The FBI accused GL Capital Partners CEO Daniel Thibeault of creating fictitious loans to divert millions in assets to business accounts.
A prominent alternative fund manager in Waltham, Mass., was arrested on securities fraud charges last week after the FBI accused him of a fraudulent scheme to divert some $12.6 million from a fund he was overseeing.
Daniel Thibeault, chief executive of asset manager GL Capital Partners, was released after posting $700,000 in bail secured by the equity in his house. A court date is scheduled for Jan. 2.
Since March 2012, Mr. Thibeault took out fictitious loans to gain access to money in a closed-end interval mutual fund, known as the Beyond Income Fund, according to the testimony of Federal Bureau of Investigation special agent Jennifer Hale Keenan in U.S. District Court for Massachusetts. Mr. Thibeault co-managed the fund, which invested in consumer debt.
Around $36.6 million worth of loans had been issued from the fund, of which some $12.6 million was taken out through an intermediary that Mr. Thibeault had created purportedly for borrowing money in the name of friends and associates. The money from the loans made through the intermediary, Taft Financial Services, did not go to individual borrowers, however, but to a GL-controlled bank account, according to Ms. Keenan's testimony.
“[Mr.] Thibeault caused the fund to issue or acquire fictitious loans to individuals who never requested or did not, in fact, receive such loans, falsified or cause to be falsified the documentation related to those loans and used the fictitious loans to divert a portion of the fund's assets into the operating accounts of GL,” Ms. Keenan said.
It was not clear how the money was used, according to the FBI agent's testimony. Mr. Thibeault is believed to have personally funded the company's operations, which included two dozen employees at the Massachusetts headquarters in addition to between 90 and 120 employees at a separate office near Manila, in the Philippines, according to the agent's affidavit.
Reached by phone, Mr. Thibeault said he was in a team meeting and could not immediately comment on the matter. An attorney representing Mr. Thibeault in the criminal case, Allison Burroughs of Nutter McClennen & Fish, declined to comment.
In July, GL inadvertently sent a loan statement to Z.W., a former college roommate of Mr. Thibeault, in whose name Mr. Thibeault had taken out a nearly $300,000 loan. However, Z.W. said he had no knowledge of the loan.
When Z.W.'s accountant contacted GL about the loan, Mr. Thibeault told him to “tell Z.W. not to worry about it,” according to the affidavit.
Mr. Thibeault founded the parent company, Graduate Leverage, in 2003 while at Harvard Business School as a way to provide loans to graduate students for their education. The company had not been profitable since 2009, however, and he diversified the business model to include a number of other investment management operations, including GL Capital and an investment adviser, GL Investment Services, according to the affidavit.
GL Investment Services, which had approximately $130 million under management, also directed financial advisory clients to invest in the Beyond Income Fund, according to the affidavit. The Beyond Income Fund had an annualized return of 9.23% since its inception, according to its website. The firm also runs two mutual funds, which were not mentioned in the FBI's complaint.
Mr. Thibeault has been outspoken in the industry and writes an annual report on the liquid alternatives industry in addition to occasional blogs for InvestmentNews.
