DELRAY BEACH, Fla. (CN) – A local chapter of the Alzheimer’s Association says its chairman siphoned off more than $1 million to prop up his investment fund and to capitalize his daughter’s start-up Internet business. The group claims the chairman, a former attorney at Ft. Lauderdale-based Ruden McClosky, squandered its dwindling reserves on unsecured loans for risky Bahamian land deals.
The Alzheimer’s Association, which funds Alzheimer’s disease research and provides services to families affected by the disease, claims the former chair of its Southeast Florida chapter, Patrick Moran, offered little if any disclosure of the conflicts of interest that it says plagued his management of its cash reserves.
In a breach of fiduciary duty complaint in Palm Beach County Court, the Alzheimer’s Association claims that Moran repeatedly violated its trust from 2005 to 2006.
The organization claims Moran transferred its money without authorization to fellow Ruden McClosky partner Bruce Bernstein’s investment fund, in which Moran was seeking an ownership interest. Moran stood to gain from the fund’s operation, and in an effort to meet the fund’s minimum balance requirements, he quietly supplied Bernstein with $1.1 million from the Alzheimer’s Association’s sale of its Delray Beach support center, according to the complaint.
The fund, operated under Ruden McClosky’s capital management arm, was to shut down in December 2005, but Moran’s move kept the fund alive, the complaint states.
Alzheimer’s Association attorney Phillip Ward said in an interview that as far as he could tell, there was “no disclosure” to the organization’s board members.
According to the complaint, Moran tried to validate the unauthorized transfer after the fact, when he persuaded the board to contribute a large sum to Bernstein’s fund. The complaint states that unbeknownst to the board, Moran had transferred the Alzheimer’s Association’s cash to the fund a month earlier.
Ward said the Alzheimer’s Association was frustrated to discover a cascading pattern of questionable investment practices by Moran. He said that although the board told Moran it was not interested in risky investments, Moran used Alzheimer’s Association money to finance poorly collateralized loans for speculative Bahamian land purchases.
Bernstein and Moran had worked with the recipients of these loans in previous land deals, Ward said, and most of the deals went sour.
Ward questioned why the pair did not properly collateralize the Alzheimer’s Association’s investment after they had watched the same borrowers bail on their financial obligations in previous deals.
According to the complaint, Moran and Bernstein persisted because they were positioned “to make incredible profits” on land purchases funded by the Alzheimer’s Association’s money.
The Alzheimer’s Association recites further allegations of unethical behavior in the complaint: It claims that without notifying the board, Moran dumped $450,000 into his daughter’s Web site for prepubescent girls, GoGoddess.com.
Moran could not be reached for comment.
He is no longer with Ruden McClosky, and according to Ward he may have moved back to his home state of Michigan. According to the complaint, Moran has been licensed to practice law in Michigan since 1972 and was admitted to the Florida Bar in 2002.
His legal profile at Spoke.com describes a wide-ranging career in corporate law. The profile states: “Mr. Moran … has extensive litigation experience. He has argued in the United States Supreme Court on issues of privacy and auditing rights of companies in interstate commerce. … [He] has also put together and administered white collar crime teams for regular corporate clients, coordinating the services of national authorities in the field.”
Ward would not comment on how much money allegedly was lost while Moran ran the board. The Alzheimer’s Association’s estimates are tentative, he said, as they’re based on incomplete 2008 financial statements.
Ward added that Ruden McClosky’s lax oversight of its capital management arm facilitated the alleged misappropriations.
The firm and its financial advisory branch, Ruden McClosky Capital Partners, are also named as defendants, along with RB Investment Group, Bernstein, and Moran’s wife, Valerie.
Ward is a managing partner of Ward, Damon, Posner, Pheterson & Bleau in West Palm Beach.