Pittsburgh foundation claims in suit that investors took $2 million
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The Downtown-based Claude Worthington Benedum Foundation has sued a New York-based financial adviser and his firm, alleging that they were complicit in costing the charity $2 million, in a case that was transferred to federal court today.
The foundation's civil complaint, originally filed in the Allegheny County Common Pleas Court nearly a month ago, names as defendants William Francis Harley III and Fursa Alternative Strategies LLC, both based on Long Island. According to the complaint, they now "operate out of the basement of a Hooter's restaurant."
The foundation in 2005 placed $2 million in an offshore investments fund run by Mellon Holdings LLC, the complaint said. But Mellon Holdings divested itself of the fund, and Mr. Harley, through Fursa, bought it, the complaint said.
When the foundation sought updates on its holdings, Mr. Harley and Fursa reported steep declines in the balance, culminating in a 2008 statement that the investment had withered to $306,376, the complaint said. They told the foundation that it would get some of its money back, the complaint said, but then became incommunicado.
"Defendants closed the company's offices, shut off their phone and ceased communication," the complaint said. "Subsequently, it has been discovered that defendants have continued to operate with the foundation's money, yet have never returned any of the money."
Mr. Harley and Fursa, it said by way of example, in 2010 bought 8 million shares of Frederick's of Hollywood stock, raising their holdings to 17 million shares.
The foundation accused them of converting its funds from their lawful use, breaching fiduciary duties, committing fraud and misrepresenting themselves. It demanded its money back.
An attorney for Mr. Harley and Fursa exercised their right to move the case to federal court, noting that it involves residents of two states and potential damages of $2 million. A phone number listed for Mr. Harley was disconnected, and his attorney could not be immediately reached.
First Published September 25, 2012 1:09 pm