Riley: Mancini, Wainwright and Taveras Part 2
Tuesday, August 12, 2014
A few weeks ago, I checked out the website of Providence investment advisor Wainwright Investment Counsel, LLC, and I was confused. It looked very much like an amateur, fake website that offered little to no information at all. No management team with photos, no bios, no portfolio managers. No testimonials. No Eric Bertonazzi. It really is an awful website. I then compared that to some of their competitors in Massachusetts like: NEPC, Callan Associates, Segal Consulting and Meketa Investment Group.
While a crappy website, lousy receptionist, connections to Bernie Madoff, and losing multiple contracts in Massachusetts are not necessarily fraudulent - or even illegal - they are certainly enough for a prudent manager of public pension funds to ask questions of Wainwright. As with the case of the $57 million missing from pension plans, Taveras owes a fiduciary duty to carefully safeguard the funds entrusted to him. He has completely ignored these responsibilities. So I questioned his finance director.
Communication with Mancini’s Office
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTOn August 4, I asked the Director of the Finance Department for the city, Lawrence J. Mancini, a few questions about Wainwright Investment Counsel, LLC, the city of Providence’s investment advisor for the last 20 years.
Below is the content of the second email I sent to Mancini’s office. The first email was sent on August 4 and, in an immediate reply, I was told that Ms. Sara Merrit would respond by that afternoon of August 4 or the morning of August 5.
The second email was sent to Sara the afternoon of the August 6. It read:
I was wondering if you have responses to the questions I posed on Monday
How long has the Board of Investment Commissioners existed in Providence? Who is the current investment adviser to the commission? How long have they been advisor? What moneys have they been paid from Providence 2010 -2014? When was the last RFP for advisor conducted?
mgriley
These are not difficult questions to answer, and I had more, but I figured they could answer these first. I received nothing. As I understand the Access to Public Records Act (APRA), the clock is ticking now because it is not necessary to fill out official forms to start the process. Mr. Mancini, therefore has another five days or so to respond and also has the right to file a request for a 20-day extension in regards my request.
An "Eerie" Place
Having heard nothing from Finance Director Mancini or Mayor Taveras from the list of questions I gave them, I embarked upon some further investigation of Wainwright Investment Counsel. I have a long career in the industry and know several people who live and work in Boston. I wanted to see what Wainwright’s offices look like. They describe themselves as a multi-billion dollar asset manager and their address is rather exclusive: 1 Boston Place, a 41 story, high-class, high-service building. Wainwright is on the top floor, a bit of information gathered from SEC filings, not from their website.
Several friends and acquaintances work nearby or in that building. It is a high security building and not every floor has unfettered access. You need a pass to move around the building. Many of the floors have multiple businesses and some have a whole floor with around 200 people working on it. The building has 18 passenger elevators. The 41st floor is where Wainwright Investment Counsel, LLC exists, at least a few friends got as far as that floor and they all described it the same way, “eerie.” There was only one set of glass doors with a sign on or near it saying “Wainwright Investment Counsel, LLC.” There was no intercom or buzz lock.
Only two of my friends actually entered and they felt “creeped out.” Inside the door, there was a small hallway and, at the end and on the right, an elderly woman was sitting at a very sparse old desk with an old computer. There was no name on the desk. There was no literature or brochures of any type. The name “Wainwright Investment Counsel, LLC” was not posted anywhere. There was no place for anyone to sit.
Another door was behind the person at the desk. She looked startled to have anyone walk in. When questioned as to whether it was Wainwright Investment Counsel, LLC, she said ‘yes.’ When asked about whether they ever had interns, she said ‘no,’ there was no sign of activity. There was, possibly, a hallway behind the door and to the left of the person at the desk.
These creepy reports brought me back to reading the minutes of the meetings of the Providence Board of Investment Commissioners. From there, I was able to garner that Wainwright was hired in 1995 by Buddy Cianci. What “hired” means I still do not know since Taveras and Mancini have not yet responded to my questions. Wainwright Investment Counsel, LLC, appears to have been born out of HC Wainwright, an old line Boston Investment Firm that fell on hard times in the 1990s. Survivors of its downfall included a broker dealer “wfs,” 75 percent owned by Wainwright Investment Counsel LLC and a boutique, asset manager: Wainwright Investment Counsel LLC.
Fiduciary Responsibility
It’s pretty clear that Eric Bertonazzi is a knowledgeable advisor representing Wainwright, but it is not at all clear how he gets paid. Is there directed order flow to Wainwright? Do they collect an advisor fee from Providence? Do they get placement fees from managers that are selected? Wainwright lost a significant amount of business following the revelations that they had invested client money in Bernard Madoff feeder funds. After that, their presence in Massachusetts public pension consulting shrank dramatically, possibly down to zero.
If I had been elected Mayor of Providence in 2010, and I looked at my role as Chairman of the Board of Investment Commissioners, I certainly would have dug into this relationship and put out a request for proposals. Taveras’ lack of intellectual rigor and due diligence is, once again, mind-boggling. It is as if he has no financial background what so ever. He does not question anything and when asked about accounting and finance, he does not answer anything.
I am asking these questions because Providence’s finances are critical to the future of the State of Rhode Island. No one should be hiding information about how investments are managed and how much an advisor of 20 years is being paid.
The state’s investment advisor on the alternative side is Cliffwater. I have actually visited Cliffwater in New York City. It is in an office setting that you might expect. It was fully equipped with conference rooms, receptionists, telephones and people. State of the art display and conference call features abounded. The waiting room was large, with plenty of seating as well as investment brochures. They are paid a single fee of $450,000 annually by Rhode Island and no placement fees are allowed at the state level. Several reports appear on the state website showing the fees paid to each manager. It is one of the most comprehensive websites in the country and very detailed. The Providence site has gotten better and, with the exception of the investment adviser Wainwright Investment Counsel LLC, much of the necessary information is available. There does not appear to be anyone actually auditing Wainwrights reports to the board, in the links below, and Wainwright uses a lot of data from State Street. Wainwrights’ claims of superior performance to the state’s audited reports are somewhat unconvincing.
I have said repeatedly, Mr. Mancini and Mr. Taveras need to take their fiduciary responsibilities seriously and stop all the obfuscating and double talk. The next step is an APRA filing with the Attorney General.
https://data.providenceri.gov/Retirement/Hedge-Fund-Statistical-Analysis/qwcy-tfd6
https://data.providenceri.gov/Retirement/Asset-Allocation-Of-Similar-Retirement-Plans/43n7-3xxs
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.
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