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A former pension manager barred by the Securities and Exchange Commission convinced a former colleague to invest millions from the University of Michigan's endowment into funds that he represented, the Detroit Free Press reported.
William M. Stephens was barred by the SEC in 2002 from working for any registered investment adviser after engaging in a union kickback scheme. In an effort to repair his reputation, he sought out former employee L. Erik Lundberg, who oversees the University of Michigan's $11 billion endowment. The university invested $95 million into funds that Stephens represented, and Stephens earned $1 million in commissions. Officials at the University of Michigan did not say whether Lundberg disclosed his previous relationship with Stephens or Stephens's history with the SEC to university regents.
The SEC did not bring criminal charges against Stephens in this case. Instead, a civil lawsuit was filed after the SEC revealed that Stephens was working as an unregistered broker. He settled the case and the SEC took no action against the university.
The report comes among criticisms that the University of Michigan lacks proper financial oversight. An earlier investigation by the Detroit Free Press revealed that the university often invested money from the endowment back into the firms of major donors, raising concerns about conflicts of interest and ethical negligence.
