The private equity industry is not safe from internal rogues--which, as of late, seem to be affecting the hedge fund industry. Consider Chicago-based AA Capital. FINalternatives reports, the SEC charges that partner John Orecchio asked the CFO to withdraw over $600,000 from AA Capital's client trust accounts, deposit the funds into AA Capital's operating account and then wire the money to Orecchio's personal bank account.

Does that sound way too simple? The SEC also charges that between May 2004 and October 2005, the CFO, Stevens, made at least 20 payments in this manner, totaling nearly $6 million. In several instances, the funds were wired from AA Capital directly to bank accounts associated with Orecchio's horse farm and a Detroit strip club he was renovating. There were other forms of theft as well. The SEC uncovered all this during a compliance inspection. 

For more:
- here's the article

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