.

Operation Plunder Dome began in 1998, and became public when the FBI executed a search warrant of City Hall in April 1999. 

Cianci Aide Frank Corrente, Tax Board Chairman Joseph Pannone, Tax Board Vice Chairman David C. Ead, Deputy tax assessor Rosemary Glancy were among the nine individuals convicted in the scandal. 

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John Celona

In 2003 Operation Dollar Bill, a codename for an undercover investigation by the FBI, looked into corruption in the state of Rhode Island.  State Senator John Celona was investigated for accepting money and gifts from CVS, Blue Cross & Blue Shield, and Roger Williams Hospital.

In 2005, charges were filed against Celona for accepting gifts and money from CVS, Roger Williams and Blue Cross & Blue Shield. These companies all had interest in legislation that Celona was involved in as the Chairman of the Senate Corporation Committee.

Celona did his best to receive a lenient sentece by cooperating with the governemt and proved to be a key witness in the conviction of two former Roger Williams Medical Center Executives. Celona was later sentenced to two and a half years in prison.

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N. Providence Councilmen

Three North Providence City Councilmen were convicted in 2011 on charges relating to a scheme to extort bribes in exchange for favorable council votes. In all, the councilmen sought more than $100,000 in bribes.

Councilmen Raimond A. Zambarano, Joseph Burchfield, and Raymond L. Douglas III were sentenced to prison terms of 71 months, 64 months, and 78 months, respectively. 

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Charles Moreau

Central Falls Mayor Charles Moreau resigned in 2012 before pleading guilty to federal corruption charges. 

Moreau admitted that he had give contractor Michael Bouthillette a no-bid contract to board up vacant homes in exchange for having a boiler installed in his home. 

He was freed from prison in February 2014, less than one year into a 24 month prison term, after his original sentence was vacated in exchange for a guilty plea on a bribery charge.  He was credited with tim served, placed on three years probation, and given 300 hours of community service.

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38 Studios

38 Studios was a video game company founded in 2006 by former Major Leaguer Curt Schilling. First based in Massachusetts, the company moved to Rhode Island to secure a $75 Million loan guarantee from the state’s Economic Development Corporation (EDC).

In 2012, 38 Studios released its first game, “Kingdoms of Amalur”. In May of 2012, 38 Studios missed a payment of $1.125 million to the RIEDC.  Later that month 38 studios paid a check for that amount, but it was later returned by the state for inefficient funds. On that same day 38 Studios did not make the payroll for its employees.

At the end of May, 38 Studio laid off all of their employees. In June, 38 Studios filed for bankruptcy. At the same time Federal and State officials begin a probe of the company. That year the state sued 38 Studios as well as Schilling.

In May of 2014, a report came out that the video game company knew that the money they had received was not going to be enough to cover the development of their first project.

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Gordon Fox

The Rhode Island State Police and FBI raided and sealed off the State House office of Speaker of the House Gordon Fox on March 21--marking the first time an office in the building has ever been raided.

Following the raid, Fox resigned as Speaker of the House. Days after the resignation from Fox, Nicholas Mattiello was chosen to replace him.

 
 

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