Cbus allegedly missed $US25m windfall under Brookfield in venture capital ‘conflict’: whistleblower
A case in California brought by a former Brookfield VC manager turned whistleblower alleges an Australian superannuation fund, believed to be Cbus, was wronged as conflicts over capital raged inside Brookfield.
An Australian superannuation fund client of Brookfield, believed to be Cbus, is one of the alleged victims of internal conflicts at the Canadian asset manager that a whistleblower claims lost money as a capital war raged inside the firm.
Court documents filed in California by Josh Raffaelli, who was fired by Brookfield on December 1, 2024, and who made a whistleblower complaint to the US Securities and Exchange Commission about alleged “material misrepresentations” at Brookfield-backed entity Pinegrove, claim “Superannuation Fund A” – Cbus – was a victim of its infighting.
The client was deprived of co-investing with a $US75m-$US100m conglomerate and participating in a bigger $US1 billion strategy because Brookfield did not want to tip more of its own capital in.
Brookfield “no longer wanted to invest the level of funds to Fund 3 that it had committed in the PPM (private placement memorandum) and its sister entities (such as BAM)” – meaning Brookfield Asset Management – “were trying to look for a way to accommodate BN (Brookfield) so it could circumvent those commitments,” the pleading by Mr Raffaelli said.
Brookfield is domiciled in New York and counted Canadian Prime Minister Mark Carney its talismanic chair of asset management until he resigned this year to pursue his political ambitions. It is the owner of Healthscope, Australia’s second-biggest hospital group which is on financial life-support and up for sale. Brookfield also tried to buy Origin Energy.
The plaintiff had a career in Silicon Valley including firms Silver Lake where he contributed to its pre-IPO investment in SolarCity before joining Brookfield, where he reported to the now boss of Asia-Pacific, Stewart Upson.
A recurring claim of Mr Raffaelli is that Brookfield wanted to direct Fund 3 to its affiliate Pinegrove, where it was not beholden to the same obligation to co-invest.
Pinegrove co-acquired the venture capital arm of the collapsed Silicon Valley Bank.
But to the plaintiff, it was “a ‘dog’ of a fund that was having very little luck raising capital or making money” including allegedly lying about how much capital it raised.
He got wind that Brookfield wanted to merge its venture capital strategies with Pinegrove.
Anuj Ranjan, who took over from Mr Upson and ran private equity investments, told Mr Raffaelli in November 2024 the BAM VC funds were being transferred to Pinegrove to “wind down” or in Mr Raffaelli’s words “meaning wither and die”.
He believed this was against the interests of clients, because “after taking the LPs (limited partners) money for the BAM VC Funds, they” – meaning Brookfield – “abruptly decided to get out of the VC fund business -- at least when it triggered a requirement that the Brookfield defendants co-invest in cash it did not want to spend”.
One of these funds was Fund 3, a $US1 billion strategy of which $US560 million was raised. Fund 3’s limited partner advisory committee only had one member, “Superannuation Fund A” which is Cbus. That conferred it certain rights, and the potential conglomerate investment of $US100m was brought to the committee of one, and approved.
Mr Upson wrote Mr Raffaelli a note described as “Congrats, thats [sic] awesome news” upon securing the $US100m lead.
But Mr Ranjan’s reception was allegedly cooler, saying Brookfield Asset Management had “stopped fundraising” in light of the possible Pinegrove handover.
A Brookfield spokeswoman said: “This suit is absolutely without merit and these baseless claims run counter to how Brookfield manages its business. We will vigorously defend against this meritless suit, which was brought by a disgruntled former employee.”
Cbus nominates Brookfield Asset Management as one if its external investment managers in its annual report, and as a private equity manager overseeing $396.9m of its $94.6bn in its public disclosures. Cbus further self-reported as a client of Brookfield Technology Partners in 2021 public documents denoting its private equity strategies.
Cbus and Brookfield have other investment relationships too. Cbus was approached for comment.
According to Mr Raffaelli’s pleading, “Superannuation Fund A” was by extension, overruled.
“The Brookfield defendants acted to kibosh the investment into Fund 3 by the major foreign conglomerate. That decision was improper for several reasons,” the claim states, citing not reaching its fundraising goal, depriving it of an ability to invest and diversify, and the “more nefarious” allegation that Brookfield raised that same money from the same conglomerate client for Pinegrove after firing Mr Raffaelli.
“Superannuation Fund A” was also an investor in Fund 2.
It was allegedly dudded when Mr Ranjan overruled a proposed $US25m portfolio investment and directed it to Fund 3, as well as downsizing its commitment to $US5m, again with the alleged intent of limiting its further capital obligation.
“This was devastating to both Fund 2 and Fund 3 because Company B has tripled in value since the time when Funds 2 and 3 had the opportunity to invest,” the claim states.
It relies on a follow-on raising struck at “a 2x uplift” on the previous round and by March 2025 it “achieved a 3x in value” to assert this.
“Had the Brookfield defendants not overridden Raffaelli’s investment decision (for which Raffaelli was designated the primary decision-maker) and the Fund 2 Investment Committee’s approval, Superannuation Fund A would have realised nearly $US15 million of gains in Fund 2, versus $US2.65 million that has been marked in Fund 3 based on present valuation.
“And if Company B achieves a 7x return, which is entirely likely, Superannuation Fund A alone stands to lose more than $25 million from the Brookfield Defendants’ decision on this matter had they allowed the investment.”
Mr Raffaelli also alleges that “Superannuation Fund A” was told he resigned, which his claim describes as wrongful termination for his whistleblowing (and for which he claims $US46m of compensation was forfeited based on his investment performance, as well as other remedies).
More Coverage
Carnarvon’s play makes it kingmaker over rival Strike’s future
The Western Australia oil and gas developer has bought a 19.9 per cent strategic stake in its rival.
Dodgy sponsor rocks banking association love-in
A back-end blunder has spoiled Anna Bligh’s last hurrah at the Australian Banking Association, after Mayfair 101 architect James Mawhinney was allowed to sponsor the ABA’s national conference.