Boston Business Journal – July 17, 2010
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VC showing signs of recovery
Boston Business Journal – by Galen Moore
Industry tracker Dow Jones Venturesource hailed a return to pre-recession levels in venture capital investing in the second quarter of 2010, but when combined with a dismal Q1, the venture industry remains on track for a $20 billion to $25 billion year in 2010.
VCs invested $7.7 billion over 744 deals in Q2, a 26-percent increase over the dollars invested, and 13 percent above the deals done in the same period in 2009.
Massachusetts enjoyed its share of the upswing, with $792.2 million invested over 81 deals – a 19 percent increase in activity, and a 56-percent increase in volume, over the year-ago period, when investors put $508.2 million to work over 68 deals.
However, New York was a fast follower, with $412.2 million invested in 63 deals. California remained the leader by far, with $3.96 billion invested over 296 deals.
Nationally, average deal size broke the $10 million mark for the first time since before the fall, 2008 financial collapse, reaching $10.4 million on the strength of outsize deals in the energy sector, where the average deal sizze shot to $43.8 million, compared to $22.6 million in Q2, 2009.
The New England region’s largest energy deal on the quarter was Westborough-based lithium ion battery maker Boston-Power Inc., which took $62 million – up from $60 million initially reported – from existing investors Foundation Asset Management, Oak Investment Partners, Venrock and Gabriel Venture Partners.
However, the region’s biggest deal of the quarter closed in the IT sector. In April, Summit Partners invested $96.5 million Casa Systems Inc., an Andover-based company that makes network equipment for delivering video over cable.
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Lisa van der Pool – Article Courtesy of the BOSTON BUSINESS JOURNAL
TV’s decline follows heady days of Mad Men
Not that we needed any more evidence that those days are gone, but research firm Yankee Group reported this week that the U.S. ad market will decline by more than $1.6 billion in 2009.
The steep drop-off is due to an oversupply of media, which Boston-based Yankee Group details as an average of 119 TV channels to choose from. Those programmers are competing with a “trillion internet links and more than a million mobile Web sites,” according to the company.
That oversupply is also driving a $2 billion decline in TV advertising alone this year, per the Yankee Group.
The company notes that “the market power of television is being eroded by dramatic growth in IP networks and their corresponding capacity to carry advertising.”
Indeed, the company forecasts there will be more than 477 million wired broadband users by the end of 2009, a jump of more than 50 million since 2008.
Ironically “Mad Men” itself is a victim of increasingly fragmented TV audiences. The show’s season 3 premiere on Sunday drew a record live audience of 2.8 million viewers. And although that number is a 33 percent increase over last year’s season premiere, it’s still a viewership that’s less than half of other original cable series. For example, TNT’s “The Closer” averages about 7 million viewers per episode, according to Forbes.com.
Even Utz potato chips, a popular snack brand during the 1960s that still exists today, relies on clever product placements in “Mad Men” rather paying for pricey TV campaigns.
For veteran ad men nostalgic about the good old days when it was easier to get the attention of consumers and cocktails were thrown back at the office to celebrate a new business win, there’s always “Mad Men.”
Categories: Media & Marketing
Companies: Yankee Group
Adviser leading ‘double life’ stole $57M for planes, mistress
The U.S. Attorney’s Office in Massachusetts yesterday indicted John Doorly, who has managed the trust funds left behind by wealthy New England industrialist Frederick Ayer, on charges that he looted millions of dollars from the family for more than a decade.
The Ayer family, which has several hundred million dollars in trusts held for more than 100 of the industrialist’s descendants, began asserting in 2006 that Mr. Doorly had stolen family money for his personal use.
And through a family attorney, the Ayer’s noted that the federal indictment now “clearly spells out how Doorly led a ‘double life’ and exploited the trust of his victims” to provide personal extravagances to “himself, his wife and son, and his mistress.”
The attorney went on to put Mr. Doorly in some dubious company: “Doorly looted this family out of tens of millions of dollars and joins the likes of disgraced money manager [Bernard] Madoff,” stated Will Nystrom, an attorney a Boston-based law firm Nystrom Beckman and Paris LLP. Marc Salinas, an attorney at Andrews & Updegraph P.C. representing Mr. Doorly, said his client denies all of the allegations in the indictment and will plead not guilty to all of the charges. Mr. Salinas said that his firm is in the process of reviewing the indictment and is planning for a trial, although a specific date for a court hearing has not yet been set.
Mr. Doorly, 60, allegedly pilfered the assets from the Ayers family trust through various different tactics, according to charges in the indictment. He is said to have stolen roughly $10 million over the course of eight years when he “systematically overcharged” the trusts for accounting and administrative fees that were 60% greater than the trusts’ actual operating expenses, according to the indictment.
Mr. Doorly, who was also responsible for managing the cash portion of the Ayers’ family trust, allegedly managed to steal another $13 million from an internal money market fund he created and oversaw for the family.
The money was then used by Mr. Doorly to fund a number of personal purchases and business ventures, according to federal investigators. Aside from buying real estate, three airplanes, timeshares and golf club memberships, the indictment claims that Mr. Doorly put the money toward the “payments of extravagant credit card expenses,” investments in side businesses, real estate, and construction projects, and also to make “unsecured loans to friends and acquaintances.”
If convicted on the charges brought by federal investigators, Mr. Doorly faces up to 20 years in prison, followed by five years of supervision and a fine of up to $250,000.
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Attorney Marc Salinas:
Marc Salinas is a trial attorney whose practice areas include criminal defense, civil litigation and domestic relations. Marc was born in Boston, Massachusetts and attended Suffolk University and Suffolk University Law School where he was a member of the National Trial Teams.
Marc has successfully represented individuals and small companies throughout the Commonwealth of Massachusetts.
He is admitted to practice in the Commonwealth of Massachusetts and in the United States District Court for the District of Massachusetts.
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Case highlights family office risk
Boston Business Journal – by Craig M. Douglas & Todd Wallack Journal staff
Lowell industrialist Frederick Ayer Sr. and his descendants built a $600 million fortune over more than a century. But a family confidant allegedly siphoned about $58 million away in a few years, exploiting his position with the family office that manages the estate, according to a lawsuit by the firm.
That case, being played out in the Business Litigation Session of Suffolk Superior Court in Boston, offers a rare glimpse at the inner workings of the clubby and highly guarded world of family offices, the corporate entities often tasked with managing the day-to-day operations of large family trusts and other wealthy estates. The saga also highlights a little discussed but unavoidable fact in the arena of wealth management: Many family offices are vulnerable to fraud, especially by trusted insiders.
“It’s a fear that every wealth owner has,” said John Benevides, president of Family Office Exchange LLC, a Chicago company that advises more than one-tenth of the estimated 3,500 family offices in North America.
Adds Carrie Seligman, director of U.S. Trust’s estate and financial planning division in Boston: “If a trustee is bad, fraud isn’t difficult. It’s like giving away the keys to the safe.”
In the case of the Ayers, court documents and interviews indicate the trusts may have been especially vulnerable because of the complexity of the estate, relaxed oversight and what the family claims are auditing failures.
Tenens Corp., the family company charged with managing the estate for more than 100 relatives, operated in relative obscurity for years under the name Essex Street Advisors from a woodsy, non-descript group of offices in Beverly.
But the tranquility was shattered in March 2006 when Essex Street CEO Caleb Loring III terminated a longtime employee, John F. Doorly, after learning about a suspicious transaction, according to court filings.
Within days, Essex filed suit against Doorly, accusing him of stealing millions of dollars from the family fortune — money he allegedly spent on everything from a Gulfstream jet to gifts for his mistress and family, including a luxury condo in Boston’s Back Bay for his son’s girlfriend.
Doorly, 57, denied stealing any money, insisting many of the withdrawals were used for loans and investments that are still earning money for the Ayer estate. In fact, he argues that the jet and other properties were long on the family’s books, but were simply unnoticed due to lax oversight.
Doorly, a graduate of St. Mary’s High School in Lynn, joined Essex Street in 1973, when he was a self-described computer operator. He never earned a college degree, but he eventually became the company’s chief operating officer, managing most of the company’s daily operations, including the payroll and some of the family’s investments.
But over the last 14 months, Essex Street said in the lawsuit, its forensic accountants uncovered evidence that Doorly used a variety of schemes to steal more than $58 million, far more than Essex initially thought was missing.
Even more troubling, Essex Street alleged the embezzlement began at least a decade ago without detection.
According to court papers, it appears Ayer family members didn’t identify the missing money earlier for several reasons. Among them:
- The complexity of the trust. According to the lawsuit, Essex Street maintained a network of 300 trusts for more than 100 family members, making money difficult to track.
Rather than operate as a single trust, the Ayer estate was set up as a so-called “separate shares” trust, whereby new trusts were added as the family tree grew. And each of the trusts requires trustees. But trust experts say separate-shares trusts can be complicated as the number of beneficiaries grows, as trustees often run into roadblocks when making decisions that require input from all family members.
“Some beneficiaries are very passive,” said Bob Holdway, a vice president with Fiduciary Trust in Boston, speaking generally. “As a good trustee, you try and reach out to them. But there are always some who are used to running on auto pilot.”
- Inadequate oversight. Doorly testified that Loring, the CEO, and other trustees were rarely in the office, leaving Doorly to manage the operation largely on his own.
“I would be the first one in, last one out, seven days a week averaging 70 hours doing my work as well as work that should have been performed by Caleb Loring III,” Doorly said in his sworn affidavit.
A Loring associate, speaking on the condition he not be identified, said the characterization is unfair.
- Auditing failures. Although Essex hired outside auditors, it appears they didn’t catch the missing money. Essex accused one auditor, Vitale Caturano & Co., of following Doorly’s instructions to ignore many of the accounts, leaving Essex Street vulnerable. Vitale said it did what it was hired to do.
Essex has sued Vitale and others in the case to try to recoup the missing money. But it has saved most of its ire for Doorly, calling him in a prepared statement a trusted employee who “abused that trust by looting the family’s cash accounts to enrich himself.” The family also vowed to pursue any parties who benefited from or aided the alleged theft.
Benevides says there are a number of safeguards families can put in place to protect themselves, including annual audits, strong internal financial controls and the screening of new hires. His firm’s research indicates that nearly three-quarters of its members had audits in the last two years, though audits can vary widely in scope.
But Benevides warns: “As any auditor will tell you, if someone has the intent to defraud, it is very difficult to detect.”
Essex Street has recovered around $9 million in cash and real estate from Doorly and Doorly-affiliated entities, according to court filings. Suffolk Superior Court Judge Allan van Gestel recently ruled that Doorly defied a court order to disclose and freeze his total income and assets. Doorly has since been forced to roll hundreds of thousands of dollars in cash into an escrow account.
It’s unclear, however, how much more Essex Street will be able to recoup. As of January, Doorly said he had an annuity worth $1.4 million, a time share at the Ritz Carlton in Jupiter, Fla., and two Cadillacs and a Jaguar. He also has claimed that Essex Street’s accounts hold around $2.5 million of his money.
Meanwhile, his personal life appears to be unraveling. Earlier this year, Doorly’s wife of 34 years, Maryjane Doorly, divorced him after learning through court filings that Doorly had a mistress. And as of a few months ago, John Doorly, who now lives in Peabody, was unemployed.
Meanwhile, the office of U.S. Attorney Michael Sullivan has issued a number of subpoeanas as it investigates the matter, a person directly involved in the case said.
Craig M. Douglas can be reached at cdouglas@bizjournals.com. Todd Wallack can be reached at twallack@bizjournals.com.
U.S.: Exec John F. Doorly jetted off with $20M from Ayer trust
A Topsfield man has been charged with stealing $20 million from a family trust and spending it on Gulfstream jets, a waterfront condo in Florida, golf club memberships and girlfriends.
John F. Doorly faces up to 20 years in jail on multiple counts of mail fraud and money laundering arising from an alleged scheme to defraud more than 100 descendants of 19th century industrialist Frederick Ayer, according to the indictment filed in District Court by U.S. Attorney Michael J. Sullivan.
Ayer and his family built a $600 million fortune over more than a century. The Ayers include descendants of World War II hero Gen. George Patton, who married into the Ayer family in 1910.
Authorities allege that Doorly, the 60-year-old former chief operating officer at Tenens Corp., used his position to steal funds to buy himself, his family and his girlfrends real estate, cars, three airplanes, timeshares and golf club memberships at the Ritz-Carlton Golf Club & Spa in Jupiter, Fla. Doorly was fired in March 2006 after the company said it learned of his alleged scheme.
In a separate civil lawsuit, the Ayer family alleges Doorly engaged in “systematic looting” of $57 million from the trust.
Similar, though on a much smaller scale, to the case of Bernard Madoff – the former Nasdaq chairman who has been charged with a $50 billion Ponzi scheme – investigators allege Doorly hid the theft by manipulating internal accounting systems and sent false statements to trust beneficiaries.
The indictment says that from 1999 to 2006 Doorly transferred millions of dollars from the trust for his own purposes, including payments of extravagant credit card expenses.
Doorly’s attorney, Marc R. Salinas, said his client denies all the allegations and will plead not guilty.
Through a spokesman, the Ayer family said they are pleased Doorly has been indicted.
“Doorly led a double life and exploited the trust of his victims, stealing their money for personal extravagances for himself, his wife and son, and his mistress,” the statement said. “He looted this family out of tens of millions of dollars and joins the likes of disgraced money manager Madoff. We are heartbroken by Doorly’s personal betrayal and stunned by the scope and audacity of his criminal acts.”
Article URL: http://www.bostonherald.com/business/general/view.bg?articleid=1156521
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The United States Attorney’s Office
District of Massachusetts
FOR IMMEDIATE RELEASE
Thursday, March 9, 2009
WWW.USDOJ.GOV/USAO/MA
CONTACT: CHRISTINA DiIORIO-STERLING
PHONE: (617)748-3356
E-MAIL: USAMA.MEDIA@USDOJ.GOV
FORMER CHIEF OPERATING OFFICER OF TRUST MANAGEMENT COMPANY INDICTED FOR FRAUD
BOSTON, MA – A Topsfield man was charged yesterday in federal court with multiple counts of mail fraud and money laundering arising from his scheme to defraud the clients of his former employer, Tenens Corporation.
United States Attorney Michael J. Sullivan and Jerry Cormody, Acting Postal Inspector In Charge of the U.S. Postal Inspection Service, Boston Division; Warren T. Bamford, Special Agent in Charge of the Federal Bureau of Investigation, Boston Field Division; and Joann Zuniga, Acting Special Agent in Charge of Internal Revenue Criminal Investigation – Boston Field Division, announced today that JOHN F. DOORLY, age 60, was charged in an Indictment that alleges that DOORLY misappropriated more than $20,000,000 from trust beneficiaries whose wealth was managed by Tenens Corporation. The Indictment alleges that DOORLY, Tenens Corporation’s Chief Operating Officer and an employee for more than thirty years, used his position of trust with the company to steal funds for his own purposes including the purchase of real estate, cars, three airplanes, timeshares and golf club memberships for himself, his family and friends; investments in businesses, real estate developments, and construction projects for DOORLY’s benefit; and unsecured loans to DOORLY’s friends and acquaintances. DOORLY concealed his misappropriations by means of wrongful manipulations of the internal trust accounting system, and caused false accounting statements to be mailed to trust beneficiaries that further concealed his actions.
If convicted on these charges, DOORLY faces up to 20 years imprisonment, to be followed by 5 years of supervised release, and a $ 250,000 fine.
The case was investigated by the U.S. Postal Inspection Service, Federal Bureau of Investigation and Internal Revenue Service. It is being prosecuted by Assistant U.S. Attorney Lori J. Holik of Sullivan’s Economic Crimes Unit.
The details contained in the indictment are allegations. The defendant is presumed to be innocent unless and until proven guilty beyond a reasonable doubt in a court of law.
