November 1, 2012 (PLANSPONSOR.com) - The Police and Fire Retirement System for the City of Detroit is suing investment adviser Michael Abraham Leibowitz.
The pension plan claims Leibowitz lost $5.4 million and pocketed $2.2 million of it, from 2008 to 2010, using some of its $10 million to pay off credit cards and give his relatives cash gifts. Leibowitz approached the pension plan in 2008 and suggested it invest in Invescor, a "national life insurance settlement brokerage firm" over which Leibowitz "exercised total control," the complaint states, according to Courthouse News Service.
The pension plan claims Leibowitz persuaded it to invest by showing it financial statements that showed Invescor's net income as $260,370 in 2006 and $383,984 in 2007, but “Invescor actually lost $1,326,100.49 in 2007," the complaint states.
The pension plan transferred $10 million to Investor via two $5 million loans. Each time a transfer came through, Leibowitz immediately gave himself a six-digit salary, paid off thousands of dollars in personal credit card debt, and doled out hundreds of thousands of dollars in cash to cronies, the lawsuit alleges.
Invescor failed to make interest payments on the loans, so the fund declared Invescor in default. When it demanded repayment of the loan, Leibowitz closed down his business.
The retirement system sued Invescor for breach of contract and default of the loan agreement. Since Invescor did not defend the action, the court awarded the system a $10,131,250 default judgment. While reviewing Invescor's financial statements, the retirement system discovered Leibowitz's misuse of company funds and moved to file an amended complaint naming Leibowitz as an additional defendant. The lawsuit asks for judgment against Leibowitz for at least $10,131,250.