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Musk-Tied Investor Clashes With One of World’s Biggest Asset Managers

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Musk-Tied Investor Clashes With One of World’s Biggest Asset Managers

A prominent Silicon Valley investor is in a bitter dispute with his former employer, one of the world’s largest asset managers, accusing it of fraud and attempted bribery.

In a lawsuit filed on Thursday in California, Josh Raffaelli, who until late last year was a fund manager at Brookfield Asset Management, said the company had mistreated investors in his funds as it sought to make up for losses in other parts of its business.

The 100-page complaint is notable in part because Mr. Raffaelli has close ties to Elon Musk, the world’s richest man. That relationship enabled Mr. Raffaelli’s funds to put money into Mr. Musk’s private companies, a coveted opportunity in Silicon Valley. But among Mr. Raffaelli’s allegations is that Brookfield improperly limited the amount that he could invest in a Musk company on behalf of Brookfield’s clients.

In December, shortly after Mr. Raffaelli filed a whistle-blower complaint with the Securities and Exchange Commission, Brookfield fired him, according to his lawsuit.

“Brookfield repeatedly betrayed the trust and best interests of its investors, and then fired the employee who challenged its behavior,” said Mark Mermelstein, Mr. Raffaelli’s lawyer.

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Brookfield manages more than $1 trillion on behalf of pension plans, government investment funds and financial institutions. Until January, its chairman was Mark Carney, Canada’s new prime minister.

“This suit is absolutely without merit and these baseless claims run counter to how Brookfield manages its business,” said Kerrie McHugh, a spokeswoman for Brookfield. “We will vigorously defend against this meritless suit, which was brought by a disgruntled former employee.”

Mr. Raffaelli, 45, has had a long career in Silicon Valley. In 2004, he became an analyst at what was then called Draper Fisher Jurvetson, a leading venture capital firm. At the time, Mr. Musk was on the ascent in Silicon Valley. He had recently founded the rocket company SpaceX and made an early investment in Tesla, which would become the world’s most valuable car company.

By 2009, Mr. Raffaelli was a board observer at both SpaceX and Tesla, according to his LinkedIn profile. That entitled him to attend the companies’ confidential board meetings. The proximity to Mr. Musk also gave Mr. Raffaelli the opportunity to invest his clients’ money in the billionaire’s private ventures. In Silicon Valley, that access made Mr. Raffaelli a hot commodity in his own right.

In 2017 he joined Brookfield, working out of its San Francisco office. His job was to manage a handful of funds that would invest clients’ money in technology companies. His base salary was $500,000, but his bosses told him that if his funds performed well, his total compensation could ultimately be in the tens of millions of dollars, according to the lawsuit, filed on Thursday in Superior Court in San Mateo, Calif.

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In part to attract outside investors, Brookfield agreed to put its own money in Mr. Raffaelli’s funds, meaning the company’s financial interests would be aligned with those of its clients. By 2024, his funds collectively managed more than $1.75 billion, which came from pension funds, other outside investors and Brookfield itself.

Tapping his contacts in Mr. Musk’s orbit, Mr. Raffaelli arranged for his funds to invest in several of Mr. Musk’s private businesses, including SpaceX, the artificial-intelligence company xAI and the tunnel-building venture known as the Boring Company, according to Mr. Raffaelli’s lawsuit and people familiar with the investments.

But Brookfield soon encountered financial problems, according to the lawsuit. The Covid-19 pandemic had hammered the commercial real estate industry, in which Brookfield and its affiliates were major investors. Brookfield Property Partners, the asset management firm’s sister company, lost about $2 billion in 2020.

That set the stage for Brookfield to begin engaging in fraud, Mr. Raffaelli said in the lawsuit.

Short on cash, Brookfield in 2024 backtracked on some of its pledges to put hundreds of millions of dollars into Mr. Raffaelli’s funds alongside outside investors, the lawsuit said.

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Around the same time, Brookfield also vetoed a proposal from an unspecified “major foreign conglomerate” that wanted to invest up to $100 million in one of Mr. Raffaelli’s funds, the lawsuit said, describing that decision as “indefensible.”

The combined result was that there was less money than expected for Mr. Raffaelli to invest. That, in turn, limited the potential upside for Brookfield’s outside clients, the lawsuit said.

Already, Mr. Raffaelli said, he had been forced to sharply reduce — from $25 million to $5 million — the amount that one of his funds planned to invest in Mr. Musk’s xAI. (The lawsuit did not identify xAI by name, but people familiar with the investments confirmed it.)

“That is like walking away from the chance to buy Facebook or Apple stock” at a bargain price, the lawsuit said. “The markets expected this investment to go nowhere but up, and that is exactly what has happened.” The estimated value of xAI has more than tripled to $80 billion over the past year.

Last summer, Brookfield informed Mr. Raffaelli that the firm was thinking of merging his funds into a company called Pinegrove Capital Partners, according to his lawsuit.

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Ms. McHugh, the Brookfield spokeswoman, said Mr. Raffaelli’s funds were not performing well. Mr. Raffaelli’s lawyer disputed that, saying the funds were among the best-performing at Brookfield.

Mr. Raffaelli started looking into Pinegrove, an asset manager that was mostly owned by Brookfield. He was alarmed by what he found. He said that Pinegrove had exaggerated its capital levels by more than $100 million, making it appear financially stronger than it really was. Hundreds of institutions — including nonprofit organizations and pension funds for police officers and firefighters — had been persuaded under false pretenses to entrust their money to Pinegrove, according to the lawsuit.

Last October, Mr. Raffaelli anonymously reported his findings to Brookfield through the company’s whistle-blower website. A few weeks later, he said, he submitted a complaint to the S.E.C.

Shortly after, Mr. Raffaelli’s boss, Anuj Ranjan, told him that Brookfield’s chief executive had signed off on the decision to fold his funds into Pinegrove. According to the lawsuit, Mr. Ranjan acknowledged to Mr. Raffaelli that the move was not good for his clients but was designed to prop up Pinegrove and save money for Brookfield. Mr. Raffaelli viewed this as a violation of federal securities laws.

Mr. Ranjan did not respond to a request for comment.

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The investors in Mr. Raffaelli’s funds needed to approve the Pinegrove merger. Brookfield pushed Mr. Raffaelli to pitch them on it “because his credibility would resonate better with the investors that trusted him,” the lawsuit said.

In exchange for his help, Mr. Raffaelli said, Brookfield offered to pay him an amount “way beyond” what he was currently owed. He said the head of the company’s human resources department then sent him a spreadsheet showing he could eventually be due as much as $46 million under his existing compensation agreement.

Mr. Raffaelli said he viewed that as Brookfield offering him a bribe.

The following week, Mr. Raffaelli sent the general counsel at Brookfield Asset Management the complaint he had previously sent to the S.E.C.

“As uncomfortable as this is for me, I wanted to share with you that I felt I had an obligation to blow the whistle on certain illegal conduct,” he wrote, according to the lawsuit.

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Nine days later, Mr. Raffaelli said, he was fired.

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Ranch lovers can soon travel with a TSA-friendly kit of the popular American dressing

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Ranch lovers can soon travel with a TSA-friendly kit of the popular American dressing

Ranch dressing is having a moment thanks to the World Cup and Kraft is ready to meet it.

The company said Thursday that it is working on a “TSA Compliant Ranch” for those looking to travel with the quintessentially American condiment. The announcement follows the influx of social media videos showing international soccer fans sampling the dressing for the first time.

“Some visitors leave with souvenirs. Others leave with America’s favorite dressing,” Kraft wrote in a caption accompanying an AI image of a TSA-approved clear bag packed with ranch dressing packets posted to social media. The image showed the bag — complete with a luggage tag resembling a ranch dressing bottle — placed in an airport security screening bin along with other travel essentials.

Additional details will be announced later, the company said.

TSA has also leaned into ranch’s apparent newfound popularity among international travelers, providing some helpful tips (and warnings) on social media.

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“If you’re visiting for a very large sporting event & you happen to discover RANCH while you’re here… pls pack it in your CHECKED BAG on your way home,” the agency posted on Instagram Tuesday. It also asked travelers to “avoid chugging your ranch outside security” lines.

“Who knew dip-lomacy could be achieved through addressing the obvious: ranch is the king of condiments,” TSA wrote in the caption accompanying its carousel of humorous ranch-related quips. “If you’re traveling within the U.S., make sure to keep your carry-on sauces to 3.4 oz or less and place any larger containers in your checked bags.”

“Some heroes wear capes. Others bring ranch,” it added.

According to 1987 Times reports, ranch dressing was invented by Steve Henson, who opened the Hidden Valley Guest Ranch in Santa Barbara in the mid-1950s with his wife, Gayle. The unnamed condiment originally mixed herbs and spices with buttermilk and mayonnaise and its popularity with guests led to it being jarred so they could take some home. The more travel-friendly powdered form followed.

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Landmark downtown apartment tower faces foreclosure

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Landmark downtown apartment tower faces foreclosure

A landmarked downtown Los Angeles apartment building designed by famed Los Angeles architect John Parkinson is on the market as its owners face foreclosure.

Residences in the Metropolitan, a 10-story tower built in 1913, are nearly filled with tenants but its ground floor retail spaces on Broadway and 5th Street are unoccupied, as are other street-level stores in downtown’s Historic Core.

The historic building was once considered one of the best in the city and is owned by the Fallas family, which operated a chain of value-priced clothing stores based in Gardena including one called Fallas Paredes in the Metropolitan.

Fallas-Paredes at 449 S. Broadway, Los Angeles, CA 90013.

(Google Maps)

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Around 2011, Michael Fallas, who once worked in family’s downtown store as a stock boy, converted the upstairs floors from offices to apartments while continuing to operate Fallas Paredes. The store closed more than five years ago in the wake of a 2018 filing by its parent company for Chapter 11 bankruptcy protection.

Earlier this month in state Superior Court, a special servicer representing Fallas’ lender asked for a judicial foreclosure of the property, alleging that Fallas had stopped making payments on a $32 million loan dating to 2017. After leasing the property for years, Fallas bought the building in the 1990s.

Fallas didn’t respond to requests for comment.

The location of the Metropolitan where the buildings stands was hailed in a Times story in 1912, saying “it is regarded by many realty men as the most valuable piece of real estate in Los Angeles.”

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The building today is recognized as a city historic-cultural monument because “Broadway became the commercial center of the Southland, a title it retained until well after World War II,” with its development, the city said. One of the architects who designed the Metropolitan in the Beaux-Arts style was John Parkinson, who is credited with designing such well-known local structures as City Hall, the Los Angeles Memorial Coliseum and Union Station.

Notable tenants in the Metropolitan have included the Los Angeles Public Library, Owl Drug Co., variety store J.J. Newberry and real estate company Janns Investment Co., which sold the land where UCLA is built and developed Westwood Village, among other Los Angeles neighborhoods.

In recent years, the buildings around the Metropolitan have struggled to keep retail tenants after a spurt of residential conversions of historic buildings starting in the early 2000s brought commerce to the neighborhood. Many downtown businesses have struggled since the pandemic reduced occupancy in offices downtown and reduced the flow of visitors.

“The lack of bodies on the street is generally hurting downtown, and that’s one of the reasons that has building has problems,” said downtown real estate broker Hal Bastian, who lives in the Historic Core.

There are close to 1,000 residential units in historic buildings at the intersection of Broadway and 5th Street, Bastian said, but all the ground floor stores are closed. Drug stores there suffered substantial losses from shoplifting he said, and now, “our challenge on Broadway is leasing.”

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The 88 apartments in the Metropolitan are 91% rented, according to a listing for the property by the Zacuto Group, which also touts its roof deck with pool, fitness center and barbecue grills. No sale price is set.

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January 2025 wildfire victims seek tougher penalties against State Farm over claims handling

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January 2025 wildfire victims seek tougher penalties against State Farm over claims handling

A fire survivors’ group announced Thursday it was seeking tougher penalties against State Farm over its handling of January 2025 wildfire claims.

The Every Fire Survivor’s Network said it was petitioning to join a state enforcement action announced this year against the company to make sure the case results in meaningful changes at California’s largest home insurer.

“We’re seeking a systematic review of all their claims and penalties calibrated to the actual scale of the harm — and we’re seeking the payouts that families are owed,” said Joy Chen, executive director of the group, at a Pacific Palisades news conference joined by victims of the fires.

The Department of Insurance in May filed an administrative action against State Farm General — the subsidiary of the giant Bloomington, Ill., insurer that handles California home insurance — after completing a “market conduct” exam.

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The Jan. 7, 2025, fire damaged or destroyed more than 18,000 structures and killed 31 people.

State Farm has received more January 2025 claims than any other insurer — more than 13,700 auto and homeowners claims as of May 4, with payouts totaling $5.7 billion, according to the company.

The market conduct exam looked at 220 sample claims filed by the victims and found 398 violations of state law in about half of them.

Among other alleged violations, it found that the company failed in numerous cases to pursue a “thorough, fair and objective investigation” into claims, failed to come to “prompt, fair, and equitable settlements” and made settlement offers that were “unreasonably low.”

In announcing the action, Insurance Commissioner Ricardo Lara called the company’s claims handling “unacceptable” and said his department was taking “decisive action to hold them accountable.”

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The state is seeking a “cease and desist” order to stop the insurer from engaging in unfair or deceptive practices.

It also has threatened to suspend State Farm’s license over the alleged violations, which each carry a penalty of up to $5,000 — or twice that figure if found to be willful. That could amount to a penalty of $2 million or more.

The threat to actually suspend State Farm’s license and its authority to write policies has been viewed skeptically by some, given its roughly 20% market share of the state’s home insurance market.

The company, which had an opportunity to include its responses in the exam report, denied fault in some cases and admitted fault in others. It often blamed problems on individual adjusters and denied systemic issues with its claims handling.

The petition filed by the wildfire survivor’s group criticizes the sample size of the market conduct exam as too small to capture all the alleged deficiencies in State Farm’s claims handling, which it claims are a “general business practice” of the company.

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The group is seeking to conduct discovery, cross examine witnesses, present testimony from fire victims and bring more that 1,600 firsthand policyholder statements regarding State Farm’s practices into evidence, according to the petition.

It also wants State Farm to reopen cases in which claimants were paid too little, and it is seeking to participate in settlement discussions in order to increase any penalty State Farm would pay.

It calculated that a $2-million penalty would amount to a minute fraction of the assets of the State Farm Group.

“I submit to you that doesn’t defer bad conduct, it just allows you to continue to do it,” said Michelle Meyers, an attorney for Every Fire Survivor’s Network, at the news conference.

Consumer Watchdog, which has been a harsh critic of State Farm, also is providing legal support for victims’ effort.

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Sevag Sarkissian, a spokesperson for State Farm, said the company was aware of the petition.

“We recognize that many wildfire survivors, including those that are State Farm General policyholders, continue to face difficult recovery challenges,” he said. “Our focus remains on helping customers recover.”

Michael Soller, a spokesperson for Lara, said the department is “acting with urgency to assist wildfire survivors in their ongoing recovery by investigating formal complaints filed by survivors and conducting the expedited market conduct exam that led to this enforcement action.”

He added that the department’s position is the state’s Administrative Procedure Act does not contemplate the commissioner or department staff authorizing intervention requests in the case.

He said that would be a hearing officer’s or administrative law judge’s decision when one is assigned to the case.

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Meyers acknowledged the request was novel but said her reading of the law is that Lara can make the decision because no judge is yet assigned.

In response to the criticism, State Farm pledged earlier this year to improve its claims handling, including by providing single points of contact and improved communication so there are “fewer handoffs, fewer repeated explanations, and seamless support.”

It also named a new vice president of customer relations for State Farm General.

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