A pair of fallen-angel Meridian brokers who invested in the company’s lending business are questioning the supposed “fire sale” of the once-heralded unit — and putting the firm’s “unregulated culture” on blast.
Ari Adlerstein and Josh Tzvi Simpson, who were fired from Meridian last year, filed a lawsuit in Delaware court Friday alleging the company stonewalled their requests for info on the $425 million sale of NewPoint Capital to the asset manager Benefit Street Partners earlier this year.
As leaders of Meridian’s multi-billion-dollar healthcare group, Alderstein and Simpson said company founder Ralph Herzka and others offered them an opportunity in 2021 to invest $1.66 million in a Delaware company named Bravo that holds a controlling stake in NewPoint.
NewPoint, which pre-sale was owned by a joint venture that included Meridian, has one of the limited, highly lucrative licenses to originate loans for Fannie Mae and Freddie Mac.
“Herzka and his allies convinced Adlerstein and Simpson to invest in Bravo by promising them that Meridian would direct the majority of its Fannie Mae and Freddie Mac deals to NewPoint,” the complaint read. “At the time, Meridian was sourcing more Fannie Mae and Freddie Mac deals than any other brokerage in the country, meaning that NewPoint would, according to Herzka’s telling, have unlimited potential and be virtually guaranteed to succeed.”
But Meridian’s business was dealt an existential blow when Fannie and Freddie blacklisted the company in 2023 amid an investigation into a multifamily broker who was using doctored financial statements to secure outsized loans. (The agencies have since removed Meridian from their blacklists.)
Alderstein and Simpson said the loss of Fannie and Freddie’s business put Meridian “on the brink of financial ruin,” and that the company was directed by its lead investor — Stone Point Capital — to sell NewPoint to Benefit Street “at fire-sale prices to the detriment of all other shareholders,” including Adlerstein and Simpson.
The brokers didn’t specify in their lawsuit how they determined the $425 million price tag to be a discounted price; Meridian and co-owner Stone Point invested a figure in the low $200 millions in acquiring the company, according to The Promote.
They said their requests for information on the deal have been unfairly denied, and are asking the court to order Bravo to allow them to inspect its books.
Adlerstein and Simpson declined to comment, and a spokesperson for Meridian was not immediately available.
In the grand scheme of things, a pair of minority investors agitating for some bookkeeping records isn’t the most consequential of claims. But it’s the first time Meridian insiders have gone on the record describing the company’s troublesome inner workings that facilitated the alleged mortgage fraud.
“The hard-driving, freewheeling and unregulated culture in Meridian’s multifamily brokerage business resulted in fraudulent, unethical and illegal practices designed to bring in business by any means,” the brokers’ lawsuit explained. “Not only was Meridian aware of these practices, it encouraged them.”
Alderstein and Simpson say that instead of firing the broker at the center of the fraud claims, Meridian promoted him at company meetings of top executives. They say that another employee — “a Meridian senior managing director, who was and is considered the ‘right hand man’ of [Herzka]” — was also found to have committed fraud.
Though the lawsuit didn’t name either of these people, that “right hand man,” The Real Deal has learned, is 20-year veteran Abe Hirsch. The Promote reported earlier this month that Fannie put Hirsch on its black list a few months after Freddie lifted its ban on Meridian with a host of strings attached.
It should be noted that Alderstein and Simpson potentially have an axe to grind with Meridian.
The Promote reported in December that the brokers spent several months negotiating an exit from Meridian and had even been in talks to create some kind of investment vehicle with the company before they were both fired for cause.
In their lawsuit, the brokers said they wanted to leave on good terms but were fired abruptly and then served with a 40-page demand seeking millions in damages based on what they characterized as “a host of specious allegations.”
The two sides are currently in arbitration over the termination.
Adlerstein and Simpson in January launched a new company, T7 Capital. And while their lawsuit
blamed Meridian for cultivating a culture that turned a blind eye to fraud, they made sure to distance themselves from an association with the company’s fast-and-loose ways.
“For avoidance of doubt, Adlerstein and Simpson were unaware of the fraudulent activities transpiring in other parts of Meridian’s business (until such activities were exposed in the media), and they were not involved in those unethical and illegal practices,” the lawsuit said.
Read more
Meridian Capital says its off Fannie Mae’s blacklist
Freddie Mac opens up to Meridian again — but with a catch
