RETURN DATE: MARCH 17, 2009 : SUPERIOR COURT RETIREMENT PROGRAM FOR EMPLOYEES JUDICIAL DISTRICT OF OF THE TOWN OF FAIRFIELD; RETIREMENT : FAIRFIELD PROGRAM FOR POLICE OFFICERS AND FIREMEN OF THE TOWN OF FAIRFIELD; and ‘TOWN OF FAIRFIELD v. : AT BRIDGEPORT NEPC, LLC; and KPMG, LLP : FEBRUARY 26, 2009 COMPLAIN EIRST COUNT [as to NEPC, LLC] 1. Plaintifis The Retirement Program for Employees of the Town of Fairfield and The Retirement Program for Police Officers and Firemen of the Town of Fairfield {the “Plans”} provide retirement benefits for approximately 1,500 active, retired and disabled employees and former employees of the Town of Fairfield. 2. Plaintiff the Town of Fairfield [the “Town”] is responsible, pursuant to the Fairfield Town Charter, for funding the retirement benefits payable to members of the plaintiff Plans. 3. Defendant NEPC, LLC [“NEPC"] is a limited liability company formed pursuant to the laws of State of Delaware and is a successor entity to New England Pension Consultants, Inc., which merged into defendant NEPC on or about December 31, 2007. 4. Atall times mentioned herein, defendant NEPC has held itself out as one of the nation’s leading investment advisors and represented that it provides sophisticated investment consulting services specially tailored to the needs of retirement plans, endowments, foundations, insurance and private wealth programs throughout the country, including to municipal pension plans.5. Atall times mentioned herein, defendant NEPC has held itself out as having particular expertise and experience in evaluating alternative assets, including hedge fund investments, 6. Inor about May 2006, defendant NEPC sought to enter into an investment advisor relationship with plaintiffs and submitted materials describing NEPC’s expertise and experience to plaintiffs for the purpose of persuading plaintiffs to enter into an investment advisor contract with defendant NEPC. 7. In its materials and presentations to plaintiffs, defendant NEPC represented that it possessed the “industry's most qualified, experienced and stable senior staff,” and that it possessed “unrivaled technology,” including “state of the art systems” to evaluate its clients” investments, 8. __Inits materials and presentations to plaintiffs, defendant NEPC emphasized the particular demands of providing investment consulting services with respect to hedge fund investments, noting that “most hedge funds are fairly illiquid, not very transparent, and subject to different risks than traditional managers.” 9. In its materials and presentations to plaintiffs, NEPC represented to plaintiffs that it had particular expertise and experience in providing investment advice with respect to hedge fund investments. NEPC represented that it employed “twelve professionals dedicated to alternative assets/hedging strategies, supported by twenty-five additional general research analysts,” with “additional hires planned in the coming months.” NEPC represented that it had developed a “proprietary alternative assets database” with information on “1000+ managers over the entire spectrum of alternative investment strategies,” and supplemented its proprietary database with information from other databases.10. _Inits materials and presentations to plaintiffs, defendant NEPC expressly represented, with respect to its monitoring and advice on hedge fund investments, that, NEPC requires transparency, and we have developed specialized monitoring and due diligence tools to help our clients more effectively build and manage their hedge fund portfolio. 11, In June 2006, in reliance on defendant NEPC’s representations as aforesaid, the plaintiff Town entered into a consulting agreement with defendant NEPC providing that defendant NEPC would, for compensation, provide confidential investment advisory services to the plaintiff Plans, including such services with respect to the Plans” hedge fund investments. 12, Beginning in June 2006, and continuing through 2008, defendant NEPC represented that it was condueting continuing due diligence reviews of the plaintiff Plans’ investments in order to make recommendations to the plaintiff Plans concerning the Plans’ asset allocations. These purported reviews included purported analyses by defendant NEPC of the risk/return of the Plans’ investments, recommendations as to whether investment managers should be retained, and recommendations as to whether investment allocations should be maintained or altered 13. In June 2006, when defendant NEPC began providing investment advisory services to the plaintiff Plans, the Plans had several alternative asset investments, including an investment in three hedge funds — American Masters Broad Market Fund (AMBMF), Pequot Core Investors Fund, Inc. and Pequot Endowment, 14, As of June 2006 (and continuing through 2008), AMBMF was a hedge fund in the form of a limited partnership that placed all of the partners’ investments under the management of one investment manager, Bernard Madoff.