Financier's career hits highest of highs and lowest of lows

Sun Staff

At the height of his brief career, Alan B. Bond was a Wall Street phenom, arich and telegenic guru whose stock picks were eagerly parsed during the greatbull market of the 1990s.

But now Bond, like the market, has crashed to Earth, and the reverberationsare being felt in Maryland. Investigators are probing investments he made onbehalf of the state's biggest public-employee pension fund.

He is in a New York City jail awaiting sentencing. In June, jurorsdeliberated for barely an hour before convicting him of swindling millions ofdollars from clients. On Friday, he pleaded guilty to additional charges ofconspiracy, fraud and tax evasion in an unrelated scheme.

Records show that the 41-year-old investor once owned 75 luxury and antiquecars, as well as homes in two states. His assets are frozen, his business isshuttered, and he is relying on a public defender.

His bail - backed by a mortgage on his parents' home - was yanked after theJune conviction. The judge sent him away in handcuffs, noting scornfully thatthe victims in the case were people who had "trusted Mr. Bond at a time whenothers were abandoning him."

Among them: Baltimore money manager Nathan A. Chapman Jr., a fellow staramong African-American financiers. Chapman had been hired to find minority-runinvestment firms for the State Retirement and Pension System, operated onbehalf of thousands of teachers, police officers and other government workersand retirees. He selected Bond as a "sub-manager" and entrusted $33 million ofthe state's cash to him.

Bond used more than $5 million of that money to buy stock in companieslargely owned and operated by Chapman. The investments boosted the fledglingfirms but lost money. Federal and state authorities are now investigating thetransactions, which experts say appear to represent a conflict of interest andmay be illegal.

Bond's fall has been almost as sharp as his rise. He was born in Queens,the son of a teacher. He graduated with honors from Jamaica High School, a NewYork public school, then received a bachelor's degree in economics fromDartmouth in 1983 and a master's in business administration from Harvard in1987.

He began his career as a sales associate at Wall Street's blue-chip Goldman Sachs Group Inc. but was accused of inflating his expense account and fired in1989, according to testimony at his trial.

It was a minor setback. Bond, who through his attorney declined to commentfor this article, became a portfolio manager for W.R. Lazard & Co., then thenation's largest black-owned money management firm.

Soon he was rubbing shoulders with Harrison J. Goldin, who had just retiredas New York City comptroller and wanted to create his own African-Americaninvestment company.

`Something great'

Goldin introduced Bond to John and Ernesta Procope, owners of the venerableE.G. Bowman Co., the largest black-owned insurance brokerage. They decided tojoin Goldin in backing the new venture, which Bond would lead.

Bond, Procope Capital Management went into business in 1991, making AlanBond one of the youngest African-American chief executive officers on WallStreet.

"We thought with his credentials, this would be something great," JohnProcope said. "Blacks don't have that kind of opportunity that often."

A few months later, Bond made a splash by winning a popular contest in TheWall Street Journal, in which stock picks by professionals were matchedagainst random selections made by the newspaper's staff using a dartboard.Bond's imaginary portfolio returned 37.5 percent over six months.

Bond became a fixture on PBS's Wall Street Week with Louis Rukeyser,traveling from his home in Montclair, N.J., to Owings Mills for tapings. Hewas one of the "elves" who predicted market trends. He was also a guest onCNBC and was widely quoted in newspapers and magazines.

Each year he brought scores of inner city kids to his offices forinvestment seminars, a program called A Day on Wall Street that was designedto expose the children to high finance.

Anthony Chappelle, publisher of Securities Pro, a newsletter aboutAfrican-American financial professionals, said Bond established himself asplayer on Wall Street, and his company grew to be one of the biggestblack-owned investment firms.

"Alan was highly respected," Chappelle said.

Despite a spotty investment record - Bond acknowledged in his trial thissummer that his 10-year return was below average - Bond, Procope compiled animpressive roster of clients.

The company invested hundreds of millions in pension money for players inthe National Basketball Association, bus drivers in Philadelphia andWashington, and city workers in Birmingham, Ala. In 1997, Maryland's systemwas added to the list.

`A lackluster job'

One of the first to invest with Bond, Procope - and among the first to dumpit - was the Pennsylvania Municipal Retirement System.

"He was a fresh firm. We gave him some money, and he did a lackluster jobthe first year," said James B. Allen, secretary of the municipal system.

In the second year, the firm missed its investment goals, and Allen andother officials went to New York to meet with Bond. "I'll never forget thatwhen we came out of his office," Allen said, "the comptroller and I looked ateach other and said, `He doesn't have a business plan that we can becomfortable with.'"

The agency dropped Bond in 1994. But other clients kept coming, attractedby his media appearances and the racial diversity his firm could provide. Withhis wire-rim glasses and unflashy demeanor, he exuded confidence andstability.

"We were very impressed with him, his Ivy League background and hisappearances on Rukeyser," said Robert Cowman, chief investment officer for theOhio Bureau of Workers' Compensation.

The bureau, which invests workers compensation insurance premiums paid byemployers, hired Bond in 1997. "He was very charismatic, well-spoken,intelligent and very knowledgeable in the investment area," Cowman said.

The investments performed adequately, and the agency stayed with the firmfor about a year after Bond's first indictment in December 1999. The Ohiobureau operated its own trading desk, buying and selling stock as ordered byits money managers, which turned out to be fortunate.

First indictment

Other Bond clients weren't so lucky. According to the 1999 charges to whichhe pleaded guilty Friday, Bond conspired with a broker to inflate the fees forhis clients' stock transactions beginning in 1993. In exchange, he kept aportion of the proceeds. These "kickbacks" totaled nearly $7 million from 1993to 1998.

The Securities and Exchange Commission accuses Bond of spending the moneylavishly, buying 75 cars and going on shopping sprees at Saks Fifth Avenue. Inone month, Bond charged $470,000 on his American Express card. The governmentsays clients' money was used to pay his dues at the Harvard Club, buy hosieryat Bloomingdale's, and to cover other apparently personal expenses.

When federal agents began asking questions in 1998, the Procopes andGoldin, who have not been implicated in the scheme, pulled out of thepartnership. Bond, Procope became Albriond Capital Management, an amalgamationof Bond's full name, Alan Brian Bond.

"When we heard there was something wrong, we dropped out," said JohnProcope. "We were very disappointed."

When the criminal charges on the kickback scheme were filed, Bond had 25clients and more than $600 million under management. Business dried upquickly. Clients withdrew their money. Rukeyser announced that Bond would nolonger be a guest.

But Chapman was considerably more patient.

On Dec. 1, 1996, a firm controlled by Chapman bought the "minority equitytrust," a fund that specialized in selecting minority- and women-owned moneymanagement companies for institutional clients. The minority trust's biggestcustomer was the Maryland pension system.

Two months after buying the trust, Chapman added three new managers -including Bond, Procope, to which he gave $10 million of state money toinvest.

By late 1997, Chapman's trust was managing $109 million of the Marylandpension fund, a sliver of the system's assets - now about $27 billion.

Subsequent charges

As other clients pulled cash out of Albriond, Chapman poured more ofMaryland's money in. Telling state officials that the charges against Albriondwere "trumped up," he invested an additional $10 million of the pensionsystem's money with Albriond in 2000 and 2001. In total, state documents show,Chapman put Bond in charge of $33 million of state money, an investment thatshrank to $14.2 million by the time it was liquidated last year.

Clients who stuck with Bond in 2000 and 2001 paid a high price for theirloyalty. Facing more than $1 million in legal bills on the kickback charges,Bond hatched a new scheme beginning in March 2000, just a few months after hisindictment. The victims: municipal pension funds in Alabama and Virginia, andChapman's minority trust, made up mostly of Maryland pension system money.

According to prosecutors, Bond "cherry-picked" trades he directed,reserving for himself the profitable ones and sticking his clients with mostof the losing ones. An improbable 97 percent of the trades credited to hispersonal account made money between March, 31, 2000, and July 31, 2001.

Bond's clients, including the Maryland pension system, lost $54 million,while his $260,000 personal account grew to $5.5 million. Meanwhile, Chapman'saccount with Albriond lost 63 percent, or $40 million - much of it Maryland'smoney.

Bond, appearing as the only defense witness at his trial this summer,testified that he made the money in rapid-fire "day trades" that were toorisky for his clients. He blamed the market drop for his clients' losses.

The jury didn't buy it. He was convicted on all counts related to thecherry-picking scheme and faces nine to 11 years in prison.

Maryland investigation

Investigators are now exploring the circumstances under which Chapman gaveBond state money that ended up being invested in Chapman's company, somethingexperts say is a conflict of interest. SEC officials have told the Marylandsystem that the transactions appear to be illegal.

Moreover, the timing - and price - of the investments has raised suspicion.State records show that Bond twice bought stock in Chapman ventures when firstsold to the public, the initial public offering. The second time, Bond paidalmost twice what the stock ever sold for on the open market. When the pensionsystem finally disposed of the stock, it was worth pennies.

Chapman, who resigned Friday as chairman of the state university system'sBoard of Regents, declined to comment for this article. He has not beencharged with any crimes and denies any wrongdoing. He and the other victims ofthe cherry-picking scheme have filed a lawsuit to recover some of the lossesfrom the brokerage Bond used.

Chapman said that he informed state officials about Bond's investments inhis companies and that they didn't protest. The pension board fired Chapman inJanuary when it learned the SEC was investigating.

`Knew it was wrong'

At Friday's proceedings in New York, Bond, dressed in dark blue jail garband closely guarded by a pair of U.S. marshals, appeared chastened.

He acknowledged that he was guilty of conspiracy, investment-adviser fraudand tax evasion. Prosecutors dropped wire fraud charges as part of a pleabargain. The agreement has been sealed, and it is not known if Bond hasdropped plans to appeal the June conviction in the cherry-picking scheme.

The kickback charges to which Bond pleaded guilty Friday carry up to 40years in prison and $10 million in fines. He could undoubtedly provideinformation helpful to the investigators looking into the Maryland pensionfund transactions, though lawyers on both sides refuse to discuss thatpossibility.

Reading from a statement, Bond, who is married and has three children,calmly told the judge, "I knew it was wrong to take money of my clients for myown benefit."

John Procope lamented the fall of someone once so full of promise. "He wassuch a bright young man, and so soft-spoken. I don't know what happened tohim. You would never dream he would put his hand in the till."

Sun staff writers William Patalon III and Michael Dresser contributed to this article.

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