I have done enough bragging on this blog lately, about my students and about Harvard. Time to highlight Harvard's role, and my own, in turning out charlatans.
Well, I did call out Noah Freeman recently.
But today's subject is Buddy Fletcher, that is, Alphonse W. Fletcher, Jr. Harvard AB 1987 in Applied Mathematics. My student. My advisee. Once the toast of Harvard, when he donated a University Professorship in his own name in 1996:
"We are extremely grateful to Buddy Fletcher for his wonderful generosity to Harvard and for his powerful statement of confidence in the University and its programs," Rudenstine said. "His support is magnificent testimony from an alumnus who only recently celebrated his thirtieth birthday, and who is still a year away from his tenth reunion. Buddy has a deep dedication to Harvard and a strong commitment to the importance of education.
"Those qualities are reflected in the intention and spirit of the new professorship that will bear his name," Rudenstine added. "He has expressed his preference that the chair be held, whenever possible, by a faculty member from one of the professional schools who is devoted to teaching and research about contemporary moral, religious, and social values, and whose interests include undergraduate education. The intention is to give special attention to our nation's tradition of pluralism, including the ways that differences in cultural, ethnic, and regional values may be reconciled and drawn upon to strengthen our democracy."That chair was held first by Cornel West and now by Henry Louis Gates Jr.
Buddy has had a strange history. After years of reporting dizzying hedge fund profits, he now seems to be broke. A story published yesterday, the Wall Street Journal reports his latest woes.
In a prospectus to investors, hedge-fund manager Alphonse Fletcher Jr. said he planned to achieve returns by doing deals "immediately, quantifiably worth more to the buyer than the seller."
But a court-appointed bankruptcy trustee said in a report this week that the values Mr. Fletcher placed on investments were inflated through fraud, and that his firm's funds were likely insolvent as far back as December 2008.
In the report, the trustee, Richard J. Davis, said that a network of related Fletcher hedge funds had not made a profitable investment after August 2007. Instead, working with a consultant, Mr. Fletcher, chairman and owner ofFletcher Asset Management, created "wildly inflated valuations" to generate more than $30 million in fraudulent fees and attract new investors, the report said.
Mr. Davis's report said that the Fletcher firm also generated "cashless notes" between its own funds that led to extra fees and improperly increased calculations of assets under management, just before funds were evaluated by a key hedge-fund industry index.
"In many ways, the fraud here has many of the characteristics of a Ponzi scheme where, absent new investor money coming in, the overall structure would collapse," Mr. Davis said in a nearly 300 page report.What investors fell for this? The Firefighters' Retirement System of Louisiana. The Municipal Employees' Retirement System. The New Orleans Firefighters' Pension and Relief Fund. And the Massachusetts Bay Transportation Authority Retirement Fund.
Pensioners are bearing the costs of Buddy's alleged schemes, and his $8 million investment in a movie project of his brother.
I wonder what sort of due diligence they did. Not due enough, obviously. I hope they did not think that Buddy has a University Professorship named after him at Harvard, so he must be on the level.
I don't mind having my salary paid by the gift to Harvard of a generous cad. I like to think that universities cleanse the money they take from such folks and society comes out better the exchange, as long as the donors don't buy too much influence and the university doesn't honor the donors too publicly or too fulsomely. Harvard accepted the Fletcher Professorship long before the beginning of the period covered by the current fraud allegations. People change, and it's hard to question a gift accepted early in the lives of someone who engages in sketchy activities years after the gift was made.
But it's a bit awkward to be sure, and may explain why in all the current celebration surrounding Professor Gates and his "Many Rivers to Cross" project, we are seeing more of the Hutchins name than the Fletcher name. (Or the DuBois name for that matter, but that would be a subject for another time: How it is that it a university that needs money but has limited growth potential more or less retires names like Mather and Holyoke and Dubois in favor of Stone and Smith and Hutchins.)
Can Harvard change the name of the chair? The Houston Astros changed
ReplyDeleteEnron Field to Minute-maid-field, but they got another donor.
Univ of MD has THE FRANCIS SCOTT KEY building. Ugrads ask me who he was and how much money did he give to the University. I ask how long will it be before we name it THE PEPSI BUILDING since we are a pepsi campus
It all depends on how the deal was written. I imagine that the deal between the Astros and Enron was for a fixed period of time, or had an escape clause in case the company went under, or both. But people who give chairs generally think they are signing up for eternal recognition, better than a building name.
DeleteI once had an address in William James Hall and got a letter that began "Dear Mr. Hall … ."
McKay was a cad but not apparently a thief. One way for "society to come out better" would be for Harvard to use the donated money towards making up the losses of the defrauded pension funds.
ReplyDeleteNot clear to me actually. Even if one came to the very arguable conclusions that Harvard is not making a contribution to society with the incremental professorship and that it is Harvard's responsibility to give back the Fletcher money (which is not known to have been fraudulently made), whoever is running the investments for those funds hasn't made a good case for giving them more to invest.
DeleteThank you for speaking up on this subject, Harry. I was Buddy's roommate for several years at Harvard, and one of his colleagues early on at Fletcher. It was a very unpleasant place and there's a trail of broken Harvard friendships as a result of Buddy's, uh, personal style.
ReplyDeleteMore importantly now is that Harvard needs to come clean on the actual cash value realized on the gift which funded the Fletcher chair. I worked on the Calgene contract with their CEO Roger Salquist, which formed much of the basis of Buddy's gift. To call it disputed would be putting it mildly.
It's one thing for Harvard, as you suggest, to cleanse dirty money and make it clean again through education; it's another thing entirely for a chair to be endowed "no money down" purely on the basis of race, as some reports seem to suggest. Harvard needs to provide answers given the questions that have been widely raised in the media and in the fraud report. By speaking up, it is hoped Harvard will avoid further shame.
Dr. Cass,
DeleteThanks for writing. I wonder if you could write or call so I know I am not dealing with a troll.
Yes, it would be interesting if something along the lines of what you suggest were to come out. Where have the questions you mention about the Harvard gift appeared? I don't remember seeing those speculations in print anywhere.
I remember visiting Buddy early on, in his offices on the top floor of the GM Tower. If I remember correctly, Buddy was at that point still with his original business partner, another Applied Math concentrator whose name I don't remember (Michael somebody? I don't think it was you).
Buddy kindly had his chauffeur-driven Bentley give me a lift back to Laguardia. Sign.
Hello Henry,
DeleteYes, trolls abound but sadly for me, I'm not one of them. I'd have been happy to have avoided my own Fletcher experience.
Buddy and I shared a room in Adams House junior and senior years, and were members of the Phoenix-S.K. Club, together with Michael Meade, whom you mention. When Buddy was impeached from the Club on a financial issue, Michael and I resigned in support of Buddy. Indeed, I spoke in Buddy's defense. Michael and I later worked at Fletcher, first at 245 Park Ave then the GM Building, and left in sadly similar circumstances.
Buddy and I lived in Randolph Court, Adams House, our senior year-- one of our neighbors being the late Seamus Heaney. Two years later when I was working on my D.Phil at Magdalen College, Oxford I walked down a staircase and bumped into, and shared a laugh with...Seamus Heaney. A very kind man, as well as a great poet. Harvard did well to get him.
I believe I had the pleasure of meeting one of your predecessors, Fred Jewett. He did my admissions interview at Cate School, and I still have a handwritten letter from him somewhere thanking me for the occasion! Another very kind, decent man who gave a lot to Harvard.
And then there's Buddy.
You asked about the disputed Calgene contract. Here is the most relevant SEC filing I could quickly find online:
http://www.sec.gov/Archives/edgar/containers/fix043/1011134/97/000089161897002024/0000891618-97-002024.txt
The document dated April 1997 outlines the fact that Fletcher Capital Markets owns a Calgene option to buy shares, that Fletcher is now wholly owned by Harvard University, and that Harvard/Fletcher is having to sue Calgene to get anything from the contract.
This is the contract-- a lawsuit really-- that Buddy donated to Harvard, and got a University Professorship in return.
There is further detail on this "gift" in Adam Lashinsky's extensive piece in Fortune from October last year. Finally, there's additional information here:
"This week, the Dakota's lawyers told a judge that Fletcher failed to follow through on a $4.5 million pledge to Harvard University. Fletcher called the promise "non-binding" and said that the Dakota's allegation is the equivalent of defamation. But he failed to present any evidence that it was non-binding, and the Dakota's lawyer said that Harvard disputes Fletcher's claim."
http://www.finalternatives.com/node/23799
"Lawyers for The Dakota pressed a Manhattan judge yesterday with their claim that Fletcher welshed on a $4.5 million gift to his alma mater, Harvard University — a donation that was to be used to endow a chair in African-American studies. The chair, named after Fletcher, is now held by Henry Louis Gates, Jr. Fletcher, through his lawyers, argued the donation was “non-binding” — but failed to come up with any proof to back up the claim...Dakota lawyer Christine Chung indicated that Harvard didn’t see it Fletcher’s way, telling a judge that Fletcher had had negotiations with the president of Harvard about what he owed the university. The problem appears to be that Fletcher did not give cash, but pledged warrants in a company, called Calgene, that expired before Fletcher could cash them in and thus became worthless."
NY Post, 29 May 2013
So if even Harvard is calling Buddy to account, why was he allowed to "endow" this chair in the first place? Can the rest of us donate a corporate shell whose major asset is a lawsuit and get a University Professorship in our name? I suspect not. Harvard and Skip Gates should come clean on this one.
Lot to absorb there, thanks. I took the liberty of cross linking over on Bradley's blog. And thanks for reminding me of Michael Meade's name. Makes me feel pretty good about my memory!
DeleteThis comment has been removed by the author.
ReplyDeleteHello Harry, I'm curious as to whether the fact that Buddy has apparently fleeced the MBTA pension fund and is now under investigation by the Mass Attorney General's Office has had any impact on Harvard's thinking? Fletcher's No-Money-Down Chair is looking even more offensive as the bombs fall closer to Harvard Square, but so far the University has seemed to avoid the growing scandal.
ReplyDeleteBeen a while, Harry. Any word on this, or how much money Fletcher actually had to cough up to fund Skip Gate's professorship? The public record (see above) seems to show that Harvard got virtually nothing. Are University Professorships also selected "holistically"? Thanks.
ReplyDelete