Theobald linked to Retirement Board investment
Former New Hampshire Retirement Board Chairman Edward Theobald had an interest in the company that was evaluating the board’s investment in Hermes Technology, a deal that partly led to his ouster from the board.
Theobald’s partnership – Maiden Lane Partners — had agreed in 2001 to invest some $300,000 in Prism Venture Partners, a company later brought in to conduct “due diligence” on the proposed Hermes transaction. For a while, Theobald directly invested in Prism funds, but at the end of 2002 it was Maiden Lane that had more than $134,000 invested in funds managed by Prism. Theobald still held an interest in Prism in August 2005, according to his Retirement System disclosure statement, though the amount of that investment was not disclosed.
The retirement system also had invested $80 million in Prism funds by March of 2005, according to Retirement System documents. It last voted to increase its investment in July 2004. There was no mention of any discussion of Theobald’s interest in the company in the board’s July 2004 minutes.
The board turned to Prism in February 2005 because it was frustrated by the pace of the evaluation of the potential Hermes investment being performed by its investment consultant, as well as the obstacles and “suspicions” raised by chief counsel Alan Cleveland.
To overcome these obstacles, principals at Hermes turned to Joseph Scanlon, a principal in the firm and a representative of Ark Asset Management, a company that provides investment advice to the Retirement Board.
Scanlon also had a relationship with Theobald. Scanlon had previously represented Pine Street Partners before the Retirement Board, according to Theobald in a June 10 letter explaining his actions to the board. At the same time, Maiden Lane was also investing in Pine Street, a side investment that was approved by the retirement board at the time. (See “Another retirement board deal raises questions,” NHBR Daily.)
As an Ark representative, Scanlon also had treated Theobald to a $200 game of golf, according to Theobald’s 2005 disclosure form filed with the state Retirement System. (Subsequently, in that June 10 letter, Theobald said he was unaware that Scanlon represented Ark.)
It was Scanlon who approached Theobald to invest in Hermes in 2004. Indeed, according to the original documents, Theobald was to be given a 2 percent interest in Hermes.
Theobald said he never ended up investing in Hermes, and later documents do not list him as one of the investors. However, he voted to delay a vote terminating the Retirement Board’s investment in the company until Hermes made a presentation, a vote that board later concluded violated its ethics policy.
It was a May 2005 letter from Ark to the Retirement Board about Scanlon’s dual role that led the board to embark on the ethics investigation. Ark had allowed Scanlon to resign from the company, the letter said.
But in February 2005, the hope among Hermes investors was that Scanlon would smooth things over because of his relationship with Theobald.
“I am uncertain exactly what to recommend of Ed and I know you two are very close,” Tom Stickel, a Hermes investor wrote Scanlon on Feb. 3. “I guess I would simply say to Ed, please take care of Cleveland … I’m certain you and Ed will figure this out ….”
Scanlon forwarded that message to Theobald an hour later.
At first, Hermes investors were concerned about the involvement of Prism, which they knew very little about. But two days later, Scanlon said that he talked to Theobald and Anthony V. Minopoli, a Retirement System consultant, and assured them that things would go smoothly
“prism very close to ed and tony, ed assures vetting will be quick …. eds fine and their prism will do vetting to keep Cleveland away …” according to a Feb. 5 e-mail sent by Scanlon.
According to Theobald’s June 10 letter, Prism was brought in because the “Hermes people” (including Scanlon) were frustrated over the lack of due diligence progress, and that Minopoli suggested Prism because it had the “deep technical expertise.”
Prism ended up pointing out some major flaws in the Hermes project, which led the board to withdraw the investment. Prism’s concerns also had been a contributing factor in leading Theobald to back away from the project, Theobald said.
In that letter, Theobald wrote: “I did not play any role in purporting to be an advocate for Hermes regardless of any impressions that one might take from what I view as self-serving e-mails from Mr. Scanlon.”
The letter did not mention Theobald’s interest in Prism. Calls to Theobald, his attorney, Prism and the Retirement Board were not returned by NHBR Daily deadline. Cleveland declined comment on the matter. – BOB SANDERS