Alvin G. Donovan Equity Partners review: Service is a scam 3

Self-proclaimed investment whiz Alvin Donovan trawls sites such as LinkedIn to find entrepreneurs desperate to raise capital for their ventures. Once his clients sign up, they often wish they hadn't, write Su-Lin Tan and Michael West. Alvin Donovan is a very accomplished man. In his own assessment, he is not only a 'pioneer of the global hedge fund industry' but also an investment banker and a marketing, IT and property expert - not to mention bestselling author and philanthropist.

He also claims to speak seven languages, finds time to consult the world's leading companies and has contributed to the No.1 international bestseller Wake Up … Live the Life You Love with Deepak Chopra and Mark Victor Hansen. It wasn't his only bestseller. He also penned Make More Money Now. Then there's his athletic prowess. The self-professed 'big wave charger' reports surfing 15-foot barrels in Bali; but not only that, he is also a 'yellow bamboo master' whose dexterity in the martial arts, he boasts, is lethal. Once he was approached by no fewer than four assailants. 'Before I knew it, the four men were writhing on the ground in pain!' wrote Donovan in a blog about his journey of spiritual exploration.

It is in the business of raising capital though - or at least the business of marketing his capital-raising services - that Donovan, who lives on a sprawling estate in Pullenvale, near the Brisbane River in Queensland, has been most active.

He claims to have 'raised over $1.5 billion for new ventures'. He also claims to be backed by a Chinese bank, Zigong Bank, an institution that The Sun-Herald has been unable to locate.In an investigation of Donovan's activities, however, The Sun-Herald found that it has been his clients, rather than his assailants, who have suffered pain.

The investigation failed to find a single example of a successful capital raising - despite the slew of hyped-up media releases online touting billions of dollars in deals.

Luke Bracken, from a small mining company, claims he was taken for a ride with promises of financing. 'He would have made millions just by signing up countless companies at $15,000 a pop.' Another client left in the lurch is Jacques Blandin, chief executive of the IT company Firmware Technologies. 'We never saw a cent of the drawdown when we needed it,' Blandin says. He says Donovan claimed the company at the heart of his empire - Equity Partners Fund - had $US3 billion to invest.

When contacted, Donovan declined to respond in detail.

'All of our transactions are commercial in confidence,' Donovan responded in an email. 'Therefore, we are unable to discuss any specifics with any of our deals.' Many former clients, however, were happy to talk about Donovan, most describing him as charismatic. Kim Cox, a former marketing agent who worked for Donovan finding prospective clients for financing deals, says: 'The guy is a bit of a loose cannon. 'To every client I presented him, he would say, 'Yeah, yeah, they're all right. Sign them up, sign them up.' Some of these companies looking for funds have not even broken dirt yet or don't have any capital at all.

'And he would still tell me, 'Sign them up!'

Despite the bonhomie, Cox says that Donovan sometimes appeared worn down, constantly pursued by angry clients looking for their money back. In the meantime, Donovan had already secured his fees.

Dr Alvin G. Donovan III, as he has also dubbed himself online, is at the sharp end of a new generation of cyber-marketers, stalking the corridors of the internet looking for investors, scouting out companies desperate to raise money for their business.

The tools of his trade are social media and business networking websites such as LinkedIn and FinRoad and free public relations sites such as PR Newswire and Newsmaker.

'Lead, follow, or get out of the way!' is Donovan's catchcry on LinkedIn.

And his operation is global. The Sun-Herald tracked companies in South Africa, Hong Kong and the United States, all of which Donovan claimed to have assisted to raise large amounts of capital - all of which came to a dead end.

Some deals have been announced with much fanfare, only to then go very quiet. Renaissance Financial Holdings, listed on the Johannesburg Stock Exchange in South Africa, claimed in October it was teaming up with Donovan to raise $US1.5 billion. Nothing has been reported since. Renaissance could not be contacted for comment.

Donovan also claimed via PR Newswire in September to have undertaken a €500 million capital injection for Zfere, a mobile ecommerce company in the US. Nothing has been heard since.

Things have gone awry for the entrepreneur more recently. Late last year, a key associate was slapped with a 'cease and desist' order by the US Securities and Exchange Commission. Joseph B. LaRocco, general counsel to the company at the heart of Donovan's empire, Equity Partners, was accused of deceiving 12 investors through a 'purported hedge fund'.

LaRocco, a 53-year-old New York attorney who lives in Connecticut, is a principal of LeadDog Capital LP. The SEC orders describe LeadDog making 'reckless misrepresentations', 'deliberately concealing' information from investors, preying on the elderly and lying to its auditors. This venture, the SEC found, was a 'tangled web of related parties and conflicts of interest'.

Donovan doesn't see it that way. 'Joseph LaRocco is a highly valued partner and legal adviser to [Donovan's head company] EPF and neither he nor us can comment on the status of that matter, which is administrative in nature, which EPF considers to be a minor administrative matter,' Donovan told The Sun-Herald. According to the SEC, however, LeadDog spent its investors' funds buying shares in micro-cap companies owned or controlled by LeadDog principals LaRocco and his partner Chris Messalas - all unbeknown to fund investors. LaRocco does the legal work for Donovan's Equity Partners Fund. Equity Partners claims to 'provide fast, efficient and inexpensive access to equity capital'. But the claim is proving a long distance from the reality.

Lately, even the claims themselves have become harder to find. Over the past four months since The Sun-Herald began investigating, many of the web pages put up by Donovan and his cohorts to attract clients have been taken down. Although the lively entrepreneur has approached at least one ASX-listed company as large as $150 million by market value, Donovan's stomping ground remains small companies and start-ups. These are invariably in need of cash and are interested in anyone who claims they can raise it cheaply and easily.

Another client, with a private company in fibre optics, who asked for its identity to remain confidential, also paid a fee to Donovan to raise money but was later told to raise the $200 million himself.

A common practice is to encourage the client to float the company on the lowly regulated Frankfurt Stock Exchange. There is a fee in this for the promoter. Donovan's real bread and butter, though, is 'equity line financing'; that is, a promise of instant funds akin to a very expensive overdraft.

Often the funds are not delivered. Even if they are, equity lines are an expensive form of funding and can lead to sharp losses in a company share price.

Not all Donovan's clients are critical. One, Simon St Ledger, the principal of the weight-loss supplement distributor Rapid Nutrition, recently announced a '$50 million joint venture' with Equity Partners Fund.

'This transaction was facilitated by the Singapore-based Equity Partners Group, who have developed an exemplary track record with total transactions completed in excess of $US4.5 billion,' St Ledger wrote on his website.

Contacted by The Sun-Herald, St Ledger said he had not yet drawn down the $50 million. He did say, though, that he believed that Donovan and Equity Partners did have $US4.5 billion in funds.

Donovan himself disagreed with this. He said via email to The Sun-Herald that he and his associates did not provide investment funds, only equity line financing.

Notwithstanding Donovan's mission statement - 'Lead, follow, or get out of the way' - many of his clients, with the benefit of hindsight, wish they had selected the latter course of action.

View 0 more photos