A Hedge Fund’s Bet on Criminal Justice

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She is a criminal justice activist who founded a nonprofit organization to help women exiting prison re-enter society — having spent three and a half years incarcerated herself.

He is a titan of Wall Street finance, who oversees a $16 billion hedge fund and built a fortune shaking up corporate titans from Sony to Intel to Sotheby’s.

Topeka K. Sam and Daniel S. Loeb may make for an unusual pairing. But Mr. Loeb has, quietly, become one of Ms. Sam’s biggest supporters. More unusually, his firm, Third Point, has also become a corporate partner of her Ladies of Hope Ministries, providing not just money but also expertise and other kinds of support.

“He called me and said this is an investment,” Ms. Sam said of Mr. Loeb’s proposal for a partnership. “It was a complete game-changer.”

Third Point’s backing of Ms. Sam’s group is, by Mr. Loeb’s own reckoning, similar to the kinds of investments that his hedge fund makes. “Philanthropy is a lot more like hedge fund investing than you might think,” he said. “You’re thinking of ways to allocate capital and creating a scalable impact.”

That includes political impact: Mr. Loeb said that he worked his network to lobby for a presidential pardon for Ms. Sam, which she received last December.

Mr. Loeb said he arranged a call to Brooke Rollins, a senior adviser to President Donald J. Trump, to argue for a pardon, believing that it would help Ms. Sam expand L.O.H.M. “They were dealing with so many files,” he said. “That might have made the difference.”

Receiving clemency, Ms. Sam said, helped lower hurdles for her organization. “It allows me to think even more boldly,” she said. Mr. Loeb has committed to donating $1.5 million over three years through his family’s foundation, and Third Point employees have given $80,000 so far.

Criminal justice has been a popular cause for many in the finance world, drawing in backers from across the political spectrum, from progressives like George Soros to conservatives like Charles Koch. When JPMorgan Chase created an internal policy unit in 2019, its first initiative was about how to make it easier for ex-convicts to find work, including at the bank, where around 10 percent of new hires in the United States have a criminal record.

Mr. Loeb, who has donated largely to Republicans in recent election cycles, has supported groups like the Brennan Center for Justice, the Innocence Project and the Marshall Project in recent years.

“We’ve seen bipartisan support really grow over past five to 10 years,” said Lois M. Davis, a senior policy researcher at the RAND Corporation, adding that private philanthropy has helped fill in a funding gap.

Those private dollars and initiatives can provide big benefits, said Abbe Smith, director of the criminal defense and advocacy program at Georgetown’s law school, particularly for bail, defense and re-entry programs. But she cautioned that philanthropy alone could not change bigger structural issues. “The sorun is, we arrest too many people for too many crimes,” she said. “The answer is to change the law so as not to lock people up for poverty and nonviolent crimes.”

“Philanthropy is a lot more like hedge fund investing than you might think,” said Daniel S. Loeb of Third Point Capital. Credit…David Paul Morris/Bloomberg

Born in New York, Ms. Sam became involved in selling drugs, and pleaded guilty to a federal conspiracy charge in Virginia in 2012, receiving a sentence of more than 10 years in prison. Her time in prison opened her eyes to the plight of incarcerated women, particularly women of color, she said.

Almost 2.3 million people are incarcerated in the United States, in prisons, jails and other correctional facilities. More of those inmates are currently locked up for drug offenses than there were for all crimes in 1980.

Around 230,000 women are in prisons and jails, with Black women “markedly overrepresented” compared with their share of the population. The effects of incarceration on health, wealth and other factors can be devastating — especially because, Ms. Sam said, women tend to be punished more harshly than men and have a hard time rejoining society.

After she left prison in 2015, having cut years off her sentence after an appeal and attending a drug program, Ms. Sam founded criminal justice nonprofit groups, including L.O.H.M. and, along with a friend, Hope House, a halfway house in the Bronx.

Ms. Sam, 44, also raised her public profile as a criminal justice reformer. She helped bring attention to Alice Johnson, a woman who was sentenced to life in prison for a nonviolent drug offense, that helped lead to a commuted sentence, and later a full pardon, by Mr. Trump, at the urging of Kim Kardashian West.

Mr. Loeb first met Ms. Sam around 2017, as he was looking for new ways to donate to criminal justice groups. Her emphasis on helping prevent recently released women from recidivism persuaded him to back her as a sort of philanthropic entrepreneur.

“So often, people don’t look at lived-in experience as expertise,” Ms. Sam said.

To potential donors, such people are among the most persuasive advocates for overhauling the criminal justice system, said Ann Jacobs, the executive director of the John Jay College Institute for Justice and Opportunity. “That’s a good start, but that’s not enough,” she said. “If you want to figure this out, you need a lot more immersion.”

At Third Point, Mr. Loeb said, the sweeping protests over racial justice after the killing of George Floyd prompted questions from some employees about whether the firm planned to make a statement. It didn’t, but Mr. Loeb said he told his colleagues, “Just because we’re not making a formal statement doesn’t mean we’re not doing anything.”

That led Mr. Loeb to bring the firm into advocacy, instead of just donating money (although that is also important). Michelle Marcellus, a lawyer at the hedge fund, has joined the nonprofit group’s board; the fund’s real estate team will help find more affordable housing for women using its services; the marketing department started holding regular calls with the group; and outside lawyers for Third Point at the corporate firm Willkie Farr & Gallagher offered their services to the group.

After Third Point’s “investment,” L.O.H.M. is looking at expand in Baltimore, Miami and Philadelphia. The way it approaches its work may also change because of the support coming from the hedge fund.

“Which markets do we want to get into? How do we quantify our metrics? How do we know what impact we’re having?” Ms. Sam asked. Foundation donors don’t usually help organization’s like hers figure out the answers to those sorts of questions, she added: “They expect you to come up with that.”

The next step is getting others on board. Mr. Loeb said that he would introduce Ms. Sam and her organization to the growing community of financiers and entrepreneurs who had moved to Miami, where he — along with a burgeoning group of hedge fund tycoons — has been spending more time.

“This won’t work if it’s only a pet project of Dan Loeb and Third Point,” he said.

Ephrat Livni contributed reporting.

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