A.G. Beshear Gets Witness Thrown Out in Kentucky Pension Case

Republican Gov. Bevin attacks judge as a biased Democrat.

Andy Beshear, Democratic attorney general of Kentucky, was awarded another court victory in his ongoing pension lawsuit against GOP Gov. Matt Bevin, by getting a witness knocked out in the case.  

The governor responded by calling the judge politically biased against him.

Beshear’s legal team filed a protective order against Bevin’s administration to stop it from taking Beshear’s depositions reports WKYT. Beshear’s lawyers objected to Bevin’s lone witness for the case—an attorney who works for him.  Backed by the Kentucky Education Association and the Fraternal Order of Police, Beshear’s office said that this would deem the witness as inappropriate, as a conflict of interest.

When Judge Phillip Shepherd of the Franklin County Circuit Court granted the motion in Beshear’s favor, he reiterated his goals of keeping the case on the “legal issues.”

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Bevin’s team said that the ruling deprives his team of their right to collect information and evidence for their argument. Steve Pitt, Bevin’s attorney, said that while legal issues sound great, they “are often defined by the facts of the case, and here, the facts of the case are very much an issue.”

The governor labeled the judge’s decision as political. He called Shepherd “the most incompetent hack of a judge” in an interview on 55KRC Radio in Cincinnati. “This guy’s a former Democrat operative. He used to be in a previous Democrat administration as an appointee. Now he happens to be a—quote, unquote—judge,” he said in the interview, reported by the Courier Journal.

At the center of the court dispute is a pension reform bill that aims to shore up the worst-funded state’s $40 billion shortfall by cutting teacher benefits and changing the pension plan for new hires. Beshear says the bill itself is illegal as it violates the state constitution, and he decries the way it was passed.  Bevin inserted the reform measure into a sewage bill late in the 2018 legislative session. The bill was then passed the next day without legislative review or public comment.

Beshear issued a statement where he touted the victory and also announced a website which tracks the entire legal procedure from both sides. The site, ag.ky.gov/pensionbill has a full timeline as well as links to Beshear and Bevin’s filings to keep the public informed of the full procedure.

Last month, Judge Shepherd awarded Beshear his first victory in the case when he ruled against the governor’s bid to disqualify the attorney general. Bevin noted that Beshear advised lawmakers on the pension measure and then sued when they ignored his advice.. The governor argued that doing both things was unethical, but Shepherd felt otherwise, allowing Beshear to carry on with the lawsuit.

Bevin’s main response to all allegations is due May 23, with Beshear’s retort due May 30. An oral argument will be held in the Franklin County Circuit Court on June 7.

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Hedge Fund Manager Sentenced to Six Years for Fraud

Yasuna Murakami ordered to pay $10.5 million in restitution for running Ponzi scheme.

Former hedge fund manager Yasuna Murakami was sentenced to six years in prison, and ordered to pay more than $10.5 million in restitution after pleading guilty to defrauding hedge fund investors. 

Murakami admitted to diverting millions of dollars of investor funds to accounts that he controlled, which he then used to support an extravagant lifestyle that included paying for a sports car, international travel, high-end shopping trips, luxury hotel stays, and thousand-dollar restaurant bills. He also used the money to place investments in his own name, and make Ponzi scheme-like payments to investors who requested redemption.

According to US district court filings, Murakami and his business partner Avi Chiat defrauded more than 50 investors in three hedge funds run by their two-man investment advisory businesses Cambridge, Mass.-based MC2 Capital Management, LLC and MC2 Canada Capital Management,  LLC. .

When the two opened the Partners Fund in 2007, they marketed it mainly to their friends and family. The fund purportedly had a value-oriented investment strategy, and focused on small-and mid-cap US stocks. The two raised more than $15 million from investors, and then lost more than 70% of the money raised for their first hedge fund in less than two years due to unprofitable trading. 

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“In reality, the Partners Fund had no discernible strategy and lost nearly $600,000 in the first three months of trading,” said the administrative complaint from the Massachusetts Securities Division. And the following year, in late 2008, poor trading moves led the Partners Fund to a negative cash balance of nearly $2.4 million, which “resulted in a margin call, decimating the Partners Fund with an almost-total loss of investor’s equity.” 

The losses ultimately led Murakami to operate the fund as a Ponzi scheme from 2011 to 2017.

Murakami also admitted to withholding material information regarding the management of a hedge fund, and to providing investors with falsified account statements and tax documentation in an effort to trick them into thinking their investments were safe, and that the hedge fund was above board.

In 2017, the SEC filed an enforcement action against Murakami in federal district court in Boston, alleging that he misappropriated more than $8 million for business and personal expenses, and made approximately $1.3 million in Ponzi-like payments. The SEC also charged Chiat for allegedly helping Murakami raise money from investors while providing investors with fake account statements that vastly overstated the investment’s performance.

Additionally, the SEC charged Murakami and Chiat with aiding and abetting MC2 Capital Management, LLC’s and MC2 Canada Capital Management, LLC’s violations of the Investment Advisers Act. The SEC’s litigation against Murakami and his co-defendants remains ongoing.

In a parallel criminal action, the US Attorney’s Office for the District of Massachusetts also charged Murakami with one count of wire fraud.

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