Alliance Capital Fraud
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| Alliance Capital Fraud InfoCenter is an Internet resource that offers you an opportunity to research securities fraud and your legal rights associated with brokerage fraud. Alliance Capital Fraud InfoCenter does not offer legal advice or referrals. |
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Alliance Capital Management FraudAlliance Capital Management is a research and investment management firm that serves individual and institutional investors. Among its clients are banks, insurance companies, pension funds, foundations, and affluent investors. Why is Alliance accused of fraud? Alliance Capital Management was the mutual fund manager for the Florida state pension fund until it was fired for losing over $300 million of the fund’s money, primarily on Enron stock. While this loss actually made up a relatively small percentage of the $94 billion pension fund, the state is questioning Alliance’s integrity and competence. Alliance also invested significant amounts of its clients’ money in Tyco stock. Both Enron and Tyco have been rocked by financial and accounting scandals that have sent their shares plummeting. Early warning signs of trouble did not dissuade Alliance from making investments in either company. Even during the months preceding Enron’s bankruptcy—when signs of the energy giant’s imminent downfall were difficult to miss—Alliance continued to invest Florida’s money in Enron stock. In the months preceding its bankruptcy, Enron restated its earnings because of incorrect accounting, the Securities and Exchange Commission (SEC) was conducting a probe, and the company’s chief financial officer, Andrew Fastow, had been replaced. Alliance Capital did not respond to these signs of looming financial disaster for Enron by redirecting Florida’s investments. In fact, during this period of time, Alliance actually increased the amount of Enron stock it bought for Florida. What’s more, Alliance Capital Management CEO Frank Savage sat on Enron’s board of directors. Although Alliance claims to have received no inside knowledge about Enron’s impending doom, some are questioning whether the money manager may have known more than it is willing to admit. What is the current status? The Florida State Board of Administration has filed a lawsuit against Alliance Capital Management. The charges include breach of contract, breach of fiduciary duty, and negligence. Alliance has responded by saying that it was a victim of Enron’s falsified accounting just as many other investors were. The company has cited Enron’s suggested merger with its smaller energy rival Dynegy as a major reason it believed the stock’s value would rebound and make a good investment. The merger never took place, and Florida found itself out a total of $322 million. Alliance says that while this is unfortunate, it is not responsible, because investing poses inherent risks. In January 2003, a Florida state probe found Alliance Capital innocent of criminal charges of racketeering. However, this is irrelevant to Florida’s civil lawsuit, which is still ongoing. |