Before a rapt gathering of investors, Bill McGlashan was holding forth on his favorite subject: “impact investing,” which aims to generate lofty social, as well as financial, returns.
A senior executive of private-equity giant TPG, McGlashan headed up its fast-growing business of investing for “social good.” His Rise Fund boasted A-list backers. Musician Bono and eBay billionaire Jeff Skoll co-founded it. Former Education Secretary Arne Duncan and former Yale President Richard Levin signed on as senior advisors.
At the Sustainable Development Impact Summit in New York last September, McGlashan — who had raised $2 billion, the most of any social-good private equity fund — called for making investments in needy but corrupt countries.
“There is an opportunity — using the innovation engine of capitalism — when directed in a way that brings a moral lens to bear,” he said.
Turns out that McGlashan had already blurred his own moral lens, according to federal prosecutors. As recently as a month before, a Federal Bureau of Investigation wiretap caught him planning to cheat his son’s way into the University of Southern California, court records allege.
The rise and fall of Bill McGlashan shows the damage that can be wrought — to a company, his industry and his family — when a high-profile executive seemingly fails to live up to his oft-stated ideals.
Jon Winkelried, co-chief executive officer of TPG, on Wednesday said the news shocked the firm, which had started an internal investigation to determine whether McGlashan’s actions bled into parts of the business. The company fired McGlashan after federal prosecutors brought the charges.
“It was something we had no knowledge of,” Winkelried told the Bloomberg Equality Summit 2019 in New York. “Bill was engaged in the scheme on a personal basis.”
McGlashan, who faces one count of conspiracy to commit mail fraud, said earlier he had, in fact, resigned and was “deeply sorry this very difficult situation may interfere with the work to which I have devoted my life.” A spokesman said he had no further comment.
Part of the biggest college admissions scandal in U.S. history, the charges against McGlashan have given ammunition to critics of the otherwise ascendant impact investing movement. The social investing industry has gathered $12 trillion in assets, up 38% since 2016, according to a report last year from the Forum for Sustainable and Responsible Investment.
Anand Giridharadas, author of the book “Winners Take All: The Elite Charade of Changing the World,” sees McGlashan’s alleged crimes as a fundamental shortcoming of the whole enterprise: One-percenter financiers cast themselves as fighting for justice while secretly rigging the system for themselves.
In McGlashan, “I see an exaggeration of a widespread tendency of the desire to help people while refusing to surrender one’s own privilege,’’ Giridharadas said.
But advocates of impact investing object to drawing any connection between McGlashan and the rest of the movement and expect little effect, though New Jersey and Washington state are reviewing their investments in one of TPG’s funds.
“I don’t see why reputational damage to one of its principals should affect the industry as a whole,” said Paul Brest, a former dean of Stanford Law School who teaches courses on impact investing.
A seventh-generation Californian, McGlashan, 55, grew up in a family long devoted to charitable causes, especially land conservation. He is a descendant of Charles F. McGlashan, who was called the “patriarch of Truckee, California,’’ a scenic town of 17,000 near Lake Tahoe.
His father, William Earl McGlashan Sr., was a prodigy who entered Yale at age 16. He earned an electrical engineering degree and attended Stanford’s business school, where he graduated near the top of his class, according to a 1973 article in the New York Observer. He sat on a committee for the Los Altos School District and was involved in the Sierra Club and the Committee for Green Foothills, which protects farmland in California.
Like his father, Bill McGlashan, who attended a Catholic private high school in Portola Valley, Calif., went to Yale and Stanford business school. He worked at Bain Capital before co-founding a venture capital firm.
In describing the turnaround of an internet company he ran, he stressed the importance of ethics. “We brought in classy people who have had extraordinary careers, who have reputations and wouldn’t conceive of doing something that would jeopardize their reputation,” he told Bloomberg in a 2002 interview.
In 2004, McGlashan joined TPG, which is based in San Francisco and Fort Worth, and manages $103 billion. The private equity firm, co-founded by billionaires Jim Coulter and David Bonderman, made its name through blockbuster buyouts of companies such as J.Crew Group Inc. and Burger King Corp.
Soon after, McGlashan, who worked out of TPG’s San Francisco office, started a unit, TPG Growth, that marked a shift in focus. Instead of turning around established companies, the business invested in fast-growing upstarts such as ride-sharing giant Uber Technologies Inc. and Airbnb Inc. A fund he launched in 2012 had doubled investors’ money by the end of last year, according to New Jersey pension fund documents.
In 2017, as part of his growth investing efforts, McGlashan founded the social-good unit with Bono and Skoll. New York, New Jersey and Washington state were among several pension funds that entrusted him with money.
That April, to advise on education-related investments, McGlashan tapped Duncan — Barack Obama’s education chief and former head of the Chicago public schools, and Levin, the onetime Yale president and former chief executive of online-education company Coursera Inc. The Rise Fund made investments in companies such as digital course provider EverFi and DreamBox Learning, a tech company focused on math.
McGlashan and his wife, Marie, an acupuncturist, also donated to educational causes, such as Challenge Success. It’s a Stanford-affiliated nonprofit that aims to fight stress related to grades and test scores and promote healthy child development. Among the successes it cites: encouraging children to cheat less.
Bill McGlashan was particularly focused on the education of his three children and served on the boards of their private schools in Marin County, Calif.
The FBI said it caught McGlashan on taped phone calls with the corrupt college counselor William “Rick” Singer, who pleaded guilty to masterminding a scheme in which dozens of parents paid more than $25 million to get their children into college.
Ultimately, on behalf of one of his sons, McGlashan paid Singer $50,000 to bribe a proctor to improve his son’s answers on the ACT college admissions test, investigators said. McGlashan didn’t want his son to know, according to court records. (The government didn’t accuse any children of wrongdoing.)
In a Thursday court filing arguing that the government should return his passport so he could take a long-planned family trip, McGlashan’s lawyers took direct aim at a central claim in the government’s case — that McGlashan discussed a payment to a college athletic director to get his son into USC.
“Mr. McGlashan did not pay for the use of a so-called ‘side door’ to obtain admission for his son at USC or any other college,” his lawyers said in the filing.
His lawyer said the allegations against McGlashan differed from others in the case; prosecutors said some parents had improperly convinced psychologists that their children had disabilities, so they could get extra time on college entrance exams. In McGlashan’s case, his 18-year-old son had been diagnosed with learning disabilities in eighth grade and had legitimate school-sanctioned accommodations, according to the filing. His son is still in high school, never enrolled in college and has withdrawn all his applications.
Singer also offered to create a fake sports profile, investigators said. McGlashan said he had pictures of his son playing lacrosse. But since it was their understanding that USC didn’t have a lacrosse team, they settled on making the student a football player, according to the government. But his high school didn’t field a football team, so they decided to turn him into a punter who learned the skills at a sports camp, the FBI said.
“Pretty funny. The way the world works these days is unbelievable,” McGlashan said, according to court papers. (In the filing, his attorney said he didn’t ultimately pay for this arrangement.)
Only a month later, McGlashan began his talk at the New York summit about the necessity of investing even in corrupt countries.
At one point, he misspoke, as he name-checked two fellow socially oriented investors, Bono and Mo Ibrahim, a Sudanese billionaire, along with panelist Anne Finucane, vice chair of Bank of America.
“I am the co-founder of the Rise Fund, along with people like Anne, who is up here, Bono, Mo Ibrahim, who is very involved in corruption.’’
As the audience tittered, Finucane chimed in: “Prevention of corruption?”
McGlashan then corrected himself: “Sorry, involved in preventing corruption. Very good catch.”