If even half of the accusations are legitimate, the current United States secretary of commerce could rank among the biggest grifters in American history. -Forbes
Forbes is out with a fascinating Tuesday read detailing allegations that Commerce Secretary Wilbur Ross, who the magazine estimates is worth around $700 million, engaged in a series of ruthless business practices prior to joining the Trump administration - including former employee David Storper who claims Ross "stole his interests in a private equity fund, transferred them to himself, then tried to cover it up with bogus paperwork," writes Forbes' Dan Alexander.
Two weeks ago, just before the start of a trial with $4 million on the line, Ross and Storper agreed to a confidential settlement, whose existence has never been reported and whose terms remain secret. -Forbes
Highlights and allegations, while keeping in mind that Forbes has a long-running feud with Ross over what they claim are outright lies about his net worth:
- Forbes spoke with 21 people who know Ross and gathered that "Many of those who worked directly with him claim that Ross wrongly siphoned or outright stole a few million here and a few million there."
- "all told, these allegations—which sparked lawsuits, reimbursements and an SEC fine—come to more than $120 million"
- Workers at his house in the Hamptsons used to call Ross's colleagues, claiming they hadn't been paid for work.
- Ross once pledged $1 million to charity, yet never actually gave them the money.
Past business associates have attested to Ross's ruthless nature. “He’ll push the edge of truthfulness and use whatever power he has to grab assets,” said Asher Edelman, a New York Financier. A former colleague of Ross's was more direct: “He’s a pathological liar.”
Ross defended himself in a statement, claiming "The SEC has never initiated any enforcement action against me," while failing to mention the $2.3 million fine it slapped his firm with in 2016.
The commerce secretary also noted that one lawsuit against him got dismissed, without saying it is currently going through the appeals process. Ross confirmed settling two other cases, including the recent one against Storper, but declined to offer additional details. -Forbes
Forbes also points out that Ross's appointment to Trump's cabinet - where he was heralded as a "legendary Wall Street genius," couldn't have come at a more perfect time for Ross, as "The future cabinet secretary’s private equity funds were underperforming—one on track to lose 26% of its initial value and another two dribbling out mediocre returns—and the accusations were starting to pile up."
Around two months before the 2016 US election, the SEC announced that WL Ross had been slapped with a fine and refunding $11.9 million "it allegedly skimmed from its investors, including interest," reports Forbes.
The scheme was complex. Like other private equity firms—including several that coughed up money to the SEC around the same time—WL Ross derived much of its revenue from management fees charged to its investors. With funds as large as $4.1 billion, management fees of 1.5% could alone bring in more than $60 million a year for Ross’ firm—serious money.
But WL Ross promised that it would give its investors something like a rebate. For example, when Ross and his colleagues got certain fees for working on deals, they were supposed to give at least 50% of that money back to investors. But, according to SEC investigators, the firm gave back less than it suggested it would and pocketed the difference, leading the feds to conclude Ross’ firm broke laws that prohibit defrauding and misleading clients. WL Ross paid the big settlement but never admitted guilt. -Forbes
And according to authorities, WL Ross charged many of the inapprorpriate fees prior to the firm's sale to Invesco for $100 million up front and a potential $275 million in the future. As such, Ross ostensibly would have cahsed out at a larger valuation than he deserved - an amount Invesco has never clawed back according to a statement by Ross.
Oh, it gets worse...
According to those Forbes spoke with, WL Ross was also charging investors fees on money the firm had lost them, collecting fees based on the principal amount invested - not the amount lost.
If WL Ross made an investment of, say, $100 million that declined dramatically, in the final years of the fund the firm was supposed to charge management fees on the actual value of the investment, not the $100 million starting point. However, WL Ross allegedly continued collecting fees on the amount invested, taking more than it deserved. WL Ross was allegedly even charging fees on one investment that was essentially worthless. -Forbes
“There are all sorts of fee issues,” said one investor, “but it was just the most egregious that I’ve seen.”
Ross insisted his firm had been calculating fees correctly.
Ross is also alleged to have "skimmed money by serving on corporate boards of his firm's portfolio companies," money which was supposed to have been passed back to his investors as rebates.
Instead, Ross "was like a kid in a candy store," says one of his former employees. "He pilfered it."
Read the rest here