CT Treasurer Requests Investment Firm Probe

September 25, 2003 (PLANSPONSOR.com) - Possible ties to organized crime have Connecticut State Treasurer Denise Nappier calling for a criminal investigation into Pioneer Ventures Associates.

Nappier wrote about her concerns in a letter to Connecticut US Attorney Kevin O’Connor and Wayne Carlin, New York regional director for the US Securities and Exchange Commission (SEC).   “Can you confirm whether … Pioneer Ventures Corp., or any individual or entity associated with (Pioneer) are targets of any criminal inquiry or investigation of the violation of securities laws?” Nappier wrote, according to a Hartford Courant report.

The investigation request is in response to state pension investments made in 1999 by the Windsor, Connecticut-based firm into small companies whose shares were traded thinly as low-priced “penny stocks.” Their prices per share had plummeted, losing millions of dollars in investment value for state pensioners, now estimated at approximately $14 million on a $50 million investment.

Fuel was only add to the fire after a New York Post report last month that three of the penny stocks Pioneer put state funds into were also owned by Lancer Management Group, a family of investment hedge funds founded by financier Michael Lauer.   Lancer was shut down this year after the SEC found evidence that the funds’ portfolios were essentially worthless.

Additionally, two of the penny stocks owned both by Pioneer and Lancer were tied to Abraham Salaman, whom the Post labeled a “twice convicted organized crime figure.”   This raised concern that the two investment managers were in communication with one another on investments that have been alleged by federal regulators to be part of a stock-price manipulation scheme.

Silvester’s Legacy

Nappier’s concern of possible mob ties to Pioneer is the latest chapter in the saga that further unfolded when former state Treasurer Paul Silvester, who has pleaded guilty to corruption and awaits sentencing, testified that the $50-million investment in Pioneer was the worst deal he made during his tenure (See  Jury Slams Investment Firm For CT Treasurer Bribery Scandal ).   Overall, Silvester says that he invested state pension funds in the firm only because it was “favored by the governor.”  This was after Connecticut Governor John Rowland had personally sent Pioneer’s sales literature to the treasurer’s office before the deal was made.

In response to these accusation, a managing partner of Pioneer said any suggestion that his group was involved in criminal or improper activities is “not true,” Robert Lerman, said. “I’m very surprised by the letter that was written.”