The pioneering minority-owned consulting firm Washington Hackett Poitevien & Co. faces serious problems.
Among the difficulties:
Principal Christian Washington lied about his academic background on the Form ADV, which is filed with the Securities and Exchange Commission. A former SEC attorney said Mr. Washington could face civil and criminal charges. Mr. Washington has resigned from the firm.
The New Orleans-based firm resigned as consultant to the $1 billion Louisiana School Employees Retirement System, Baton Rouge, and dropped out as a finalist in the system's consultant search.
Washington Hackett is in default on a significant amount of money owed to the estate of Valerian Butler-Smith Jr., the father of Valerian Butler-Smith III, a former WHP principal.
The firm was terminated by the $365 million St. Louis Employees' Retirement System Dec. 28. Tina Poitevien, a principal with WHP, said the loss of the St. Louis account was unrelated to and preceded the disclosure about Mr. Washington.
*Clients are requesting the remaining principals meet with them to assess if WHP can still provide the services for which it is contracted.
Ms. Poitevien is scheduled to meet this week with representatives of the $70 billion New York State and Local Retirement Systems, Albany, for which WHP serves as manager of managers of a group of emerging managers.
Also, a trustee at the $513 million Atlanta General Employees' Pension Fund will ask the staff to review the firm to determine if it is still capable of providing contracted services.
Pension funds routinely conduct a review of a firm when a principal leaves. WHP has seven pension fund clients, said Ms. Poitevien.
Although Ms. Poitevien declined to identify the clients, Pensions & Investments learned WHP's additional clients include the pension fund for Atlanta-based Grady Health System, the Firefighters Pension and Relief Fund of New Orleans and the New Orleans Sewerage & Water Board Employees Pension Fund. Telephone calls to representatives of the pension funds were not returned.
It is not known how Mr. Washington's falsehoods became public. Some industry sources speculated the problem was discovered during a background check by the Louisiana system. Patrick Cosper, fund director, was ill last week and unavailable for comment.
"We began to get some inquiries from the rumor mill about Mr. Washington's educational background," said Ms. Poitevien. "We thought it was a fabrication, but in the process of talking about it, he informed us that there were inaccuracies in his educational background."
The principals, past and present, have denied knowledge of the deception.
No Yale, California degrees
Mr. Washington falsely claimed he graduated from Yale University with a master's degree in public policy management. He also claimed he had a bachelor's degree in economics from the University of California, San Diego.
He now admits he never attended Yale and attended the University of California, San Diego, for four years without receiving a degree.
Yale officials confirm there is no record of Mr. Washington's attendance.
Mr. Washington also said on his ADV form that he received his high school diploma from exclusive prep school Phillips Academy in Andover, Mass.; he repeated that assertion to a reporter. But a spokeswoman for the school said Mr. Washington was not a matriculating student and did not receive a diploma. He did, however, attend a summer session at the school in 1977, said the official.
Mr. Washington said he lied about his background because early in his career he thought credentials were more important than experience.
"My educational credentials came up maybe 10 times in 10 years," Mr. Washington said. "It's a mistake I made as a young man," said Mr. Washington, now 35.
"My partners didn't know and, in the interest of the firm continuing, I made a decision to depart."
Mr. Washington said he has not decided what he will do next.
"I'm not an attorney, but from everything I know right now, I haven't done anything illegal."
But John Heine, a spokesman for the SEC in Washington, said: "There is a specific statutory provision which says it is unlawful to falsify information on Form ADV. As to what might happen, it would depend on the facts and circumstances."
And, Edward A.H. Siedle, a former attorney with the SEC, said Mr. Washington might have broken the law and could face civil and criminal charges if he lied to an agency of the federal government.
WHP filed a Form ADV with the SEC because of its manager-of-managers affiliate. Pension fund investment consultants are unregulated.
"It's a violation of federal law to lie to the public in connection with offering investment advice," said Mr. Siedle. "There are all types of sanctions that apply.
"What's the worst that can happen? He can be thrown out of the business. The firm can be shut down," said Mr. Siedle. Mr. Siedle is president of New York broker/dealer ANVIL Institutional Services Inc.
Firm found niche early
Washington Hackett Smith & Co. was founded in 1987 in New Orleans by Mr. Washington, Toni Antrum - the former Toni Hackett - and Mr. Smith. The firm established its niche by specializing in searches for minority and women-owned money management companies.
The fund also ran trustee education seminars that were popular among African-American trustees that soon found themselves appointed or elected to retirement system boards.
Mr. Washington soon established himself as an articulate and thoughtful authority on the subject. He is widely credited with coining the term "emerging manager," which evolved as the debate about small managers turned contentious because it excluded small firms owned by white men.
In recent years, WHP - Mr. Smith left about five years ago, and Ms. Poitevien joined in spring 1994 - tried to broaden its client base by pursuing general consulting contracts and establishing an emerging manager trust.
Lacking a degree may have indeed prevented Mr. Washington from getting a foot in the door of the industry, but few would say -for the record, at least - that he was unknowledgeable.
"The lack of a degree (in this instance) is an issue of integrity, not professional competence," said Sheila Brown, a trustee of the Atlanta pension fund.
Trustee cites 'major' deception
Ms. Brown said she will request at the February trustee meeting that the staff do an examination of WHP to determine if the departure alters its abilities.
"He had been accepted in the industry without a degree," she said. "I can say I have never heard anything critical of his professional knowledge.
"I have never had reason to question his preparedness or competence as a consultant." Ms. Brown, nevertheless, described the deception as "a major one."
The revelation has the remaining WHP partners scrambling to distance themselves from Mr. Washington and to fortify client confidence in the firm.
Ms. Poitevien noted many of the remaining clients dealt with her or Ms. Antrum. Mr. Washington was the lead consultant to the Louisiana school fund, and he attributes his decision to leave the firm as the reason for WHP's resignation from the account, rather than the revelation of his falsehoods.
"There is no reason to believe this impacts the viability of the firm," said Ms. Poitevien. "Yes, we have resigned an account and lost one, but we have also gained three accounts in the fourth quarter," she said, declining to identify them.
Ms. Poitevien attributed the loss of the St. Louis account to a change in the board of trustees.
William Duffe, secretary and plan administrator for St. Louis, said there was no discussion on the motion that resulted in WHP's termination.