MIAMI BEACH, Fla. (HedgeWorld.com)--Agents of the Federal Bureau of Investigation and officers of the Miami Beach Police Department together arrested the founder of International Management Associates LLC, Wednesday [May 17] at a hotel, according to a report in the Atlanta Journal-Constitution.
IMA principal Kirk Wright appeared before a U.S. magistrate in Miami Thursday on federal charges of mail fraud. Mr. Wright also faces lawsuits brought by several investors and the Securities and Exchange Commission.
A statement issued from the U.S. Justice Department March 10, when the charge was filed, said that the charge carries a maximum sentence of 20 years in prison and a fine of up to $250,000.
Mr. Wright appears to have had $185 million in assets under management at one point. But the SEC's complaint, filed Feb. 27, said that virtually all of the assets had been dissipated.
Beginning in early 1997, the SEC alleges, Mr. Wright had raised money from up to 500 investors through a fraudulent investment scheme. He has since provided investors with quarterly statements that misrepresented the amount of assets in the seven funds he managed, as well as their rates of return.
Jacob Frenkel, of Rockville, Md., represents Mr. Wright in the SEC action. But when reached Thursday regarding the arrest, a spokeswoman for Mr. Frenkel said, "We're letting people know that we don't represent Mr. Wright in any other case, that's not related to the SEC investigation."
In September 2005, some investors expressed concern about the funds. Mr. Wright is alleged to have alleviated their concerns by displaying copies of what appeared to be Ameritrade statements, dated August 2005, showing that Marietta, Ga.-based IMA and a related concern, International Management Associates Advisory Group, had more than $150 million.
The federal mail-fraud complaint alleges further that these claims were lies, and that the supposed Ameritrade statements were fabrications, reflecting balances that were more than 1,000 times the actual value of IMA and IMAAG's accounts.
The mail fraud arose specifically, the complaint states, in the mailing of a false statement to IMA investor Stephen Atwater. Mr. Atwater was a free safety with the Denver Broncos in the 1990s--fairly typical of Mr. Wright's client list, which includes many athletes, from football and other sports, both active and retired. Clients include other Broncos, Terrell Davis and Rod Smith, and former Tennessee Titan Blaine Bishop.
The Atlanta Journal-Constitution report said that authorities focused on the Miami area as a result of several leads from around the country.
The unraveling might be said to have begun in early January 2006, when one investor, a Massachusetts resident with a total of $3.2 million invested in two of IMA's funds, requested a withdrawal of $200,000. IMA's policy had been that redemption required one month's notice. Around Feb. 5, according to Massachusetts securities regulators, that investor followed up on his request and was informed, "two of the principals of the firm had resigned and the other principal was unavailable."
The "unavailable" principal was Mr. Wright, the company's chief executive. The resignations had come days before from two anesthesiologists: Fitz N. Harper Jr., chief financial officer, and Nelson Keith Bond, chief operating officer.
The magistrate set a pretrial detention hearing for Tuesday, May 23, the purpose of which will be to decide whether Mr. Wright will be sent back to Georgia for trial.
Contact Bob Keane with questions or comments at email@example.com.