(November 13) – “For decades, Jeffrey Grayson was a pillar of the business and civic elite of Portland, Ore.,” writes John Emshwiller in today’s Wall Street Journal..

“Mr. Grayson’s investment-management firm, Capital Consultants LLC, handled more than $1 billion, mostly for union pension funds, companies and wealthy Oregonians. His community-affairs work put his name on a building at the University of Oregon and a room at the local science museum. He did all this even as multiple sclerosis gradually robbed him of the ability to walk or turn a page.”

“Now federal authorities are alleging that Mr. Grayson has robbed his clients. On Sept. 21, the Securities and Exchange Commission and the Department of Labor filed civil complaints in federal court here charging the 58-year-old Mr. Grayson and his firm with fraud and self-dealing involving $231 million of client funds. The alleged wrongdoing started with a $160 million loan to a local hotshot entrepreneur that went sour and climaxed with what the SEC calls a ‘Ponzi-like scheme’ involving another $71 million to cover up the initial problem. Based on government filings, losses could exceed $150 million.”

” ‘This is one of the largest and costliest frauds ever perpetrated by an investment adviser,’ SEC attorney Kelly Bowers says.”

“In the wake of the government’s actions, Mr. Grayson lost control of his firm to a court-appointed receiver. As thousands of union members wait to learn the impact on their pensions and benefits, Mr. Grayson waits to learn whether he will be charged in a continuing criminal investigation by federal officials in Portland.”

“Mr. Grayson, through his attorney, declined to be interviewed; Mr. Grayson hasn’t yet filed a response to the Sept. 21 federal suits.”

“The charges shocked Oregon’s tightly knit business and civic leadership. Donald Tykeson, managing partner of Tykeson Associates Enterprises, a Eugene, Ore.-based owner of media properties, says his first reaction to the news was ‘disbelief.’ “

“But a look at Mr. Grayson’s activities during the past 30 years shows that while he was successful, and even inspirational, he also had run-ins with clients and regulators. He appears to have been an unusually aggressive competitor in the generally staid world of pension-fund management. ‘The guy always skirted close to the edge,’ asserts Marc Robins, a former Capital Consultants official who is now chief executive of RedChip Review, a stock-analysis firm here.”