Have College Endowment Funds Been Victimized by Unscrupulous Brokers?

 

Recently released figures show that colleges across the nation suffered a 19 percent decline in their endowments in 2009. Some school endowments have reported even steeper declines, including Georgia Tech (26%), the University of Georgia Foundation (23%), and Emory University (21%). While the financial markets as a whole experienced a significant downturn in 2008, the stock market began rebounding in early 2009 and many investment portfolios have since regained much of their value?but not all. According to an article in the Atlanta Journal Constitution, Emory has had to cut its expenses by $50 million a year and eliminated 500 administrative positions, despite having one of the richest endowments in the country. Smaller schools with more modest endowments are in a more precarious position, because a single bad investment may threaten the very survival of the institution.

Like any investor, those who manage college endowments should examine their portfolios and determined whether the declines they suffered are due to cyclical fluctuations in the market, bad investment decisions, or?worst case scenario?fraudulent or unethical conduct by brokers and investment advisers. According to Craig T. Jones, an Atlanta attorney who represents investors in securities fraud lawsuits and arbitrations, “many institutional investors including colleges, foundations, and labor unions may be able to recover losses from unscrupulous brokers if misrepresentations were made or the risks of particular investments were not properly disclosed. Just because you are big does not mean you cannot be a victim of financial fraud.”

Jones’ law firm, Page Perry, represents investors of all stripes?individuals, family businesses, corporations, and even charitable foundations?that were induced into making bad decisions by brokerage firms, investment banks, or investment advisers who concealed facts or cut corners. “When you are trusting someone with your money,” says Jones, “you expect them to look after your best interests. Unfortunately, that does not always happen.”

While laws differ from state to state, there are a variety of legal theories under which bilked investors may be able to bring claims. Fraud, suitability, breach of fiduciary duty, negligent misrepresentation, breach of fiduciary duty, and violations of securities laws are commonly raised, but each type of claim has a different statute of limitations, depending upon what state’s law is applicable. Typically those statutes of limitations range from two to four years, but they can be as short as one year or as long as ten. In short, time is of the essence, and any institution or individual who believes that their losses may have been due to something more sinister than a “bad market” needs to act quickly to explore their legal options.

Jones’ firm is located in Atlanta but handles cases all over the country. “Most of our cases are handled in arbitration,” he says, “which is quicker, less expensive, and less public than going to court. If you think that you or your organization may have a case, we would be happy to meet with you discretely and confidentially to assess your options.”