Sandra Navidi - SuperHubs - How the Financial Elite and Their Networks Rule our World

Upon leaving Kidder, Fletcher set up his own firm. Despite the fact that he had started out with little capital and a limited track record, he seemed to prosper almost beyond belief, displaying a lavish lifestyle and the accoutrements of wealth. Of slightly pretentious demeanor, he always looked dapper in expensive custom-tailored suits and a bow tie. His opulent offices on the forty-eighth floor of the venerable General Motors Building, with sweeping views of Central Park, included a personal dining room with a private chef and full-time waitress. He later moved offices to a pricey, ultra-elegant townhouse on East 66th Street and eventually settled at the prestigious landmark building in the heart of Wall Street. An assortment of luxury limousines—including a Mercedes, a Bentley, and a Jaguar—was at his disposal to be chauffeured in style. He owned not one but several apartments in the über-exclusive Dakota building on the Upper West Side adjacent to Central Park. The building is a historic landmark that has counted John Lennon, Lauren Bacall, Leonard Bernstein, and billionaire financier Wilbur Ross amongst its countless famous residents. He also bought several multimillion dollar homes in the Hamptons, and topped off his real estate holdings with a seventeen-room “castle” in Connecticut, including 1,100 acres of surrounding forestland.

Fletcher actively engaged in philanthropy early in his career and established a foundation in his name. The newly minted patron of the arts and sciences became a regular on the charity circuit and frequently hosted events at his glamorous Dakota apartment. In 2004, he pledged $50 million to support work on civil rights and $9 million to Harvard University. As is crucial for cementing a truly powerful network position, Fletcher also became involved in politics by giving to the Obama campaign. As a major donor, he was even invited to President Obama’s inauguration and hosted a star-studded pre-gala cocktail party. Through his alignment with major Wall Street donors such as Paul Tudor Jones and George Soros, as well as many others, a whole new world of networking opportunities opened up to him. He developed an excellent reputation, and his social standing steadily increased. The press feted him as a rising superstar. Later, his employees described him as a person who was quite different from his public persona. They claimed that he terrorized them with his irascible temper and disappeared for prolonged lengths of time. Joseph DiMartino, chairman of the Dreyfus Family of Funds and former senior adviser to Fletcher Asset Management, soon quit after believing that Fletcher was not sufficiently focused on his day job.10

Fletcher’s wife-to-be, Ellen Pao, had been an overachiever throughout her life. After graduating with an engineering degree from Princeton University, she went on to Harvard Law School and later to Harvard Business School. She began her career in Silicon Valley and eventually accepted a position at Kleiner Perkins Caufield & Byers. Kleiner Perkins is a highly respected venture capital firm with a mind-blowing track record of successful investments, including Amazon, Google, Netscape, and Genentech. There, Pao became head of staff for billionaire John Doerr, one of Kleiner Perkins’s most successful partners. It was an enviable position at the intersection of tech and finance with invaluable exposure to top people and unique opportunities.

Then Fletcher’s and Pao’s lives fatefully intersected in the summer of 2007 at the Henry Crown Fellowship Program at the Aspen Institute, a leadership seminar for extraordinarily gifted professionals. A whirlwind courtship ensued, culminating in a wedding four months later and the birth of a baby girl a few months thereafter.11 Perhaps most stunning was the fact that throughout his life Fletcher had been openly gay, for many years living with a male partner, and in 2005 accepted the Harvard Gay & Lesbian Caucus’s annual Civil Rights Award. Now in his early forties, Fletcher had arrived: He was a multimillionaire, established fund manager, respected philanthropist, and top political donor with a direct line to President Obama; had an Ivy League educated and professionally accomplished wife, and a baby. Life was great. And then his house of cards collapsed.

The catalyst was a lawsuit that Fletcher himself had launched. When the board of the Dakota denied his application to buy his fifth apartment in the building in April 2010, he sued for racial discrimination. The board countered that discrimination had nothing to do with the rejection. Fletcher had previously been elected to the board, his mother was on the board at the time of his application, and he had close social ties to many residents in the building. The board contended that Fletcher’s financial statements seemed inaccurate and that he could not afford the purchase. According to the board’s president, Fletcher “has virtually no liquid assets . . . is highly leveraged, with significant debt, [and] his current level of annual interest expense far exceeds his annual income.” He further noted that there was a “blurry distinction between Fletcher’s personal accounts and business accounts” and that he regularly withdrew money from his stake in the fund in the millions of dollars.12 The lawsuit set off a series of events that led to Fletcher’s eventual demise.

After the controversy became public, the Wall Street Journal reported further irregularities. Thereafter, three Louisiana pension funds sued, trying to recover $145 million. Upon liquidation, the court-appointed liquidator stated that $125 million appeared to have vanished and that investors’ monies were handled inappropriately, including the drawing of opaque and excessive fees at multiple levels and payment to Fletcher-affiliated entities without any benefit to investors and payment to Fletcher-affiliated entities. It also surfaced that Fletcher had financed his brother Geoffrey’s movie Violet & Daisy with $7.7 million of public-pension-fund money, an investment that unfortunately yielded a multimillion-dollar unrealized loss.13 According to the trustee’s report, “In many ways, the fraud here has many of the characteristics of a Ponzi scheme, where, absent new investor money coming in, the overall structure would collapse.”14

While building his impressive portfolio of prime real estate, cars, and relationships, Fletcher also continued to build an impressive portfolio of high-profile lawsuits. In addition to his racial discrimination suits against Kidder Peabody and the Dakota, he was sued by two of his Harvard friends-turned-employees, Michael Meade and Stephen Cass, who alleged sexual harassment after being fired for spurned advances. Eventually the suit was settled. A few years later, two caretakers at his Connecticut mansion also sued for sexual harassment and settled. By the same token, the donation Fletcher made to Harvard ended in a lawsuit. Instead of donating money as is customary, he had donated a contract to buy shares in a company called Calgene. However, Calgene stated that it had voided the contract prior to Fletcher passing it on. Harvard and Calgene eventually settled. Fletcher even managed to get his attorneys in trouble. The storied law firm of Skadden, Arps settled allegations that it had not adequately protected Fletcher’s investors for $4.5 million.15

At the height of Fletcher’s troubles, his wife, Ellen Pao, launched her own explosive lawsuit against Kleiner Perkins for gender discrimination, alleging that she suffered professional retaliation after spurning the sexual advances of a colleague, Ajit Nazre, and claiming systematic firmwide discrimination. The suit rocked Silicon Valley, which prides itself on its young, innovative, and merit-based culture. According to Pao, Nazre pressured her into a sexual relationship. When she broke it off, he—meanwhile promoted to senior partner—allegedly retaliated against her over the next five years by excluding her from meetings and curtailing access to business opportunities. In addition, she accused another partner of giving her a book containing “sexual drawings and strong sexual content.” To top it off, she claimed that when she brought her grievances to the attention of senior management, they were ignored.