SEC v. William A. DiBella; and North Cove Ventures, LLC, District of Connecticut — Complaint

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT
________________________________________________
:
SECURITIES AND EXCHANGE COMMISSION,:
:
PLAINTIFF,:
:
v.:
:CIVIL ACTION NO.
304CV1342 (WWE)
WILLIAM A. DIBELLA AND NORTH:
COVE VENTURES, LLC.,:
:JURY TRIAL DEMANDED
DEFENDANTS.:
:
________________________________________________:
COMPLAINT
Plaintiff, Securities and Exchange Commission (Commission), for its Complaint, alleges
as follows:
SUMMARY
1.During the period November 1998 through January 1999, Defendants William A.
DiBella (DiBella) and North Cove Ventures, LLC (North Cove), participated in a fraudulent
scheme with the former Treasurer of the State of Connecticut, Paul J. Silvester (Silvester),
concerning Silvester’s investment of $75 million of the Connecticut Retirement and Trust Funds
(Pension Fund) with Thayer Capital Partners (Thayer) in Thayer’s private equity fund, Thayer
Equity Investors IV, L.P. (Thayer IV).  Silvester used the investment to reward DiBella, the
former Majority Leader of the Connecticut State Senate and his friend and political supporter, for
past and anticipated future services.  In connection with this investment, Silvester requested that
Thayer, through its senior officer, Frederick V. Malek (Malek), retain DiBella.  Thayer, through

2
Malek, agreed to pay DiBella a fee calculated as a percentage of the Pension Fund’s total
investment in Thayer IV, even though DiBella had no prior involvement with the deal and
ultimately performed no meaningful work related to the investment.  Silvester increased the
amount of the Pension Fund’s investment by at least $25 million (to a total investment of $75
million) to secure a larger fee for DiBella.  Thus, Thayer contracted to pay DiBella $525,000 in
fees, through DiBella’s consulting firm North Cove.  After Silvester left office in January 1999,
his successor as state treasurer reduced the Pension Fund investment in Thayer IV.  As a result,
DiBella’s fee was reduced and he was paid a total of $374,500 in December 1998 and March
1999.
2.Silvester violated his fiduciary duty to the Pension Fund by engaging in a
fraudulent scheme in which he solicited substantial fees for his friend and political supporter,
DiBella, in connection with Silvester’s investment of Pension Fund money with a private equity
fund.  Silvester did so with knowledge that DiBella would not provide any meaningful work in
exchange for the fees he received from Thayer.  Silvester failed to disclose this arrangement to the
Pension Fund.   Silvester’s conduct also operated as a fraud and deceit on the Pension Fund. 
Silvester thereby violated §10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15
U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5]
 3.Thayer, its affiliates, TC Equity Partners IV, LLC (TC Partners IV) and TC
Management Partners IV, LLC (TC Management IV), and Malek also violated fiduciary duties to
the Pension Fund by failing to disclose to the Pension Fund their employment of DiBella at the
request of Silvester.  Their conduct, directly or indirectly, violated §206(2) of the Investment
Advisers Act of 1940 (Advisers Act) [15 U.S.C. §80b-6(2)].

3
4.  Defendants DiBella and North Cove aided and abetted the foregoing violations by
Silvester, Malek, Thayer, and its affiliates.
5.Defendants DiBella and North Cove, unless enjoined, will continue to engage in
the transactions, acts, practices and courses of business alleged herein, or in transactions, acts,
practices and courses of business of similar purport and object.
6.The Commission seeks to enjoin Defendants DiBella and North Cove from
committing such acts or practices in violation of §10(b) of the Exchange Act, Rule 10b-5,
thereunder, and §206(2) of the Advisers Act.  The Commission also seeks disgorgement of all ill-
gotten gains they received as a result of their violations, plus prejudgment interest thereon, and
imposition of civil penalties against each of them.  Further, the Commission seeks a permanent
bar prohibiting DiBella from serving as an officer or director of a public company.
JURISDICTION
7.The Commission brings this action pursuant to §§21(d) and (e) of the Exchange
Act [15 U.S.C. § 78u(d) and 78u(e)], and §§209(d) and (e) of the Advisers Act [15 U.S.C. §§ 80b-
9(d) and 80b-9(e)].
8.This Court has jurisdiction pursuant to §§21(d) and 27 of the Exchange Act [15
U.S.C. §§ 78u(d) and 78aa], and §214 of the Advisers Act [15 U.S.C. § 80b-14].
9.Defendants have knowingly or recklessly participated in a fraudulent scheme, and
certain of the transactions, acts, practices and courses of business of that scheme have occurred
within the District of Connecticut.
10.Defendants have directly or indirectly made use of the means or instrumentalities
of interstate commerce or of the mails in connection with the purchase or sale of securities and

4
other transactions, acts, practices and courses of business alleged herein.
THE DEFENDANTS
11.DiBella, age 59, is a resident of Old Saybrook, Connecticut.  DiBella, a Democrat,
served as Majority Leader of the Connecticut State Senate, retiring in 1996.  Since leaving office,
he has worked as a business consultant and lobbyist.  DiBella is currently the chairman of the
Metropolitan District Commission, a nonprofit municipal corporation that provides regional water
and sewer services in the state of Connecticut. 
12.North Cove is a consulting firm founded in 1998 by DiBella and headquartered in
Wethersfield, Connecticut.  DiBella is the sole owner of North Cove. 
BACKGROUND
13.Silvester, age 41, of West Hartford, Connecticut, is a longtime friend of DiBella. 
Silvester served as Treasurer of the State of Connecticut from July 1997 until January 1999, when
he left office after losing the November 3, 1998 election.  Silvester previously served as Deputy
Treasurer from January 1995 until July 1997.
14.Thayer is a Washington, D.C.-based private equity firm founded in 1996 that
manages funds totaling over $1.2 billion.  Thayer organizes funds that provide investment
opportunities for its participants.  TC Partners IV is the general partner of Thayer IV, an $880
million private equity fund founded in 1998 in which the Pension Fund is a limited partner. 
Thayer, through Malek and others, controls TC Partners IV.  TC Management IV is a private
management company that manages, and receives fees from, Thayer IV.  At all times relevant to
this Complaint, Thayer, TC Partners IV and TC Management IV have acted as unregistered
investment advisers and owed a fiduciary duty to the Pension Fund.

5
15.Malek, age 67, is a resident of McLean, Virginia.  Malek is the chairman of Thayer
and each of the foregoing Thayer affiliates, and as such, owed a fiduciary duty to the Pension
Fund.
16.At all times relevant to this Complaint, the Pension Fund consisted of
approximately $18 billion in assets held for approximately 150,000 Connecticut teachers and
other state and municipal employees in at least the following fourteen funds:  Teachers’
Retirement Fund;  State Employees’ Retirement Fund;  Municipal Employees’ Retirement Fund; 
Judge’s Retirement Fund;  Probate Court Retirement Fund;  Soldiers’ Sailors’ & Marines’ Fund; 
Policemen & Firemen Survivor’s Benefit Fund;  Art Endowment Fund;  School Fund;  Ida Eaton
Cotton Fund;   Hopemead Fund;  Andrew Clark Fund;  State’s Attorneys’ Retirement Fund;  and
the Agricultural College Fund.  The Connecticut Treasurer is a fiduciary with authority to invest
money from the Pension Fund on behalf of the beneficiaries.
17.At all times relevant to this Complaint, a board called the Investment Advisory
Council (“IAC”) was responsible for advising the Connecticut Treasurer regarding the Pension
Fund.  Under Connecticut law, the IAC was charged with reviewing all of the Treasurer’s
investments and providing reports concerning the investments to the Governor, the state
legislature, and the Pension Fund beneficiaries.  In addition, there is a mechanism for the IAC to
petition the Governor to overturn individual investments made by the Treasurer.  To effectively
carry out these duties, the IAC should be provided all material information about each investment.
18.The fraud alleged in this Complaint occurred in connection with a type of
investment made by the Pension Fund in a vehicle known as a private equity fund.  A private
equity fund generally invests in privately held companies and often works closely with the

6
management of its portfolio companies.  Thayer IV, the Thayer private equity fund in which the
Pension Fund invested, was structured as a limited partnership.  Accordingly, when the Pension
Fund invested in Thayer IV, it did so by purchasing a limited partnership interest.
FACTS
19.DiBella introduced Silvester to the president of PaineWebber in approximately the
fall of 1997.  Thereafter, DiBella set up a meeting between PaineWebber and Silvester in about
July 1998 and maintained occasional contact between the two.  Eventually, Silvester agreed to
make a Pension Fund investment of $100 million in a real estate private equity deal with
PaineWebber in late 1998.  Silvester and DiBella believed that DiBella was due a finder’s fee for
introducing the parties in the PaineWebber real estate deal.  
20.In August 1998, Thayer, through a broker-dealer acting as its exclusive placement
agent, began soliciting the staff of the Treasurer’s office to invest Pension Fund monies in a new
fund Thayer was forming, Thayer IV.  By mid-September, a state treasury investment officer,
Michael MacDonald, decided against the proposed investment.  Silvester overruled his
recommendation and directed MacDonald to perform due diligence for the proposed Thayer IV
investment.
21.On November 3, 1998, Silvester, the Republican candidate for Treasurer, lost the
election to the Democratic candidate. 
22.By mid-November 1998, the Treasurer’s Office Staff had completed its due
diligence for investment in Thayer IV.  MacDonald issued a Due Diligence Report recommending
an investment of up to $25 million.  In addition, by this time, the Treasurer’s Office Staff had
negotiated and prepared the necessary closing documents to complete the transaction.

7
23.On about November 10, 1998, Silvester and DiBella learned that DiBella would
not receive a fee for his role in the Pension Fund’s $100 million investment with PaineWebber.
24. Silvester decided on about November 11, 1998 to arrange payment of a fee for
DiBella in connection with the Thayer transaction.  Silvester did so despite the near-completion of
the transaction and in the absence of any meaningful assistance provided, or to be provided, by
DiBella.  Silvester made this arrangement for several reasons:  to compensate DiBella for his
role in the unrelated Pension Fund investment with PaineWebber;  to repay political favors
DiBella had provided Silvester in the past;  and to curry favor with DiBella, a powerful and
influential politician and business person, whom Silvester believed would be helpful to his career
in the future.
25.On November 11, 1998, Silvester telephoned Malek and told him the Thayer IV
investment was going forward, but that he could make no promises.  Silvester indicated that any
such investment would be in the $50 million range.  Silvester suggested to Malek that Thayer hire
DiBella as a local representative to help with the incoming administration.  The incoming
Treasurer, like DiBella, was a Democrat.
26.Shortly after his November 11, 1998 telephone call with Malek, Silvester
telephoned DiBella and told him that he would take care of DiBella’s non-payment of a fee for his
role in the Pension Fund’s investment with PaineWebber by putting DiBella in the Thayer deal. 
Silvester instructed DiBella to call Malek and to work out a deal as a placement agent or a finder. 
Silvester made clear to DiBella that he intended to do the Thayer deal and did not suggest there
was any work to be done by DiBella.  DiBella asked Silvester how he would be compensated. 
Silvester indicated that DiBella should ask for a point or a percent of the Pension Fund investment

8
in Thayer IV.   
 27.Thereafter, on about November 12, 1998, Malek and DiBella met in New York to 
discuss DiBella’s retention by Thayer.  Malek offered DiBella a half point (i.e., 0.5% of the
Pension Fund investment), which DiBella rejected.  By about November 18, 1998, Malek agreed
to pay DiBella a fee of 70 basis points (0.7%) of the investment.  Thereafter, DiBella pressured
Silvester to increase the amount of the Pension Fund’s investment in Thayer IV solely to increase
the size of DiBella’s fee.
28. On November 23, 1998, Silvester met with Malek in Washington, D.C. to solidify
Thayer’s agreement to hire DiBella.  Silvester told Malek that it would be helpful to Silvester if
Thayer hired DiBella.  In addition, Silvester told Malek that the Pension Fund would invest in
Thayer IV and that the only question was the size of the investment.
  29.DiBella signed a written consultant and representation agreement with TC Partners
IV dated November 24, 1998.  The contract provided for payment to North Cove of 0.7% of the
amount that the Pension Fund invested in Thayer IV as DiBella’s fee.
 30.Also on November 24, 1998, Silvester signed closing documents for the Pension
Fund investment in Thayer IV.  Silvester, under pressure from DiBella, had increased the amount
of Connecticut’s investment in Thayer IV from $25-$50 million to $75 million in order to 
increase the size of DiBella’s fee.   The investment deal closed on November 30, 1998, when TC
Partners IV signed the Thayer IV documents.
31.In December 1998, TC Management IV made its first payment to DiBella (through
North Cove) in the amount of $25,000.  In January 1999, the newly elected Treasurer reached an
agreement with Thayer to reduce the amount of the Pension Fund’s investment in Thayer IV from

9
$75 million to $53.5 million.  Thayer then reduced the amount of DiBella’s fee and paid him the
balance due in a lump sum payment of $349,500 in March 1999, for total payments of $374,500.
32.DiBella and North Cove performed no meaningful work in connection with the
Pension Fund’s investment in Thayer IV.
33.Silvester thus devised a fraudulent scheme in which he persuaded Thayer and its
affiliates, through Malek, to hire DiBella in connection with the Pension Fund’s investment in
Thayer IV.  As part of the scheme, Silvester and DiBella did not expect that DiBella would
perform any work in exchange for substantial fees paid to him by Thayer, and Silvester increased
the size of the Pension Fund’s investment in Thayer IV to increase the size of DiBella’s fee.  In
addition, Silvester failed to disclose these facts to the Pension Fund in breach of his fiduciary
duty;  and his conduct operated as a fraud or deceit upon the Pension Fund.
34.DiBella knew or recklessly disregarded that Silvester was engaging in the
foregoing fraudulent scheme, that Silvester failed to disclose the scheme to the Pension Fund, or
that Silvester’s conduct operated as a fraud or deceit upon the Pension Fund.  In addition, DiBella
provided knowing and substantial assistance to Silvester’s misconduct by, among other things,
pressuring Silvester to increase the Pension Fund’s investment in Thayer IV to increase his own
fees, and agreeing to accept substantial consulting fees from Thayer despite DiBella’s lack of
previous involvement in an almost completed transaction and his performance of no meaningful
work in connection with the investment. 
35.Thayer and its affiliates, through Malek, failed to disclose to the Pension Fund that
they employed DiBella, in connection with the Pension Fund’s investment in Thayer IV and at
Silvester’s request.  Their conduct breached their fiduciary duty to the Pension Fund and operated

10
as a fraud or deceit upon the Pension Fund.
36.DiBella knew or recklessly disregarded that Thayer and its affiliates, through
Malek, failed to disclose their agreement with Silvester to employ DiBella, and that their conduct
operated as a fraud or deceit upon the Pension Fund.  In addition, DiBella provided knowing and
substantial assistance to Thayer and its affiliates by agreeing to accept substantial fees despite
providing no meaningful services to Thayer as described above.
37.North Cove is a limited liability company owned by DiBella.  DiBella used North
Cove to receive his fees for the Thayer deal.  DiBella’s knowledge of and substantial assistance  to
the scheme is imputed to North Cove.
38.The Silvester investment scheme was conducted in connection with the purchase or
sale of securities in the limited partnership, Thayer IV.
FIRST CLAIM
(Aiding and Abetting Violations of Exchange Act §10(b) and Rule 10b-5 thereunder)
39.Plaintiff repeats and re-alleges paragraphs 1 through 38 above.
40.Silvester, singly or in concert with others, directly or indirectly, intentionally,
knowingly or recklessly, by use of the means or instrumentalities of interstate commerce or of the
mails: (a) has employed, or is employing devices, schemes, or artifices to defraud; (b) has made,
or is making untrue statements of material facts or has omitted, or is omitting to state material
facts necessary to make the statements made, in light of the circumstances under which they were
made, not misleading; or (c) has engaged, or is engaging, in acts, practices, or courses of business
which have operated, or are operating as a fraud or deceit upon persons, in connection with the
purchase or sale of securities as set forth above, in violation of §10(b) of the Exchange Act [15

11
U.S. C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5] thereunder.
 41.Defendant DiBella knew or recklessly disregarded that Silvester’s conduct was
improper, and he rendered knowing and substantial assistance to Silvester in his commission of
the foregoing securities law violation.  Because DiBella is the sole owner and principal of North
Cove, his knowledge of and substantial assistance to Silvester’s securities law violation is
imputed to North Cove.
42.By reason of the foregoing, Defendants DiBella and North Cove aided and abetted
violations of §10(b) of the Exchange Act and Rule 10b-5 thereunder by Silvester and therefore are
liable pursuant to §20(e) of the Exchange Act [15 U.S.C. §78(e)].   
 43.Defendants’ conduct involved fraud, deceit, or deliberate or reckless disregard of
regulatory requirements, and resulted in substantial loss or significant risk of substantial loss to
other persons, within the meaning of §21(d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)]. 
Therefore, DiBella and North Cove are subject to imposition of significant civil penalties.
SECOND CLAIM
(Aiding and Abetting Violations of Advisers Act §206(2))
44.Plaintiff repeats and re-alleges paragraphs 1 through 38 above.
45.Thayer, TC Partners IV, and TC Management IV, singly or in concert with others,
directly or indirectly, by use of the mails or any means or instrumentality of interstate commerce,
have engaged in transactions, practices, or courses of business which operate as a fraud or deceit
upon clients or prospective clients, as set forth above, in violation of §206(2) of the Advisers Act
[15 U.S.C. § 80b-6(2)].  As a result of the conduct described above, Malek willfully aided and
abetted and caused Thayer’s, TC Partners IV’s, and TC Management IV’s violations of §206(2) of
the Advisers Act.

12
46.Defendant DiBella knew or recklessly disregarded that the conduct of Malek,
Thayer, TC Partners IV, and TC Management IV, was improper, and he rendered knowing and
substantial assistance to them in their commission of the foregoing securities law violation. 
Because DiBella is the sole owner and principal of North Cove, his knowledge of and substantial
assistance to Malek’s, Thayer’s and its affiliates’ securities law violation is imputed to North
Cove.
47.By reason of the foregoing, Defendants DiBella and North Cove aided and abetted
violations of §206(2) of the Advisers Act by Thayer, TC Partners IV, and TC Management IV
(who acted through Malek), and therefore are liable pursuant to §209(d) of the Advisers Act [15
U.S.C. §80b-9(d)].
48.Defendants’ conduct involved fraud, deceit, or deliberate or reckless disregard of
regulatory requirements, and resulted in substantial loss or significant risk of substantial loss to
other persons, within the meaning of §209(e) of the Advisers Act [15 U.S.C. §80b-9(e)]. 
Therefore, DiBella and North Cove are subject to imposition of significant civil penalties.
PRAYER FOR RELIEF
WHEREFORE, the Plaintiff Commission respectfully requests that the Court:
I.
Permanently enjoin the Defendants, DiBella and North Cove, from, directly or indirectly,
violating §10(b) of the Exchange Act and Rule 10b-5 thereunder, or §206(2) of the Advisers Act.
II.
Order the Defendants, DiBella and North Cove, to disgorge all monies received by them as
a result of the fraudulent conduct alleged herein plus prejudgment interest thereon.

13
III.
Permanently bar Defendant DiBella, pursuant to §21(d)(2) of the Exchange Act [15 U.S.C.
§78u(d)(2)], from serving as an officer or director of any issuer that has a class of securities
registered pursuant to §12 of the Exchange Act or that is required to file reports pursuant to
§15(d) of the Exchange Act [15 U.S.C. §§781(b), 781(g) and 78o(d)].
IV.
Order the Defendants DiBella and North Cove to pay civil penalties pursuant to §21(d)(3)
of the Exchange Act [15 U.S.C. §78u(d)(3)], and/or §209(e) of the Advisers Act [15 U.S.C. 
§80b-9(e)].
V.
Grant such other and further relief as this Court deems necessary and appropriate under the
circumstances.
Respectfully submitted,
                                                     
Linda B. Bridgman
District Trial Counsel
DC Bar No. 304824
Connecticut Federal Bar No. ct21694
Steven Y. Quintero
Branch Chief
Massachusetts BBO # 632079
Connecticut Federal Bar No. ct21887
Timothy B. Henseler
Staff Attorney
Massachusetts BBO # 640055
ATTORNEYS FOR PLAINTIFF
Securities and Exchange Commission

14
Boston District Office
73 Tremont Street, Suite 600
Boston, Massachusetts  02108
(617) 573-8900
(617) 573-8929 (Bridgman)
(617) 573-8954 (Henseler)
(617) 424-5940 (facsimile)
Local Counsel:
John B. Hughes 
Connecticut Federal Bar No. ct05289
Assistant United States Attorney
Chief, Civil Division
United States Attorney’s Office
Connecticut Financial Center
157 Church Street, 23rd Floor
New Haven, CT 06510
(203) 821-3700
(203) 773-5373 (facsimile)
Dated: August 12, 2004              

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF CONNECTICUT

________________________________________________
:

SECURITIES AND EXCHANGE COMMISSION, :
:

PLAINTIFF, :
:

v. :
: CIVIL ACTION NO.

304CV1342 (WWE)
WILLIAM A. DIBELLA AND NORTH :
COVE VENTURES, LLC., :

: JURY TRIAL DEMANDED
DEFENDANTS. :

:
________________________________________________:

COMPLAINT

Plaintiff, Securities and Exchange Commission (Commission), for its Complaint, alleges

as follows:

SUMMARY

1. During the period November 1998 through January 1999, Defendants William A.

DiBella (DiBella) and North Cove Ventures, LLC (North Cove), participated in a fraudulent

scheme with the former Treasurer of the State of Connecticut, Paul J. Silvester (Silvester),

concerning Silvester’s investment of $75 million of the Connecticut Retirement and Trust Funds

(Pension Fund) with Thayer Capital Partners (Thayer) in Thayer’s private equity fund, Thayer

Equity Investors IV, L.P. (Thayer IV).  Silvester used the investment to reward DiBella, the

former Majority Leader of the Connecticut State Senate and his friend and political supporter, for

past and anticipated future services.  In connection with this investment, Silvester requested that

Thayer, through its senior officer, Frederick V. Malek (Malek), retain DiBella.  Thayer, through



2

Malek, agreed to pay DiBella a fee calculated as a percentage of the Pension Fund’s total

investment in Thayer IV, even though DiBella had no prior involvement with the deal and

ultimately performed no meaningful work related to the investment.  Silvester increased the

amount of the Pension Fund’s investment by at least $25 million (to a total investment of $75

million) to secure a larger fee for DiBella.  Thus, Thayer contracted to pay DiBella $525,000 in

fees, through DiBella’s consulting firm North Cove.  After Silvester left office in January 1999,

his successor as state treasurer reduced the Pension Fund investment in Thayer IV.  As a result,

DiBella’s fee was reduced and he was paid a total of $374,500 in December 1998 and March

1999.

2. Silvester violated his fiduciary duty to the Pension Fund by engaging in a

fraudulent scheme in which he solicited substantial fees for his friend and political supporter,

DiBella, in connection with Silvester’s investment of Pension Fund money with a private equity

fund.  Silvester did so with knowledge that DiBella would not provide any meaningful work in

exchange for the fees he received from Thayer.  Silvester failed to disclose this arrangement to the

Pension Fund.   Silvester’s conduct also operated as a fraud and deceit on the Pension Fund. 

Silvester thereby violated §10(b) of the Securities Exchange Act of 1934 (“Exchange Act”) [15

U.S.C. § 78j(b)] and Rule 10b-5 thereunder [17 C.F.R. 240.10b-5]

 3. Thayer, its affiliates, TC Equity Partners IV, LLC (TC Partners IV) and TC

Management Partners IV, LLC (TC Management IV), and Malek also violated fiduciary duties to

the Pension Fund by failing to disclose to the Pension Fund their employment of DiBella at the

request of Silvester.  Their conduct, directly or indirectly, violated §206(2) of the Investment

Advisers Act of 1940 (Advisers Act) [15 U.S.C. §80b-6(2)].



3

4.  Defendants DiBella and North Cove aided and abetted the foregoing violations by

Silvester, Malek, Thayer, and its affiliates.

5. Defendants DiBella and North Cove, unless enjoined, will continue to engage in

the transactions, acts, practices and courses of business alleged herein, or in transactions, acts,

practices and courses of business of similar purport and object.

6. The Commission seeks to enjoin Defendants DiBella and North Cove from

committing such acts or practices in violation of §10(b) of the Exchange Act, Rule 10b-5,

thereunder, and §206(2) of the Advisers Act.  The Commission also seeks disgorgement of all ill-

gotten gains they received as a result of their violations, plus prejudgment interest thereon, and

imposition of civil penalties against each of them.  Further, the Commission seeks a permanent

bar prohibiting DiBella from serving as an officer or director of a public company.

JURISDICTION

7. The Commission brings this action pursuant to §§21(d) and (e) of the Exchange

Act [15 U.S.C. § 78u(d) and 78u(e)], and §§209(d) and (e) of the Advisers Act [15 U.S.C. §§ 80b-

9(d) and 80b-9(e)].

8. This Court has jurisdiction pursuant to §§21(d) and 27 of the Exchange Act [15

U.S.C. §§ 78u(d) and 78aa], and §214 of the Advisers Act [15 U.S.C. § 80b-14].

9. Defendants have knowingly or recklessly participated in a fraudulent scheme, and

certain of the transactions, acts, practices and courses of business of that scheme have occurred

within the District of Connecticut.

10. Defendants have directly or indirectly made use of the means or instrumentalities

of interstate commerce or of the mails in connection with the purchase or sale of securities and



4

other transactions, acts, practices and courses of business alleged herein.

THE DEFENDANTS

11. DiBella, age 59, is a resident of Old Saybrook, Connecticut.  DiBella, a Democrat,

served as Majority Leader of the Connecticut State Senate, retiring in 1996.  Since leaving office,

he has worked as a business consultant and lobbyist.  DiBella is currently the chairman of the

Metropolitan District Commission, a nonprofit municipal corporation that provides regional water

and sewer services in the state of Connecticut. 

12. North Cove is a consulting firm founded in 1998 by DiBella and headquartered in

Wethersfield, Connecticut.  DiBella is the sole owner of North Cove. 

BACKGROUND

13. Silvester, age 41, of West Hartford, Connecticut, is a longtime friend of DiBella. 

Silvester served as Treasurer of the State of Connecticut from July 1997 until January 1999, when

he left office after losing the November 3, 1998 election.  Silvester previously served as Deputy

Treasurer from January 1995 until July 1997.

14. Thayer is a Washington, D.C.-based private equity firm founded in 1996 that

manages funds totaling over $1.2 billion.  Thayer organizes funds that provide investment

opportunities for its participants.  TC Partners IV is the general partner of Thayer IV, an $880

million private equity fund founded in 1998 in which the Pension Fund is a limited partner. 

Thayer, through Malek and others, controls TC Partners IV.  TC Management IV is a private

management company that manages, and receives fees from, Thayer IV.  At all times relevant to

this Complaint, Thayer, TC Partners IV and TC Management IV have acted as unregistered

investment advisers and owed a fiduciary duty to the Pension Fund.



5

15. Malek, age 67, is a resident of McLean, Virginia.  Malek is the chairman of Thayer

and each of the foregoing Thayer affiliates, and as such, owed a fiduciary duty to the Pension

Fund.

16. At all times relevant to this Complaint, the Pension Fund consisted of

approximately $18 billion in assets held for approximately 150,000 Connecticut teachers and

other state and municipal employees in at least the following fourteen funds:  Teachers’

Retirement Fund;  State Employees’ Retirement Fund;  Municipal Employees’ Retirement Fund; 

Judge’s Retirement Fund;  Probate Court Retirement Fund;  Soldiers’ Sailors’ & Marines’ Fund; 

Policemen & Firemen Survivor’s Benefit Fund;  Art Endowment Fund;  School Fund;  Ida Eaton

Cotton Fund;   Hopemead Fund;  Andrew Clark Fund;  State’s Attorneys’ Retirement Fund;  and

the Agricultural College Fund.  The Connecticut Treasurer is a fiduciary with authority to invest

money from the Pension Fund on behalf of the beneficiaries.

17. At all times relevant to this Complaint, a board called the Investment Advisory

Council (“IAC”) was responsible for advising the Connecticut Treasurer regarding the Pension

Fund.  Under Connecticut law, the IAC was charged with reviewing all of the Treasurer’s

investments and providing reports concerning the investments to the Governor, the state

legislature, and the Pension Fund beneficiaries.  In addition, there is a mechanism for the IAC to

petition the Governor to overturn individual investments made by the Treasurer.  To effectively

carry out these duties, the IAC should be provided all material information about each investment.

18. The fraud alleged in this Complaint occurred in connection with a type of

investment made by the Pension Fund in a vehicle known as a private equity fund.  A private

equity fund generally invests in privately held companies and often works closely with the



6

management of its portfolio companies.  Thayer IV, the Thayer private equity fund in which the

Pension Fund invested, was structured as a limited partnership.  Accordingly, when the Pension

Fund invested in Thayer IV, it did so by purchasing a limited partnership interest.

FACTS

19. DiBella introduced Silvester to the president of PaineWebber in approximately the

fall of 1997.  Thereafter, DiBella set up a meeting between PaineWebber and Silvester in about

July 1998 and maintained occasional contact between the two.  Eventually, Silvester agreed to

make a Pension Fund investment of $100 million in a real estate private equity deal with

PaineWebber in late 1998.  Silvester and DiBella believed that DiBella was due a finder’s fee for

introducing the parties in the PaineWebber real estate deal.  

20. In August 1998, Thayer, through a broker-dealer acting as its exclusive placement

agent, began soliciting the staff of the Treasurer’s office to invest Pension Fund monies in a new

fund Thayer was forming, Thayer IV.  By mid-September, a state treasury investment officer,

Michael MacDonald, decided against the proposed investment.  Silvester overruled his

recommendation and directed MacDonald to perform due diligence for the proposed Thayer IV

investment.

21. On November 3, 1998, Silvester, the Republican candidate for Treasurer, lost the

election to the Democratic candidate. 

22. By mid-November 1998, the Treasurer’s Office Staff had completed its due

diligence for investment in Thayer IV.  MacDonald issued a Due Diligence Report recommending

an investment of up to $25 million.  In addition, by this time, the Treasurer’s Office Staff had

negotiated and prepared the necessary closing documents to complete the transaction.



7

23. On about November 10, 1998, Silvester and DiBella learned that DiBella would

not receive a fee for his role in the Pension Fund’s $100 million investment with PaineWebber.

24. Silvester decided on about November 11, 1998 to arrange payment of a fee for

DiBella in connection with the Thayer transaction.  Silvester did so despite the near-completion of

the transaction and in the absence of any meaningful assistance provided, or to be provided, by

DiBella.  Silvester made this arrangement for several reasons:  to compensate DiBella for his

role in the unrelated Pension Fund investment with PaineWebber;  to repay political favors

DiBella had provided Silvester in the past;  and to curry favor with DiBella, a powerful and

influential politician and business person, whom Silvester believed would be helpful to his career

in the future.

25. On November 11, 1998, Silvester telephoned Malek and told him the Thayer IV

investment was going forward, but that he could make no promises.  Silvester indicated that any

such investment would be in the $50 million range.  Silvester suggested to Malek that Thayer hire

DiBella as a local representative to help with the incoming administration.  The incoming

Treasurer, like DiBella, was a Democrat.

26. Shortly after his November 11, 1998 telephone call with Malek, Silvester

telephoned DiBella and told him that he would take care of DiBella’s non-payment of a fee for his

role in the Pension Fund’s investment with PaineWebber by putting DiBella in the Thayer deal. 

Silvester instructed DiBella to call Malek and to work out a deal as a placement agent or a finder. 

Silvester made clear to DiBella that he intended to do the Thayer deal and did not suggest there

was any work to be done by DiBella.  DiBella asked Silvester how he would be compensated. 

Silvester indicated that DiBella should ask for a point or a percent of the Pension Fund investment



8

in Thayer IV.   

 27. Thereafter, on about November 12, 1998, Malek and DiBella met in New York to 

discuss DiBella’s retention by Thayer.  Malek offered DiBella a half point (i.e., 0.5% of the

Pension Fund investment), which DiBella rejected.  By about November 18, 1998, Malek agreed

to pay DiBella a fee of 70 basis points (0.7%) of the investment.  Thereafter, DiBella pressured

Silvester to increase the amount of the Pension Fund’s investment in Thayer IV solely to increase

the size of DiBella’s fee.

28. On November 23, 1998, Silvester met with Malek in Washington, D.C. to solidify

Thayer’s agreement to hire DiBella.  Silvester told Malek that it would be helpful to Silvester if

Thayer hired DiBella.  In addition, Silvester told Malek that the Pension Fund would invest in

Thayer IV and that the only question was the size of the investment.

  29. DiBella signed a written consultant and representation agreement with TC Partners

IV dated November 24, 1998.  The contract provided for payment to North Cove of 0.7% of the

amount that the Pension Fund invested in Thayer IV as DiBella’s fee.

 30. Also on November 24, 1998, Silvester signed closing documents for the Pension

Fund investment in Thayer IV.  Silvester, under pressure from DiBella, had increased the amount

of Connecticut’s investment in Thayer IV from $25-$50 million to $75 million in order to 

increase the size of DiBella’s fee.   The investment deal closed on November 30, 1998, when TC

Partners IV signed the Thayer IV documents.

31. In December 1998, TC Management IV made its first payment to DiBella (through

North Cove) in the amount of $25,000.  In January 1999, the newly elected Treasurer reached an

agreement with Thayer to reduce the amount of the Pension Fund’s investment in Thayer IV from



9

$75 million to $53.5 million.  Thayer then reduced the amount of DiBella’s fee and paid him the

balance due in a lump sum payment of $349,500 in March 1999, for total payments of $374,500.

32. DiBella and North Cove performed no meaningful work in connection with the

Pension Fund’s investment in Thayer IV.

33. Silvester thus devised a fraudulent scheme in which he persuaded Thayer and its

affiliates, through Malek, to hire DiBella in connection with the Pension Fund’s investment in

Thayer IV.  As part of the scheme, Silvester and DiBella did not expect that DiBella would

perform any work in exchange for substantial fees paid to him by Thayer, and Silvester increased

the size of the Pension Fund’s investment in Thayer IV to increase the size of DiBella’s fee.  In

addition, Silvester failed to disclose these facts to the Pension Fund in breach of his fiduciary

duty;  and his conduct operated as a fraud or deceit upon the Pension Fund.

34. DiBella knew or recklessly disregarded that Silvester was engaging in the

foregoing fraudulent scheme, that Silvester failed to disclose the scheme to the Pension Fund, or

that Silvester’s conduct operated as a fraud or deceit upon the Pension Fund.  In addition, DiBella

provided knowing and substantial assistance to Silvester’s misconduct by, among other things,

pressuring Silvester to increase the Pension Fund’s investment in Thayer IV to increase his own

fees, and agreeing to accept substantial consulting fees from Thayer despite DiBella’s lack of

previous involvement in an almost completed transaction and his performance of no meaningful

work in connection with the investment. 

35. Thayer and its affiliates, through Malek, failed to disclose to the Pension Fund that

they employed DiBella, in connection with the Pension Fund’s investment in Thayer IV and at

Silvester’s request.  Their conduct breached their fiduciary duty to the Pension Fund and operated



10

as a fraud or deceit upon the Pension Fund.

36. DiBella knew or recklessly disregarded that Thayer and its affiliates, through

Malek, failed to disclose their agreement with Silvester to employ DiBella, and that their conduct

operated as a fraud or deceit upon the Pension Fund.  In addition, DiBella provided knowing and

substantial assistance to Thayer and its affiliates by agreeing to accept substantial fees despite

providing no meaningful services to Thayer as described above.

37. North Cove is a limited liability company owned by DiBella.  DiBella used North

Cove to receive his fees for the Thayer deal.  DiBella’s knowledge of and substantial assistance  to

the scheme is imputed to North Cove.

38. The Silvester investment scheme was conducted in connection with the purchase or

sale of securities in the limited partnership, Thayer IV.

FIRST CLAIM
(Aiding and Abetting Violations of Exchange Act §10(b) and Rule 10b-5 thereunder)

39. Plaintiff repeats and re-alleges paragraphs 1 through 38 above.

40. Silvester, singly or in concert with others, directly or indirectly, intentionally,

knowingly or recklessly, by use of the means or instrumentalities of interstate commerce or of the

mails: (a) has employed, or is employing devices, schemes, or artifices to defraud; (b) has made,

or is making untrue statements of material facts or has omitted, or is omitting to state material

facts necessary to make the statements made, in light of the circumstances under which they were

made, not misleading; or (c) has engaged, or is engaging, in acts, practices, or courses of business

which have operated, or are operating as a fraud or deceit upon persons, in connection with the

purchase or sale of securities as set forth above, in violation of §10(b) of the Exchange Act [15



11

U.S. C. §78j(b)] and Rule 10b-5 [17 C.F.R. §240.10b-5] thereunder.

 41. Defendant DiBella knew or recklessly disregarded that Silvester’s conduct was

improper, and he rendered knowing and substantial assistance to Silvester in his commission of

the foregoing securities law violation.  Because DiBella is the sole owner and principal of North

Cove, his knowledge of and substantial assistance to Silvester’s securities law violation is

imputed to North Cove.

42. By reason of the foregoing, Defendants DiBella and North Cove aided and abetted

violations of §10(b) of the Exchange Act and Rule 10b-5 thereunder by Silvester and therefore are

liable pursuant to §20(e) of the Exchange Act [15 U.S.C. §78(e)].   

 43. Defendants’ conduct involved fraud, deceit, or deliberate or reckless disregard of

regulatory requirements, and resulted in substantial loss or significant risk of substantial loss to

other persons, within the meaning of §21(d)(3) of the Exchange Act [15 U.S.C. §78u(d)(3)]. 

Therefore, DiBella and North Cove are subject to imposition of significant civil penalties.

SECOND CLAIM
(Aiding and Abetting Violations of Advisers Act §206(2))

44. Plaintiff repeats and re-alleges paragraphs 1 through 38 above.

45. Thayer, TC Partners IV, and TC Management IV, singly or in concert with others,

directly or indirectly, by use of the mails or any means or instrumentality of interstate commerce,

have engaged in transactions, practices, or courses of business which operate as a fraud or deceit

upon clients or prospective clients, as set forth above, in violation of §206(2) of the Advisers Act

[15 U.S.C. § 80b-6(2)].  As a result of the conduct described above, Malek willfully aided and

abetted and caused Thayer’s, TC Partners IV’s, and TC Management IV’s violations of §206(2) of

the Advisers Act.



12

46. Defendant DiBella knew or recklessly disregarded that the conduct of Malek,

Thayer, TC Partners IV, and TC Management IV, was improper, and he rendered knowing and

substantial assistance to them in their commission of the foregoing securities law violation. 

Because DiBella is the sole owner and principal of North Cove, his knowledge of and substantial

assistance to Malek’s, Thayer’s and its affiliates’ securities law violation is imputed to North

Cove.

47. By reason of the foregoing, Defendants DiBella and North Cove aided and abetted

violations of §206(2) of the Advisers Act by Thayer, TC Partners IV, and TC Management IV

(who acted through Malek), and therefore are liable pursuant to §209(d) of the Advisers Act [15

U.S.C. §80b-9(d)].

48. Defendants’ conduct involved fraud, deceit, or deliberate or reckless disregard of

regulatory requirements, and resulted in substantial loss or significant risk of substantial loss to

other persons, within the meaning of §209(e) of the Advisers Act [15 U.S.C. §80b-9(e)]. 

Therefore, DiBella and North Cove are subject to imposition of significant civil penalties.

PRAYER FOR RELIEF

WHEREFORE, the Plaintiff Commission respectfully requests that the Court:

I.

Permanently enjoin the Defendants, DiBella and North Cove, from, directly or indirectly,

violating §10(b) of the Exchange Act and Rule 10b-5 thereunder, or §206(2) of the Advisers Act.

II.

Order the Defendants, DiBella and North Cove, to disgorge all monies received by them as

a result of the fraudulent conduct alleged herein plus prejudgment interest thereon.



13

III.

Permanently bar Defendant DiBella, pursuant to §21(d)(2) of the Exchange Act [15 U.S.C.

§78u(d)(2)], from serving as an officer or director of any issuer that has a class of securities

registered pursuant to §12 of the Exchange Act or that is required to file reports pursuant to

§15(d) of the Exchange Act [15 U.S.C. §§781(b), 781(g) and 78o(d)].

IV.

Order the Defendants DiBella and North Cove to pay civil penalties pursuant to §21(d)(3)

of the Exchange Act [15 U.S.C. §78u(d)(3)], and/or §209(e) of the Advisers Act [15 U.S.C. 

§80b-9(e)].

V.

Grant such other and further relief as this Court deems necessary and appropriate under the

circumstances.

Respectfully submitted,

                                                     
Linda B. Bridgman
District Trial Counsel
DC Bar No. 304824
Connecticut Federal Bar No. ct21694

Steven Y. Quintero
Branch Chief
Massachusetts BBO # 632079
Connecticut Federal Bar No. ct21887

Timothy B. Henseler
Staff Attorney
Massachusetts BBO # 640055

ATTORNEYS FOR PLAINTIFF
Securities and Exchange Commission



14

Boston District Office
73 Tremont Street, Suite 600
Boston, Massachusetts  02108
(617) 573-8900
(617) 573-8929 (Bridgman)
(617) 573-8954 (Henseler)
(617) 424-5940 (facsimile)

Local Counsel:
John B. Hughes 
Connecticut Federal Bar No. ct05289
Assistant United States Attorney
Chief, Civil Division
United States Attorney’s Office
Connecticut Financial Center
157 Church Street, 23rd Floor
New Haven, CT 06510
(203) 821-3700
(203) 773-5373 (facsimile)

Dated: August 12, 2004              


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