The Detroit News reports that a US district judge in Chicago froze the assets of AA Capital and Orecchio and appointed a receiver to attempt recovery of misappropriated funds. The receiver has hired a forensic accounting firm to help his law firm conduct an investigation over the next few weeks, but he said that the firm’s investments were generally solid, according to the news report.
The company has insurance policies the receiver will approach to recoup losses. It is unclear how much the pension funds could lose due to Orecchio’s actions.
According to the Detroit News, Orecchio submitted more than $4.3 million in travel and entertainment expenses in the first nine months of 2006. Among other items, the SEC filing lists questionable spending by Orecchio that included:
- $1 million for political donations – $650,000 to the Michigan Democratic Party,
- $120,000 for entertaining clients at the 2006 Detroit Super Bowl,
- $43,000 for Chicago Blackhawks and Detroit Red Wings season tickets,
- $153,000 for entertainment at the Temple at Tao Las Vegas, Nevada, and
- Signed items by sports figures Don Mattingly, Brett Favre and Tiger Woods.
The SEC also alleged Orecchio diverted at least $5.7 million to various accounts, including more than $1 million to Lonyo LLC, which runs the Crazy Horse strip club in Detroit and $610,000 to a Michigan horse farm called M&J Animal Rescue LLC, according to the news report. A former employee for the horse farm told the Detroit News that Orecchio “didn’t spare any expense” to aid rescued horses and gave the farm’s owner lavish gifts, including a $400,000 diamond ring, two Bentleys and a Jaguar.
AA Capital Partners Inc. manages $194 million in assets for six pension funds, including $92.7 million from the Detroit-area Carpenters Pension Trust Fund and $75 million from Livonia-based Operating Engineers Local 324. The SEC claimed the company used money from union accounts to pay expenses. The company’s chief financial officer told the SEC the company does not keep a general ledger.
The Detroit News also reports that the Department of Labor issued a subpoena to AA Capital Partners Inc. in September from a separate investigation into losses in pension funds.