For money manager, a hard fall from a lofty perch
Two years ago, Peter J. Eichler Jr. was one of the most successful men in Southern California.
His money management firm ranked among the largest in Los Angeles, with high-wattage clients such as Goldman Sachs Group Inc. and JPMorgan Chase & Co. And he fashioned a lifestyle that was sumptuous even by the gilded standards of Wall Street.
Eichler paid himself $33 million one year. He owned five homes. He had a fleet of luxury cars, including a $320,000 chauffeur-driven Maybach. He shuttled to and from Europe in private jets.
Eichler socialized with tennis star Andre Agassi, talked shop with billionaire investor Ron Burkle and had Wolfgang Puck cook dinner at his home.
Today, Eichler’s Santa Monica investment firm is shutting down and his highflying lifestyle has been grounded.
His company, Aletheia Research & Management Inc., filed for bankruptcy after a wave of client defections and two investigations by the Securities and Exchange Commission. His $230-million net worth has shriveled. The chauffeur and chartered jets are gone.
Even in an industry notorious for its flameouts, Aletheia’s demise was fast and painful.
“It’s very unusual to see a firm rise so much and then fall so quickly,” said industry veteran Michael Rosen at Angeles Investment Advisors in Santa Monica.
It’s a jarring reversal for a man who spent years scaling to the top of Southern California’s financial pyramid — and made the most of the bounty it provided.
“I sold most of my homes and most of my cars and I had to adjust, and it wasn’t easy,” Eichler said.
The firm was done in by the SEC investigations, slumping investment performance, and bitter clashes between Eichler and two key business partners that became an embarrassing sideshow.
After mounting tension, Eichler fired Roger Peikin, Aletheia’s co-founder and finance chief. Eichler also fought Proctor Investment Managers, a New York firm that bought 10% of Aletheia in 2006, over dividends that Proctor claimed it was owed.
Peikin and Proctor hit back with blistering lawsuits. Peikin portrayed Eichler as brutish and dictatorial, describing their relationship as “open warfare.”
More damaging, Peikin and Proctor accused Eichler of charging millions in personal expenses to Aletheia to fund an indulgent lifestyle.
“Eichler has fleeced Aletheia of virtually all of its cash, not only by paying himself tens of millions of dollars through grossly excessive compensation ... but also by using Aletheia’s treasury to pay for a stunning array of his personal, non-business-related expenses,” Proctor said in its suit.
There was $500,000 for a European family vacation, up to $18,000 a night for hotel suites and $250,000 for wine, his adversaries argued in court documents and testimony. Eichler charged jewelry, shoes, groceries — even music from iTunes — to the company, according to Proctor’s suit.
Eichler gave himself 34 bonuses in the 12 months before his firm filed for bankruptcy in November, according to papers Aletheia filed in court.
A $28,000 bonus Aug. 23 was followed by $135,000 the next day. Eichler gave himself nine bonuses that month, including three in one day. The final payout came less than a week before the firm filed for bankruptcy.
Proctor’s suit is scheduled to go to trial in May. A trial date has not been set in Peikin’s case.
Eichler denied wrongdoing, but the soap opera plot lines sparked an exodus among Aletheia’s conservative clientele.
“It never occurred to him that it would all come crumbling down the way it has,” said longtime friend James Canales.
‘A lot of wrongs on both sides’
In a nearly four-hour interview at his Pacific Palisades home, Eichler, 55, spoke animatedly as he discussed the downfall of his company.
Clad in jeans and a short-sleeved shirt, he denied the accusations against him, saying they were lodged by disgruntled former partners bent on revenge.
In the interview, as in court records, Eichler accused Peikin of mismanagement. He also said Peikin was on a vendetta to bring down the firm after his ouster. And Proctor, he said, failed in its mission to drum up business for Aletheia.
Aletheia collapsed, Eichler said, because of bad publicity from the lawsuits and the $19-million cost of defending against them.
“Nobody should have to deal with some of the things I had to deal with,” Eichler said. “I put my heart and soul into something, and some other people wanted to destroy it. It’s sad.”
Eichler and Peikin were caught up in “a contest of alpha males,” said Betsy Sanders, a longtime friend of Eichler who worked at Aletheia.
“There’s a lot of wrongs on both sides,” Sanders said. “It’s just a lot of crap between two people.”
Friends described Eichler as strong-willed and occasionally polarizing, but well-intentioned with employees’ best interests at heart.
“I don’t think that he gets that he can be off-putting,” Sanders said, but added that Eichler “really cares about people and what happens” to them.
At Christmas, the firm gave employees Hermes ties and Louis Vuitton bags, Eichler said. Administrative assistants could get quarterly bonuses up to $25,000, he said.
In 2008, the year Eichler took home $33 million, Peikin was paid $15 million.
When Eichler discovered that Aletheia’s in-house chef served cheaper tuna fish to employees than to him, he ordered that everyone get his favorite, Progresso solid light tuna in olive oil.
“He’s an incredibly generous man,” said Patricia Loncaric, Aletheia’s controller. “When the company’s doing well, you as an employee are doing well.”
As for his spending, Eichler insisted that all of it was business-related and done to show that Aletheia was successful. Eichler claimed Peikin charged personal expenses to Aletheia, which Peikin denied.
“When I went to New York City, I got a very nice suite at the Four Seasons. I closed Merrill Lynch in that suite,” Eichler said.
And he dismissed complaints about his compensation and lifestyle as overblown, saying lavish perks are de rigueur in his profession.
“Every top money manager or hedge fund manager has amazing cars,” Eichler said. “There’s nothing unique about that. That’s not just me.”
As the company grows, so does pay
As with many start-ups, Aletheia’s early days were full of promise.
After working as a broker and money manager at Bear Stearns & Co., Eichler co-founded Aletheia — Greek for “truth” and “disclosure” — in 1997.
His family has a long history in Southern California finance. In 1931, his grandfather founded regional investment firm Bateman Eichler. The firm was sold in 1982.
Peikin, who represented Eichler in a custody dispute with his first wife, was to handle legal and other operations while Eichler picked stocks. Starting with $15 million in assets, the firm peaked at more than $10 billion in 2008, according to court records.
As the company expanded, so did Eichler’s compensation and lifestyle.
Aletheia’s revenue jumped to $78 million in 2008 from $35 million the prior year, according to Proctor’s lawsuit. Yet profit barely edged up, to $5.9 million from $5.7 million, as compensation surged to $56 million from $17 million, according to the lawsuit.
Eichler hired Mel Gibson’s former driver to ferry him around in the Maybach. He added the chef. And he invested Aletheia money in his second wife’s start-up yoga studio.
Eichler had a fleet of leased luxury cars, including a 2012 Porsche 911 Turbo, a 2011 Ferrari and a 2007 Mercedes-Benz S65 AMG, according to the California Department of Motor Vehicles. Plus there was the $320,000 Maybach, according to DMV records.
Eichler’s Pacific Palisades home has six bedrooms, nine bathrooms, a movie screening room, a gourmet kitchen and a poolside fireplace, according to property records and an online sales listing. He bought the 9,000-square-foot house for $9.6 million in 2007.
“Peter had a taste for the finer things in life,” Loncaric said. “Peter probably has never seen a house as small as mine, and my house is 2,000 square feet.”
In 2010, Aletheia spent $5 million on an expansion of its 19th-floor office in Santa Monica, Eichler said in the interview. The firm put a slide show of the resplendent space on its website, which is now down.
“They’re the nicest offices you’ve ever been in,” said one former employee. “Million-dollar view. Million-dollar finishes.”
Troubles mount at home and work
But myriad problems caught up with Aletheia and Eichler personally.
He paid $3.6 million in 2011 to settle his first wife’s long-running claims for overdue child support, which she said he withheld even as he lived an extraordinarily lavish lifestyle. Ultimately, he sold a Malibu oceanfront home for more than $13 million to help pay the back support, according to records filed in the divorce case.
In October, as Aletheia prepared for bankruptcy, his second wife, Mavis Christine, filed for divorce.
The two lengthy SEC probes helped spur the client exodus, driving Aletheia’s assets under management from $7.5 billion two years ago to less than $300 million, according to court records.
The first probe ended in 2011 when Eichler, Peikin and Aletheia paid a collective $400,000 to resolve SEC accusations that the firm didn’t provide hedge fund investors with quarterly account statements and didn’t inform potential clients about the results of prior SEC examinations. As is common in such settlements, Eichler and Peikin neither admitted nor denied wrongdoing.
A more serious case came in December 2012 when the SEC filed a lawsuit accusing Eichler of defrauding hedge fund clients.
The agency alleges that Eichler stuffed losing trades into client accounts while assigning winning trades to himself. The trades were allocated more than an hour after they were done, when it was clear whether they were profitable or not, the SEC said.
Eichler denies wrongdoing, saying he had $300,000 of his own money in the hedge funds.
Another blow had come in October when the state suspended Aletheia’s business license because the firm had failed to pay $2 million in taxes from 2008. It didn’t file its 2008, 2009 or 2010 returns until 2011, according to an Aletheia court filing. In court documents, Eichler and Peikin blamed each other.
One client, CIBC Asset Management, yanked its money after discovering the departure of a top Aletheia executive through a Google alert. That was proof, CIBC wrote in a Bankruptcy Court filing, of Aletheia’s “overarching operational dysfunction.”
Topping it off, Aletheia’s investment performance had slumped noticeably in the previous two years, according to Bankruptcy Court documents the company filed.
A court-appointed trustee is overseeing the liquidation of the firm. Eichler estimated that his net worth — which once was $230 million, according to records filed in his first divorce — has skidded to about $2 million. He hinted that he’d like to manage money in the future but isn’t sure he can restore his reputation.
“Does somebody ever really completely recover?” Eichler said. “There will probably always be people who look at me with a jaundiced eye.”