It’s no secret that there are plenty of cowboy outfits in the venture capital world, including scores that were started before the tech bust. But in the weightier circles of late-stage venture investment, there’s supposed to be less risk, and therefore fewer seat-of-the-pants operations. Which makes Advanced Equities, a Chicago firm fingered by Forbes in a recent expose, all the more notable.

AE is run by a pair of former stock brokers, Keith Daubenspeck and Dwight Badger, who built it in 1999 to invest in tech. But unlike the flawless pedigrees of many VCs, Forbes notes that the two are, respectively, a community college grad and a college dropout. (Perhaps telling of certain prejudices in the financial community, Forbes also chose the title “Garbage In…” for the piece.)

Here’s the outline of AE’s business plan, according to Forbes: First, find a high-profile venture capital outfit like Kleiner Perkins, Khosla Ventures or New Enterprise Associates to work with. Convince clients to give you money, based on the respectability of those firms. Then pour the money into hugely overvalued deals with later-stage firms in the portfolios of said VCs, afterward skimming hefty fees until the firms go public or, far more likely, collapse.

Valuations aside, it’s true that AE is an investor in plenty of high-profile names. In telecom, for instance, it has put money into Infinera and Turin Networks, both still operative. Somewhat less appetizing is the money it put into RFID company Alien Technology, which tried and failed to go public, and Agami, which folded recently, after taking $45 million only six months ago.

A possibly worse indictment against AE’s financial acumen is the money it poured into the early biofuels market, including Altra Biofuels, which raised $120 million in 2006, and Cilion, which got $200 million in what was at one point the biggest cleantech investment ever. Both were first generation ethanol companies at a time when that fuel was highly hyped, but most public companies in the same category have since lost half their value or more; one can only wonder if heavily funded private companies are doing much better.

But what Forbes is suggesting is not that Advanced Equities is simply a badly run firm. The tacit accusation is that AE is run by con-men who scam little old ladies and other clueless investors — in one example, a story is related of how 83 year old Constance Kamberos was toted out of AE’s building by security after trying to complain about her investment in the firm, while multiple other dissatisfied clients have filed suit.

Could it be that some of the most famous firms on Sand Hill, seeking to prop up previous investments, have made themselves complicit in Advanced Equities’ sketchy investing style to pump cash into risky firms like Agami? Perish the thought.