The Federal Bureau of Investigation recently had a long talk
with Karl E. White following allegations that he took part in what’s being
described as a possible Ponzi scheme.
Here’s how the Boston Globe summarized the events that led
the FBI to seek answers from White:
"Nine months after Karl E. White left his job as chief of the [Massachusetts Bay Transportation Authority] pension fund to join a New York hedge fund, he visited his former colleagues in Boston to pitch them on an investment idea.
"White, in his new job as chief investment officer of Fletcher Asset Management, told the authority’s pension board members in 2007 that he had devised an investment fund just for them, and that it was relatively low risk. They gave their prominent former leader $25 million to invest.
Today, that money is gone — a fact the MBTA has not previously disclosed — and a series of Fletcher hedge funds are bankrupt."
“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,’’ wrote Richard Davis, a
court-appointed bankruptcy trustee.
Gov. Deval Patrick (D-Mass) said the money’s disappearance
is “troubling.” The Massachusetts attorney general’s office, U.S. Securities and
Exchange Commission, and FBI are all investigating.
The Boston Globe reported that White claims he doesn’t know
what happened to the funds that the MBTA invested even though he held the title
of “chief investment officer” with Fletcher.
According to the newspaper, “White now works at a new
financial firm he started. He faces tens of thousands of dollars in federal tax
liens on his Beacon Hill home.”
White has served as a member of the FAMU Board of Trustees
since 2007.