Private Equity Partner Charged For Defrauding Funds
A senior partner at private equity giant Apollo Management, L.P. was named as a defendant in a Commission enforcement action for misappropriating over $290,000 by improperly charging personal expenses to funds he managed at the firm. Defendant Mohammed Ali Rashid was separated from the firm after he ignored warnings to halt the conduct. SEC v. Rashid, Civil Action No. 1:17-cv-08223 (S.D.N.Y. Filed Oct. 25, 2017).
Mr. Rashid began with registered investment adviser Apollo, an indirect subsidiary of alternative investment manager Apollo Global Management, LLC, in August of 2000. He rose to the position of senior partner. At the time of his departure in February 2014 Mr. Rashid was engaged in the business of advising private equity funds managed by Apollo affiliates, including several investment funds.
During the period 2010 through mid-2013 Mr. Rashid was an investment adviser to Apollo’s private equity funds. He led the firm’s efforts in metals and mining and generated, evaluated and executed a majority of Apollo’s transactions in the sector. He also monitored and implemented plans to enhance the financial performance of certain funds in the area.
The firm’s Travel and Expense Reimbursement Policies and Procedures permitted employees to charge their clients reasonable business and travel expenses incurred in the performance of their duties. Mr. Rashid executed an annual certification, acknowledging that he had completed compliance training that included these policies.
Mr. Rashid was issued a firm credit card to use in connection with business but not for personal charges. In 2010 Mr. Rashid began charging personal expenses to funds with which he was involved. Charges were made on the firm credit card. Mr. Rashid then claimed that the charges were business expenses on his monthly expense reports to Apollo. For example, in November 2010 Apollo’s CFO confronted Mr. Rashid about certain questionable expenses such as approximately $5,000 charges to a New York City apartment realtor billed to a fund as “research reports.” Mr. Rashid admitted those expenses and others were personal. The CFO told him it was not acceptable to bill personal expenses to the funds. At the time Mr. Rashid did not acknowledge that he had charged other personal items to the funds.
The next month, December 2010, Mr. Rashid continued billing personal expenses to the funds. He obtained pre-approval from an Apollo compliance officer for certain holiday gifts. The request was supported by a list of twenty-six portfolio company executives for whom he intended to purchase gifts. Over $3,800 was charged at one store and $800 at another for the gifts. In fact none of the executives received gifts.
Mr. Rashid continued the wrongful conduct, charging his vacation expenses to the funds. In 2012 he again charged a number of items that he claimed were for holiday gifts. When his assistance became suspicious and inquiry was made, Mr. Rashid again admitted the items purchased were personal. As in 2010, he was required to reimburse the funds.
Despite having been twice confronted and forced to make admissions of wrongdoing, Mr. Rashid persisted in the wrongful conduct. In 2013 a firm wide review was conducted. Prior to an independent forensic review, Apollo gave Mr. Rashid an opportunity to review his expenses since January 2010 and make any necessary adjustments. Again he admitted charging personal expenses to the funds. Overall, in 2013 Mr. Rashid repaid about $290,000 for personal expenses. The funds were reimbursed. The complaint alleges violations of Advisers Act Sections 206(1) and 206(2). The case is pending