July 6, 2016

Securities Fraud News: Andrew Caspersen Pleads Guilty to $40M Fraud, Massachusetts Investment Advisor to Pay $8M to Investors, & CFTC Ordesr Florida Man and His Companies to Pay Almost $175M in Sanctions in FX Ponzi Scam

Ex-Wall Street Executive Admits to Bilking Friends and Relatives
Andrew Caspersen has pleaded guilty to federal criminal charges accusing him of defrauding relatives, friends, and Moore Charitable Foundation of $40M. Caspersen is an ex-Wall Street executive and a member of the wealthy Caspersen family. The charitable foundation he bilked belongs to billionaire hedge fund manager Louis Bacon and his investment firm Moore Capital Management.

Caspersen, 39, pleaded guilty to one charge of wire fraud and one charge of security fraud. Each criminal charge comes with a maximum term of 20 years behind bars.

Caspersen's defense team initially argued that he was addicted to gambling and suffered from mental illness, which were what supposedly compelled him to run his multi-million dollar Ponzi-like scam. His mother, close friends, the family of an ex-girlfriend, and others were among those whom he bilked.

Continue reading "Securities Fraud News: Andrew Caspersen Pleads Guilty to $40M Fraud, Massachusetts Investment Advisor to Pay $8M to Investors, & CFTC Ordesr Florida Man and His Companies to Pay Almost $175M in Sanctions in FX Ponzi Scam" »

October 8, 2014

As SEC Examines Private-Equity Consultant Salaries, Blackstone Stops Monitoring Fees

According to The Wall Street Journal, the operating partners of private equity firms, are coming under closer scrutiny. These professionals are typically retained when acquiring a company with the intention of enhancing its operations.

These operating partners are usually listed with full-time employees. Regulators are worried that buyout firms are not providing private equity fund investors enough information about the way these consultants are compensated.

The firm usually doesn’t pay its operating partners. Instead, their salary usually comes from the company they are advising or the investors of the buyout firm. However, the WSJ’s examination of regulator filings regarding 80 private equity companies found that only about fifty percent of them disclosed where the money paid to operating partners comes from.

Meantime, Blackstone Group (BX) LP has decided to stop charging extra consulting fees when taking or selling public companies. This could save fund investors millions of dollars. The changes come in the wake of criticism from a senior SEC official about the practice.

These consulting payments are also known as monitoring fees. Private equity firms get into contracts with companies they purchase and they are paid these fees for years. If the company is sold or goes public before the contract is up, then the remaining fees are accelerated via a lump sum payment for services that won’t have to be rendered. Now, Blackstone will no longer collect these fees.

The SEC is looking at whether buyout firms garner hidden fees at cost to investors and without their permission or proper disclosure.

The SSEK Partners Group works with high net worth individual investors and institutional clients to recover their securities fraud losses.

Heightened Regulatory Scrutiny Makes Blackstone Halt Some Transaction Fees, The New York Times, October 8, 2014

Private-Equity Consultants Face SEC Scrutiny, The Wall Street Journal, October 8, 2014

More Blog Posts:
T.J. Malone’s Lincolnshire Management Settles with SEC for $2.3M Over Purportedly Improper Allocations That Cost Its Funds, Institutional Investor Securities Blog, September 23, 2014

Barclays to Pay $15M SEC Settlement Over Compliance Failures Following Lehman Brothers Acquisition, Pays $61.7M Fine to U.K.'s FCA Over Client Asset Issues, Institutional Investor Securities Blog, September 24, 2014

Private Equity Firms, Including Blackstone, Settle ‘Club Deals’ Case with $325M Settlement
, Stockbroker Fraud Blog, August 9, 2014

September 23, 2014

T.J. Malone’s Lincolnshire Management Settles with SEC for $2.3M Over Purportedly Improper Allocations That Cost Its Funds

Lincolnshire Management has consented to pay $2.3 million to the Securities and Exchange Commission to settle charges alleging improper expense allocations involving two of its funds’ investments in the same company. The New York-based private equity firm, which is run by businessman T.J. Maloney, claims to oversee $1.7 billion.

Lincolnshire acquired PCS Inc. via its debut fund. Several years later it acquired Computer Technology Solutions with the intention of merging the two. However, reports Forbes.com, the first fund ran out of money, so Lincolnshire used its second fund to pay for the acquisition.

Commingling investments can be precarious, especially as each fund had a slightly different investor base. Because of this, the firm created expense allocation policies that were paid directly to it. This meant that each company’s allocation would be determined by the percentage of respective contributions to the total revenue of the overall revenue. However, the policies were never put in writing, which sometimes led to misallocations.

According to the SEC’s administrative order, Lincolnshire regarded Computer Technology Solutions and Peripheral Computer Support as one company that belonged to both funds. However, contends the regulator, from 2005 to 2013, the private equity firm directed more of the costs on the latter, which hurt the Lincolnshire fund that owned the company.

The agency is accusing Lincolnshire Management of breaching its fiduciary duty to the private equity funds when it properly benefited one over the other by misallocating the costs. The private equity firm is settling the SEC charges without denying or admitting to the alleged wrongdoing.

Previously in 2011, investors sued the Lincolnshire Management, claiming it got around paying them distributions by wrongfully taking out expenses and fees and interest related to a $99 million legal victory obtained by Lincolnshire portfolio entities. The trustee of the Acconci Trust claims that Maloney and the firm stole millions from the Lincolnshire Equity fund, with Maloney keeping $7.6 million from the judgment against Cendant Corp. Investors of the Lincolnshire Fund had expected an approximately $60 million distribution but received just $45 million.

Maloney sent investors a letter explaining that the firm and he were charging litigation costs and interest. The Acconci Trust also accused Lincolnshire of self-dealing. That securities fraud case has yet to be resolved.

The SEC has been looking into conflicts of interest and hidden fees at private equity funds. Due to the big fees that may be involved, disputes may arise between private equity firms and their clients.

Our securities lawyers represent high net worth individuals and institutions seeking to recover their securities fraud losses. Contact The SSEK Partners Group today to request your free case consultation. One of our private equity fund fraud attorneys can help you explore your legal options.

T.J. Maloney's Private Equity Firm Pays $2.3 Million To Settle SEC Charges, Forbes, September 22, 2014

SEC Charges New York-Based Private Equity Fund Adviser With Misallocation Of Portfolio Company Expenses, SEC.gov, September 22, 2014

Read the SEC Order (PDF)

More Blog Posts:
SEC to Dismiss Lawsuit Against SIPC Over Payments to Stanford Ponzi Scam Victims, Stockbroker Fraud Blog, September 11, 2014

Regulator Adjust Liquidity Rule for Big Banks, Institutional Investor Securities Blog, September 16, 2014

FINRA Fines Minneapolis Broker-Dealer $1M for Inadequate Supervision of Penny Stocks, Stockbroker Fraud Blog, September 13, 2014

June 23, 2014

Pennsylvania Private Equity Firm Settles SEC Charges Over “Pay to Play” Violations Related to Political Campaign Contributions

TL Ventures Inc. has agreed to pay almost $300,000 to settle Securities and Exchange Commission charges. The regulator contends that the Pennsylvania-based private equity firm violated “pay-to-play” rules for advisory fees it continued to get from state pension funds and the city of Philadelphia even after an associate made campaign contributions to the mayoral candidate and the state’s governor.

This is the SEC’s first case under the investment advisers’ pay-to-play rules, which went into effect in 2010. Under the rules, investment adviser are not allowed to provide compensatory services via pooled investment vehicles or to a government client for two years after a firm or one of its associates makes campaign contributions to political candidates or anyone able to impact the retention of advisers to oversee government client assets.

Philadelphia’s mayor gets to appoint three members of the Philadelphia Board of Pensions and Retirement. Pennsylvania’s governor gets to choose six of the state’s retirement system board members.

The SEC is also charging TL Ventures and Penn Mezzanine Partners Management L.P., an affiliated adviser, with improperly acting as unregistered investment advisers. Both claimed separately in 2012 that they were exempt from having to registers with the SEC. However, the regulators says that for purposes of determining whether they were exempt form these requirements or not, the two entities should have been integrated as a single investment adviser

TL Ventures settled without denying or admitting to the findings. The firm is paying $256,697 in disgorgement, $3,197 in prejudgment interest, and a $35,000 penalty.

If you suspect you were the victim of institutional investor fraud, please contact The SSEK Partners Group today.

Read the SEC Order Against TL Ventures (PDF)

Read the SEC Order Against Penn Mezzanine (PDF)

April 9, 2014

SEC Says At Least 200 Private-Equity Firms Imposed Bogus Fees

According to the US Securities and Exchange Commission, over half of the approximately private-equity firms that it examined have charged unjustified expenses and fees to investors without their knowledge. The regulator’s findings are from its review of the $3.5 trillion industry.

It was the 2010 Dodd-Frank Act that gave the SEC more oversight over money managers, which allowed the agency to scrutinize some firms for the very first time. By the end of 2012, examiners had discovered that certain advisers were wrongly collecting money from companies included in their portfolio, improperly calculating fees, and using assets from the funds to pay for their own expenses. Bloomberg reports that a source in the know about the regulator’s findings said that while some of the issues seem to stem from mistakes, others might have been intentional.

SEC to Look Even More Closely At Private Funds
Per Dodd-Frank, the majority of private equity and hedge funds that are large or midsized have to register with the SEC. A lot of them hold illiquid and complex investments that are tougher to value than the ones at more conventional asset managers. They also can have complex fee structures that can be more difficult for investors to comprehend.

Now, reports Reuters, the SEC has set up a group to look more closely at both. The team will examine the way they disclose fees, value assets, and communicate with investors.

Private-Equity Firms
Private-equity firms use debt and investor capital to buy companies that they will then take public or sell for profit. Annual management fees are usually 1.5 – 2% of committed funds and the firms usually keep 15-20% of investment profits, which is also called carried interest. A lot of buyout firms will charge fees to the companies they obtain to help pay for related expenses, with investors sometimes getting part of the proceeds.

Unfortunately, according to some critics, abuse by private-equity firms can happen because these organizations tend to be so “opaque.” Managers get wide discretion and this can make it hard for investors to know what is going on.

In March, the SEC filed a securities case against Clean Energy Capital LLC and Scott Brittenham, who founded the firm, for allegedly misusing over $3 million to cover office rent, group photography sessions, bottled water, and tuition. The regulator says that investors should have gotten the money instead. The legal representation from Brittenham and Clean Energy Capital maintains that his clients thought the expenses were allowed under Delaware law and limited agreements.

If you are an investor who suspects you suffered losses because your financial representative engaged in negligence or misconduct, contact our securities lawyers today.

Exclusive: SEC forms squad to examine private funds - sources, Reuters, April 7, 2014

Bogus Private-Equity Fees Said Found at 200 Firms by SEC, Bloomberg, April 7, 2014

Detroit Reaches Settlement With Some Bond Insurers, The Wall Street Journal, April 9, 2014

Read the SEC Order Against Clean Energy Capital

More Blog Posts:
SEC Accuses Private Equity Manager of $9M Securities Fraud, Institutional Investor Securities Blog, January 30, 2014

Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 2013

Securities Fraud Lawsuit Seeks to Recover $49M From 96 Independent Broker-Dealers Liable Over Sales of Tenant-In-Common Exchanges, Stockbroker Fraud Blog, December 15, 2010

January 30, 2014

SEC Accuses Private Equity Manager of $9M Securities Fraud

The SEC says that Camelot Acquisitions Secondary Opportunities Management and owner Lawrence E. Penn III of stealing $9 million from a private equity fund. Also named in the securities fraud complaint are Altura Ewers and three entities, two of which are Camelot entities owned by Penn.

The regulator says that Penn, a private equity manager, reached out to overseas investors, public pension funds, and high net worth individuals to raise funds for Camelot Acquisitions Secondary Opportunities LP, a private equity fund that invests in companies that want to become public entities. He was able to get about $120 million of capital commitments.

According to the Commission, Penn paid over $9.3 million of the money to Ssecurion, a company owned by Ewer, as fake fees/ The two of them purportedly misled auditors about the fees that were supposedly related to due diligence, even forging documents up to as recently as last year.

The SEC is charging Penn, Ewers, Ssecurion, and Camelot entities with violating federal securities laws’ provisions related to records and books, antifraud, and registration applications. The regulator wants disgorgement of ill-gotten gains plus interest, payment of penalties, and a bar from violating the securities laws’ antifraud provisions ever again.

At the SSEK Partners Group, our securities lawyers represent high net worth clients and overseas investors with securities claims and financial fraud lawsuits against financial firms that are based in the US. Contact our private equity fund law firm today. Working with an experienced institutional investment fraud law firm can increase your chances of recovering everything that you are owed. Our securities attorneys have helped thousands of clients recoup their losses.

SEC Charges Manhattan-Based Private Equity Manager With Stealing $9 Million in Investor Funds, SEC, January 30, 2014

Read the SEC Complaint (PDF)

New York private equity manager, firm charged with $9 million theft, Reuters/Yahoo, January 30, 2014

More Blog Posts:
Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund, Institutional Investor Securities Blog, March 14, 2013
Securities Fraud Lawsuit Seeks to Recover $49M From 96 Independent Broker-Dealers Liable Over Sales of Tenant-In-Common Exchanges, Stockbroker Fraud Blog, December 15, 2010

Plaintiffs Can Pursue Narrowed Claims Against Private Equity Firms, Institutional Investor Securities Blog, March 9, 2013

March 14, 2013

Two Oppenheimer Investment Advisers Settle for Over $2.8M SEC Fraud Charges Over Private Equity Fund

The SEC is charging Oppenheimer Alternative Investment Management and Oppenheimer Asset Management, which are two Oppenheimer & Co. investment advisers, with misleading customers about the valuation policies and performance of a private equity fund under their management. To settle the allegations, Oppenheimer will pay over $2.8M. It has also resolved the related action that was filed by Massachusetts Attorney General Martha Coakley.

According to the SEC, from 10/09 to 6/10, the two Oppenheimer investment advisers put out marketing collaterals and quarterly reports that were misleading and claimed that Oppenheimer Global Resource Private Equity Fund I L.P.'s holdings in private equity funds had values that were determined according to the estimated values of the underlying manager. In truth, contends the regulator, Oppenheimer’s portfolio manager actually valued the largest investment of the fund, Cartesian Investors-A LLC, at a markup that was considerable to the underlying manager’s estimated value. This discrepancy made it appear as if the fund’s performance was much better, per its internal rate of return. For example, at the conclusion of the quarter ending on June 30, 2009, the markup of the investment upped the internal return rate from 3.8% to 38.3%

Among the alleged misrepresentations made by ex-OAM employees to potential investors were:

· The rise in Cartesian’s value was because of a rise in its performance, when, actually, it was because of the new valuation method implemented by the portfolio manager.

· The false claim that a third-party valuation firm had written up Cartesian’s value.

· The false claim that independent third-party auditors had audited OGR’s underlying funds when actually Cartesian had not been audited.

Also, per the SEC, the policies and procedures of OAM were not reasonably structured to make sure that valuations given to existing and prospective clients were put forth in a way that was in line with written representations made to potential clients and actual investors. The Commission says that OAM’s conduct violated sections of the Securities Act of 1933, the Investment Advisers Act of 1940, and Rules 206(4)-8 and 206(4)-7.

Regarding the settlement with the state, the penalty there is $132,421. As for the over $2.8M to the SEC, $200,000 will go to the pension fund of the city of Quincy and $150,000 will go to the pension fund of the city of Brockton. Oppenheimer is also going to modify its internal controls and valuation policies.

If you think you may have suffered losses because your financial representative made misrepresentations and omissions that influenced or decision to make an investment, contact Shepherd Smith Edwards and Kantas, LTD LLP today. Your first securities case assessment is free.

Oppenheimer & Co. to Pay Fine Over Fund, Wall Street Journal, March 11, 2013

Oppenheimer to Pay $2.8 Million to Settle Allegations of Misrepresenting Performance of Fund to Investors, Mass.gov, March 11, 2013

Investment Advisers Act of 1940 (PDF)

Securities Act of 1933 (PDF)

More Blog Posts:

Oppenheimer Must Pay $30M to US Airways Group Over ARS Losses, Institutional Investor Securities Blog, February 9, 2013

Oppenheimer Funds Investors Can Proceed with Their Securities Fraud Lawsuit, Stockbroker Fraud Blog, November 19, 2011

8/31/11 is Deadline for Opting Out of $100M Oppenheimer Mutual Funds Class Action Settlement, Stockbroker Fraud Blog, August 17, 2011

March 9, 2013

Plaintiffs Can Pursue Narrowed Claims Against Private Equity Firms

According to the U.S. District Court for the District of Massachusetts, plaintiffs should be able to pursue narrowed claims against large private equity firms accused of colluding to keep competition away. In Dahl v. Bain Capital Partners LLC, Judge Edward Harrington noted that although the bulk of the securities lawsuit focused on PE firm’s routine business practices, there was evidence that showed an inference of conspiracy in regards of some of the claims.

Also, Harrington refused to grant an “omnibus” motion for summary judgment requested by several of the defendants, including Bain Capital Partners LLC, Carlyle Group LLC, and Kohlberg Kravis Roberts & Co. LP. JPMorgan Chase and Co.'s (JPM) own motion for summary judgment, however, was granted, on the grounds that evidence did not support that the financial firm had taken part in the alleged “narrowed overarching conspiracy.”

The plaintiffs previously owned shares in different public companies that private equity firms later acquired. They contend that between 2003 and 2007, the defendants were involved in an “overarching” conspiracy to artificially manipulate securities prices in specific transactions. The plaintiffs believe that the private equity firms knew that by working together they could keep the competition down and prevent prices from going up.

Harrington, however, decided to narrow the plaintiffs’ claims, finding that a lot of the lawsuit had to do with practices in the industry that were considered “appropriate” and “established.” He noted that rather than depicting a portrait of an “overreaching conspiracy,” the evidence of transaction appears to demonstrate interactions among defendants that were “ever-rotating and overlapping.”

Dahl v. Bain Capital Partners LLC http://www.securities-fraud-attorneys.com(PDF)

More Blog Posts:
Investment Fraud Lawsuit Against BlackRock Over Exchange-Traded Funds Could Shed More Light on Securities Lending, Institutional Investor Securities Blog, February 18, 2013

Texas Courts Show Preference for Arbitration to Resolve Securities Fraud Claims and Other Business Disputes, Stockbroker Fraud Blog, February 15, 2013

Continue reading "Plaintiffs Can Pursue Narrowed Claims Against Private Equity Firms " »

September 20, 2012

SEC Charges Advanced Equities with Securities Fraud Related to Private Equity Offerings

The Securities and Exchange Commission is charging investment advisory firm and broker dealer Advanced Equities Inc. and its cofounders Keith G. Daubenspeck and Dwight O. Badger with securities fraud related to two private equity offerings that were made for a California alternative energy company. Badger, who spearheaded the sales initiatives for the offering and allegedly made misstatements about the company’s finances, is charged with misleading investors. Daubenspeck is accused of not correcting these misstatements, therefore allegedly inadequately supervising Badger. Daubenspeck is the Advanced Equities’ parent company’s ex-chief executive and board chairman. All three parties have agreed to a cease-and-desist order entry but they are not denying or admitting to the charges.

Per the SEC, for the Silicon Valley company’s 2009 offering, Badger led close at least 49 outside investor presentations and a minimum of five in-house sales calls with Advanced Equities brokers related to this between January and March 2009 alone. He claimed that the energy company had over $2 billion in order backlogs when actually this never went above $42 million. He also said that a national grocery chain had placed a $1 billion order even though that was only worth $2 million, and although a letter of intent for making future buys was signed, it was a non-binding one. Badger also is accused of making a misstatement when he said that a US Department of Energy loan of over $250 million had been granted to the company after it had sought a $96.8 million loan. (He also allegedly again made a misstatement about the loan application in 2010 during the follow-up offering.) His misstatements were then repeated to investors during phone calls and in e-mails by brokers, Advanced Equities’ investment banking team, and the broker-in-charge at the firm’s branch in New York. (The SEC believes that these individuals should have known that the statements that Badger made were untrue.)

Meantime, Daubenspeck allegedly did not say anything after he heard Badger issue the misstatements about the grocery store order, order backlog, and loan application even though he took part in at least two of the internal sales calls attended by Advanced Equities brokers during the 2009 offering. The SEC contends that although these misstatements should have been warning signs that there was the danger that the wrong information would get to investors, Daubenspeck allegedly did not take reasonable steps to fix these misstatements and did not properly supervise Badger.

To settle the securities fraud allegations, Advanced Equities will pay a $1 million penalty and it has consented to cease and desist from making or causing future securities law violations of the laws it allegedly violated. It also has agreed to be censured and it will retain an independent consultant to assess its sales procedures and policies. As for Daubenspeck, he has agreed to a $50,000 penalty and supervisory suspension of one year, while Badger has consented to a $100,000 penalty and a one-year ban from associating with any dealer, broker, municipal securities dealer, investment adviser, or transfer agent.

SEC Charges Chicago-Based Investment Firm with Misleading Investors in Private Equity Offerings, SEC (PDF)

More Blog Posts:
Texas Securities Fraud: Ex-Stanford Chief Investment Officer Gets 3-Year Prison Term for Her Part in $7 Billion Ponzi Scam, Stockbroker Fraud Blog, September 18, 2012

IRS Pays Whistleblower $104M for Exposing Tax Evasion at UBS AG, Institutional Investor Securities Blog, September 13, 2012

US Government Sells $18B of AIG Stock and Turns a $12.4B Profit, Institutional Investor Securities Blog, September 11, 2012

Continue reading "SEC Charges Advanced Equities with Securities Fraud Related to Private Equity Offerings" »

February 15, 2012

SEC Examines the Private Equity Industry

The Securities and Exchange Commission has started to take a broad look at the private equity industry, which until now hasn’t been subjected to much regulatory scrutiny. The industry consists of several thousand firms with over $1 trillion in assets under management. Now, the federal agency wants to know more about these financial firms’ business practices.

According to the New York Times, the Commission’s enforcement unit has sent a letter to a number of private equity funds as part of its informal look. The SEC, however, has been quick to stress that none of the firms are suspected of any wrongdoing and that it merely wants more information to be able to look into possible securities law violations. For example, the Commission wants to examine whether some private equity funds are overstating their portfolios’ value to bring in investors for future funds. Regulators also want to know about the ways in which private equity companies value investments and report performance.

The SEC’s inquiry is being conducted by its Asset Management enforcement division, which has been taking more aggressive actions to eliminate misconduct in the financial industry. At a private equity conference last month, the division’s co-chief Robert B. Kaplan talked about the need for more oversight over the industry.

Bloomberg.com reports that according to a person that knows about the inquiry, so far, it is the smaller private equity companies that are being scrutinized while some of the largest companies, including privately trading ones, are, for now, being overlooked. For example, Blackstone Group LLP, which is the largest private equity company, didn’t receive the letter the SEC sent out in December. KKR & Co. also didn’t get the letter.

The SEC decided to take a closer look at the private equity industry after the financial crisis and firms having to mark down holdings. Since then, those demanding better regulation from the agency have called for more oversight. While the SEC is tasked with policing public securities offerings and transactions it typically hasn’t looked at areas involving private placements that don’t have to register with it and sophisticated investors. That said, the Commission has still been allowed to enforce the fiduciary duties of private equity managers to the funds.

Now, per the Dodd-Frank Wall Street Reform and Consumer Protection Act, the majority of private equity companies will need to register with the SEC by the end of next month. Some 750 advisers will have to disclose “census-like” information about employees, investors, assets under management, activities beyond fund advising, and possible conflicts of interest.

Private Equity Industry Attracts S.E.C. Scrutiny, New York Times, February 12, 2012

SEC Review of Private Equity Said to Focus on Smaller Firms, Bloomberg, February 13, 2012

More Blog Posts:
SEC Gets Initial Victory in Lawsuit Against SIPC Over Payments Owed to Stanford Ponzi Scam Investors, Institutional Investor Securities Blog, February 10, 2012

Pressure from Regulators and Investors Prompts Carlyle Group to Drop Arbitration Clause from its IPO Filing, Institutional Investor Securities Blog, February 9, 2012

Senate Passes Bill Banning Congressional Insider Trading, Institutional Investor Securities Blog, February 8, 2012

Continue reading "SEC Examines the Private Equity Industry " »

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