Senior US District Judge Ellen Bree Burns of the US District Court for the District of Connecticut ruled that the US Securities and Exchange Commission (SEC) had adequately produced evidence alleging securities fraud against former state treasurer Paul Silvester and a Washington, DC private equity firm whose acts defendant William DeBella was accused of helping. DiBella was accused of facilitating a scheme in which he received state pension funds as a reward for past and anticipated future services.
According to prosecutors, Thayer Capital Partners allegedly hired DiBella and agreed to pay him a percentage of the pension fund’s investment with the firm. However, despite the alleged arrangement, DiBella had no involvement with the pension assets and “ultimately performed no meaningful work” related to the investment, the commission charged at the time.
Silvester later increased the amount of the investment by at least $25 million “solely to secure a larger fee” for DiBella, who eventually was paid a total of $374,500, the SEC added.
DiBella and his firm, North Cove Ventures LLC, had asked Burns to throw out the charges, contending that the SEC did not allege any primary securities law violations, such as material omissions by Thayer or Silvester.
Burns noted that, according to the SEC, Silvester had a conflict of interest because rather than basing his investment decisions on whether they would increase the value of the pension fund, he chose to use fund assets to reward DiBella. Not only that, but Silvester allegedly involved DiBella with the understanding that DiBella would not provide any meaningful work in exchange for the fees he received from Thayer.
As such, the complaint adequately alleged primary violations that occurred in connection with the sale of the Thayer securities, Burns ruled.
In 2000, Silvester settled charges related to his investment of other state pension assets (See Former Conn. Treasurer Gets More Jail Time ).
The case is SEC v. DiBella, D. Conn., Civil No. 3:04 CV 1342 (EBB), 11/29/05.
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