Fired Brookfield VC Head Says Firm Asked Him to Lie to Investors

(Bloomberg) — The former head of Brookfield Asset Management’s venture capital arm accused the firm of wrongfully firing him after he refused to lie to investors.

Josh Raffaelli on Thursday sued Brookfield, which manages more than $1 trillion, in California state court, claiming his former employer offered him nearly $46 million to help sell a plan that would “benefit their bottom line at the expense of their investors.” 

Bloomberg News reported in February that Brookfield quietly shuttered the arm led by Raffaelli and was in the process of moving some its assets and staff to an entity called Pinegrove Capital. According to the suit, Pinegrove is a joint venture between Brookfield and Sequoia Capital’s wealth-management arm that acquired the VC arm of Silicon Valley Bank. Raffaelli is not suing Sequoia or Pinegrove.

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

Neither Pinegrove nor Sequoia immediately responded to a request for comment.

In his suit, Raffaelli claimed Pinegrove “inflated” the amount of money it raised, and that Brookfield was also seeking to deceive prospective investors, including pension funds, about what the combination would mean for their VC funds’ strategy. 

He said he was terminated shortly after he filed whistleblower complaints internally and with the Securities and Exchange Commission. 

Raffaelli, whose suit was reported earlier by the New York Times, made his name with investments in Elon Musk’s companies, including SpaceX and SolarCity. As a Brookfield fund manager, he provided $250 million in 2022 to help finance Musk’s buyout of Twitter Inc.

But Raffaelli claims that the circumstances of Pinegrove’s founding out of the collapse of SVB led it to enter into anticompetitive agreements with all the major Silicon Valley VC firms. Those agreements meant Pinegrove could no longer invest directly in companies, only through other funds and secondaries. Brookfield offered him tens of millions of dollars to mislead clients about the change in strategy, he says.

He “refused to accept a bribe offered by the Brookfield Defendants in exchange for him lying to investors about the supposed advantages of merging their venture capital funds into one that had such an opposite trading strategy that it was sure to kill their investments,” Mark Mermelstein, Raffaelli’s lawyer, wrote in the complaint.

Raffaelli is seeking monetary damages from Brookfield for mental anguish and loss of past and future earnings, including bonuses and unpaid wages, according to the 100-page complaint.

More stories like this are available on bloomberg.com