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40 Charged in College Exam Cheating Plot, Including the Managing Partner of TPG Growth and Former PIMCO CEO

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After an FBI investigation code named Operation Varsity Blues resolved, the U.S. Department of Justice (DOJ) uncovered a network of wealthy parents who paid large amounts of money to enhance their childrens’ chances of getting into elite colleges such as Yale University, University of Southern California, and Stanford University. The alleged scam helped potential students cheat on their college exams, according to an unsealed indictment in Boston. The DOJ is charging 49 people so far, which includes 33 parents and 9 college coaches.

According to the indictment, “The Edge College & Career Network, LLC, also known as “The Key,” is a for-profit college counseling and preparation business based in Newport Beach, California that was established in or about 2007 and registered in California in or about 2012. The Key Worldwide Foundation (“KWF”) is a non-profit corporation founded in or about 2012 and based in Newport Beach, California.”

“This case is about the widening corruption of elite college admissions through the steady application of wealth, combined with fraud,” said U.S. Attorney for Massachusetts Andrew Lelling.

“There can be no separate college admission for wealthy, and I will add there will not be a separate criminal justice system either.”

The parents were charged with: “Conspiracy to commit mail fraud and honest services mail fraud.”

Some of the defendants include:
William E. “Bill” McGlashan, Jr., managing partner of TPG Growth (TPG Capital)
Douglas Hodge, former CEO of Pacific Investment Management Company, LLC (PIMCO)
Manuel A. Henriquez, founder and CEO of Hercules Technology Growth Capital, Inc.
Gamal Abdelaziz, president and CEO of Wynn Resorts Development
John B. Wilson, president and CEO of Hyannis Port Capital
Gordon Caplan, co-chairman of the law firm Willkie Farr & Gallagher LLP
Bruce Isackson, president of WP Investments (Woodside Property Investments)
Robert “Bob” Zangrillo, founder, chairman and CEO of Dragon Global
Gregory Abbot, CEO of the International Dispensing Company
Elisabeth M. Kimmel, owner of Midwest Television, Inc
Hollywood actresses: Lori Loughlin and Felicity Huffman
Mossimo Giannulli, fashion designer
Agustin Francisco Huneeus, owner/partner of Huneeus Vintners

UPDATE (later in the same day)
TPG Capital put William McGlashan Jr. on indefinite administrative leave following the allegations. Jim Coulter, Co-CEO of TPG, will be interim managing partner of TPG Growth and The Rise Fund.

Yale’s Love Affair with Venture Capital Overshadows Other Asset Classes

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Yale’s US$ 29.4 endowment has earned staggering returns of 7.4% per year over the past 10 years, racing past its benchmark and adding US$ 6.5 billion to the fund. In the year ending June 30 2018, Yale earned 12.3%. Yale’s success is due to active management, and an unconventional approach to investing, at least from the perspective of a university endowment. Yale is overweight venture capital and real estate, which has paid off handsomely over the last 10 years. Many properties throughout the country have returned to, or surpassed, their pre bubble-era prices. Yale has also actively participated in leveraged buyouts. Yale is underweight U.S. equities and its fixed income holdings are low, as is cash on hand.

Yale’s annual report notes, “The heavy allocation to nontraditional asset classes stems from their return potential and diversifying power.” Perhaps earning their Princeton Review # 3 ranking in 2018, Yale’s commitment to thinking outside the box is responsible for their recent investment philosophy: “Alternative assets, by their very nature, tend to be less efficiently priced than traditional marketable securities, providing an opportunity to exploit market inefficiencies through active management.” Alternative investments have been gaining steam among major players in the global markets, including US$ 6.5 trillion investment manager Blackrock Inc. Blackrock plans to open a new European alternative asset headquarters in Paris.

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eFront Finds a Home at BlackRock

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BlackRock Inc. entered into an exclusive agreement to acquire eFront, a French software provider of risk management products for the alternative investments industry. Asset management firms are worried about margins and have increasingly acquired service provider firms to buffer revenues. BlackRock sells the Aladdin (Asset, Liability, Debt and Derivative Investment Network) platform, which is one of the largest portfolio operating systems in the investor community. BlackRock’s offer is to pay US$ 1.3 billion in cash for 100% of the equity of eFront. The seller of eFront is private equity firm Bridgepoint.

Bridgepoint acquired eFront in January 2015 in a transaction totalling approximately €300 million. In 2006 eFront listed on the Alternext Paris market of NYSE Euronext (ALEFT) and was taken private in 2011 by Francisco Partners. eFront was founded in 1999 by Olivier Dellenbach.

According to the press release, “The combination of eFront with Aladdin, BlackRock’s investment operating platform used by more than 225 institutions around the world, will set a new standard in investment and risk management technology.”

BlackRock is funding the eFront acquisition through a combination of existing corporate liquidity and debt.

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CDPQ Supports Domestic AI Fund

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Institutional investor Caisse de dépôt et placement du Québec (CDPQ), which works primarily on behalf of pension funds and insurance plans, is opening a new fund dedicated to Québec businesses that specialize in AI, or artificial intelligence. Available funds are slated at US$ 250 million for the enterprise. The commercialization of AI seems to be a natural fit for CDPQ, “Since Montréal is emerging as a global beacon of excellence in artificial intelligence, we need to enhance our offering and ramp up the financial and development support we provide AI businesses through the various stages of their growth,” according to Executive Vice President of Quebec and Global Strategy, Charles Émond. Émond aspires to see AI spread throughout “all sectors of our economy.” The AI fund will be run by CDPQ’s Venture Capital and Technology team. They will look for companies that are already doing well in the sector.

Another program is targeting early stage organizations. Mila Quebec AI Institute, a research and development organization founded by three universities, is building a new complex to help facilitate CDPQ’s goals. The new complex will house early-stage AI companies. CDPQ is especially interested in companies that can accelerate their growth and enter markets quickly, providing speedy returns. There is a social component, whereby companies will be required to contribute to Mila. Michael Sabia, President and Chief Executive Officer of CDPQ, noted, “With this partnership, la Caisse is pursuing its commitment to helping Québec businesses in this new economy thrive and expand.”

Keywords: Caisse de depot et placement du Quebec

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