Carried interest payments can make for a nice annuity for executives long after they leave a firm. They can also be a source of nasty disputes.
Such is the case at Pacific Corporate Group, a La Jolla, Calif.-based investment advisory shop, where a former executive has filed a lawsuit claiming he hasn’t been paid all of the investment gains owed him.
The firm filed a countersuit, arguing it should not have to pay someone whom it believes engaged in an “illegal kick-back scheme,” according to PCG’s cross-complaint.
A trial date of July 1, 2011, in the Superior Court of the State of California in San Diego, has been set for the dispute between PCG and Stephen Moseley in a case that’s also part of the fallout of the recent pay-to-play scandal at the New York State Common Retirement Fund.
Led by CEO Christopher Bower, PCG advises institutional clients, such as the California Public Employees’ Retirement System, on their private equity investments.
Moseley joined PCG in 2001 and served as managing director and co-president of PCG Capital Partners, which managed a $500 million direct investment fund and a $150 million co-investment fund. He also served as the head of research and was a member of the executive committee.
The details of Moseley’s compensation package aren’t clear, but it wouldn’t be unusual for someone in his position to be entitled to a share of the profit from investments he oversaw. And because of the illiquid nature of the investments, Moseley might not receive distributions until years later.
In fact, PCG made occasional payments to Moseley after he left the firm in 2006, according to a December 2009 letter PCG sent to Moseley. The letter also states PCG would make no further distributions because he “engaged in wrongful activities which caused PCG to incur millions of dollars in damages,” a reference to the New York State pay-to-play scandal.
Moseley filed a suit against PCG in February alleging breach of contract, among other complaints, for failure to pay him all of the compensation he believed was owed to him. The suit suggests that PCG accused Moseley of wrongdoing only to deflect blame from the firm’s own role in the New York State scandal.
PCG filed an amended cross-complaint in May. It states that Moseley’s allegations about the firm “must be evaluated in the context of the racketeering, illegal kickbacks, betrayal and deceit” carried out by Moseley and his “co-conspirators.”
Thomas Stoddard, Moseley’s attorney, said his client had “no involvement in the kickback scheme at all.” Stoddard also said that Moseley has “been assured by the attorney general of New York that he is not a target of any investigation.” Moseley is seeking an amount “in the low seven figures,” he said, for “investment gains identified but not paid.”
After leaving PCG in 2006, Moseley became a managing director at Estes Management, the private equity unit of the Clinton Group, and later became president of the StepStone Group, a private equity advisory shop.
Moseley resigned from StepStone in May 2009. In his letter of resignation, he pointed to press reports that linked him to the scandal and the unfair distraction it was causing for StepStone. Moseley is now at Rockland Management, a private equity and real estate investment business in Princeton, N.J. —Nancy Gordon