Ex-Brookfield partner Josh Raffaelli asks ASIC to help Cbus take action against Canadian fund manager Brookfield

A former partner at Brookfield Asset Management has urged the corporate regulator to investigate his claim Cbus was short-changed by the Canadian fund manager’s alleged exploitative conduct.

Former Brookfield Asset Management chair and current Canadian Prime Minister, Mark Carney. Picture: Arun Sankar/AFP

A sacked US private equity executive turned whistleblower who worked for Brookfield Asset Management has pleaded with Australian regulators to investigate his claim that Cbus was short-changed $US25m by the Canadian fund manager’s allegedly exploitative conduct.

Ex-Brookfield managing partner Josh Raffaelli alleged Brookfield defrauded Cbus — one of Australia’s biggest superannuation funds with $94.6bn under management and which invested $US200m of its members’ money with Brookfield — by making misleading claims.

In a letter sent on behalf of Mr Raffaelli to the Australian Securities and Investments Commission, Mr Raffaelli’s lawyer said he was a “key manager of these funds” and unfairly sacked in December for refusing to participate in the alleged scheme.

“The lawsuit alleges serious misconduct by the Brookfield defendants involving deceptive practices that exploit superannuation savings, specifically impacting Cbus, which is identified as ‘Superannuation Fund A’ in the complaint,” the letter read.

The Australian has previously revealed that Cbus was allegedly short-changed when Brookfield’s head of private equity investments and Mr Raffelli’s then boss overruled a $US25m investment into a “high-potential AI company”, revealed to be Elon Musk’s xAI, to get around a capital commitment the asset manager had made.

Cbus’ investment in Musk’s xAI

Instead, the relevant Brookfield fund invested $US5m. Since then, the value of xAI has soared and is now worth about $US80bn up from a $US24bn valuation struck last May, according to Mr Raffaelli’s anonymised pleading. He alleged that deprived Cbus of a bigger profit.

“The Brookfield defendants’ misrepresentations, fraudulent merger scheme, and deception of Cbus (resulting in a missed US$25 million windfall) threaten Cbus’s ability to deliver returns to its own investors,” Mr Raffaelli’s letter, seen by The Australian, said.

“Cbus’s apparent inability to fully investigate, likely due to the Brookfield defendants’ misleading statements, underscores the need for ASIC’s regulatory expertise to support Cbus in protecting its members.

“The involvement of a trillion-dollar asset manager and a major Australian super fund demands urgent action to uphold market integrity.”

An ASIC spokesman said the regulator manages all correspondence received in confidence.

“Any matters referred to ASIC are considered in accordance with our normal procedures. Reports of misconduct are treated as confidential,” he said.

A Cbus spokesman said the super fund is not identified in the court filings and is not a party to the proceedings.

“As has been disclosed publicly, we have invested alongside Brookfield as part of our private equity portfolio. Brookfield has never refused capital from Cbus,” he said.

Brookfield declined to comment on Monday, but has previously rejected the allegations made by Mr Raffaelli and described his case as meritless.

“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,” a spokeswoman said previously.

Cbus chair and Labor Party president Wayne Swan. Picture: NewsWire / Martin Ollman

The letter, dated May 15, urged ASIC to “partner with Cbus to investigate the Brookfield defendants’ conduct”.

Cbus was a limited partner in two of Brookfield’s venture capital funds, Brookfield Technology Partners (fund II) and Brookfield Technology Growth Partners (fund III), according to the letter.

“We are bringing these matters to ASIC’s attention because the misconduct identified in the lawsuit is directly in the sphere of one of ASIC’s primary regulatory objectives to address misconduct that exploits superannuation savings,” it reads.

Cbus played a “critical role” overseeing fund II and fund III, but “due to the Brookfield defendants’ misrepresentations, including false statements about Mr Raffaelli’s departure, it appears that Cbus has not been able to fully investigate (Mr Raffaelli’s) allegations independently”, the letter read.

“We respectfully request ASIC’s assistance to partner with Cbus in a regulatory action to thoroughly examine the Brookfield defendants’ misconduct, thereby ensuring protection for Cbus’s members and their A$94.6 billion in superannuation savings, of which A$396.9 million is managed by Brookfield in various private equity funds,” the letter read.

Josh Raffaelli, former Managing Partner at Brookfield Asset Management.

Mr Raffaelli alleged he was wrongfully terminated for making a whistleblower complaint to the United States Securities and Exchange Commission identifying alleged securities violations by Pinegrove Capital Partners, a Brookfield affiliate.

He claimed Brookfield “further misled” Cbus in order to secure approval for a merger of funds II and III with Pinegrove, which had “poor performance that was engaged in widespread securities violations”.

Mr Raffaelli alleged Brookfield told Cbus he resigned and failed to disclose he refused to “lie” to investors, like Cbus, that moving their capital to Pinegrove made financial sense.

“These misrepresentations undermined Cbus’s ability to make informed decisions, in no small measure because moving Funds 2 and 3 to Pinegrove meant (i) their investments were being put “out to pasture” to “wither and die” rather than continue to grow and thrive,” the letter said.

Brookfield further misrepresented the reasons for Mr Raffaelli’s departure and “hid the fact that it had put its own interest above Cbus’s, resulting in Cbus missing significant investment opportunities,” the letter read.

As well, Mr Raffaelli’s alleged he was instructed to reject a $US75m – $US100m investment from an unidentified major foreign conglomerate into fund III, despite Cbus’s approval of the investment.

“This prevented (fund three) from reaching its $US1bn fundraising goal while also limiting the fund’s investment and diversification capacity and negatively impacting the fund’s overall profitability,” the letter said.

“In short, the Brookfield defendants put their interests over Cbus’s.”