By Paul Merrion
CHICAGO — Court-appointed lawyers and forensic accountants are examining AA Capital Partners Inc. to determine how the small investment firm allegedly diverted more than $10.7 million from pension fund clients to cover its losses and support the firm's president and his outside business interests, including a Michigan horse farm and a strip club in Detroit, according to court documents.
After a nine-day audit in August, the Securities and Exchange Commission won a court order in September to appoint a receiver and freeze the assets of Chicago's AA Capital, which manages $194 million for six union pension funds, including $68 million in cash accounts under its control. Judge Robert Gettleman of U.S. District Court in Chicago set a status hearing on the receivership for Oct. 19.
"We thought it was important to act as quickly as possible," says John Sikora Jr., the SEC's assistant regional director in Chicago. "This scheme was jeopardizing the retirement funds of union workers." Court documents indicate most of the firm's pension fund clients are from the Detroit vicinity, with none from Illinois.
The rock ‘n' roll lifestyle of AA Capital co-owner John Orecchio, now suspended as president, was intertwined with the firm's disarray, according to the SEC.