BOSTON (HedgeWorld.com)–For the past 10 years, Treyton L. Thomas has moved through life claiming to be a fabulously successful hedge fund manager, dispenser of political wisdom, philosopher, ace student and fountain of business insight.
But according to civil charges filed Nov. 1 by the Securities and Exchange Commission, Mr. Thomas is more fabulist than fabulous, a charlatan who spun fantastic yarns about managing hundreds of millions of dollars and producing triple-digit returns while at the same time earning highest honors in business school classes he took at Harvard University.
The part about Harvard appears to be true, even if he took the classes through Harvard’s extension service rather than the university proper. But other stories the 48-year-old Mr. Thomas has told, in particular the one about his purported investment management company, Pembridge Group Ltd., are lies, unsupported by any evidence, according to the SEC.
Mr. Thomas might still be telling stories today but for a vaguely worded March 2002 press release he issued announcing Pembridge Group’s intention to essentially buy the shares of a Vancouver, British Columbia, penny stock company, Imagis Technologies Inc., which makes facial recognition software, for roughly twice what the shares were worth at the time. The announced intent behind the move was to take the company private, wait for opportunities to merge with complementary security-related companies and eventually take the larger entity public.
The news release caught the attention of stock watch newsletters, the New York Post and, it turns out, the SEC. By mid-2003, the SEC had opened an investigation into Mr. Thomas’ dealings in Imagis stock and his position on the Imagis board.
That probe culminated with the SEC’s filing of civil charges against Mr. Thomas in U.S. District Court in Boston alleging securities fraud and stock manipulation in connection with Pembridge Group’s dealings with Imagis.
Calls to a Pembridge Group phone number listed in the Boston directory and in previous Pembridge Group press releases reached only a busy signal. Attempts to reach Mr. Thomas via email and a telephone message left at a possible home telephone number were unsuccessful. A number listed in Pembridge Group’s web site registration as the firm’s fax number was disconnected. His attorney, reported in a Boston Globe article to be Michael Collora of Boston, did not return a phone call by press time.
In numerous press releases, both from Pembridge and from Imagis, Mr. Thomas said Pembridge Group, which claims an address of 60 State Street in Boston, managed US$600 million in assets and had posted consistently high returns. He said the fund earned, before fees, 82.7% in 1998 and 102.3% in 1999–with no leverage. Mr. Thomas allegedly leveraged that false information, however, into a January 2002 deal to provide financial advice to Imagis.
In March 2002, according to the SEC, Mr. Thomas manipulated Imagis’ stock price by issuing another press release proposing to take Imagis private, which a number of news outlets and investors took to mean a cash buyout of all Imagis stock at US$4.10 per share. Subsequently, stock watch newsletters pointed out that the press release never actually proposed a buyout, in such terms anyway. Nonetheless, the announcement drove the company’s share price up 40% to US$3.43 per share, a move SEC officials said Mr. Thomas took advantage of by acquiring beforehand, via an offshore company, more than 100,000 warrants for Imagis shares at a lower price.
Mr. Thomas had also previously received 50,000 Imagis warrants from the company itself as part of the deal for Pembridge to provide financial advice to Imagis.
But according to the SEC, there really was no asset management company behind the Pembridge Group name, Mr. Thomas managed no assets and the entire elaborate scheme was a pure fiction designed to defraud Imagis and artificially drive up the price of its stock, traded on the OTC-Bulletin Board, the TSX Venture Exchange and the Frankfurt Exchange.
“Pembridge had no such assets under management and instead was simply a front that [Mr.] Thomas used to gain credibility and further his fraudulent scheme,” according to the SEC complaint, filed in U.S. District Court in Boston. “The ?? 1/2 announcement was fraudulent in that neither [Mr. Thomas nor Pembridge Group] had the intention nor the financial resources to complete the proposed tender offer. Contrary to their press releases, the Defendants did not control of have access to the hundreds of millions of dollars described in the pre-March 2002 press releases, let alone the resources necessary to buy out Imagis’ shareholders.”
The Imagis Deal
In January 2002, Imagis put out a press release saying it had entered into an “engagement letter” with Pembridge’s purported private equity affiliate, Pembridge Venture Partners, whereby Pembridge would provide “strategic financial advice.” In the release, Imagis officials described Pembridge Group in detail, saying it was “a premier Boston-based investment firm” that acted as adviser to the Pembridge Fund Management and Pembridge Venture Partners. Pembridge Fund Management, according to the Imagis release, managed “the Concert series of technology hedge funds and the Symphony fund-of-funds.”
The release continued: “Pembridge manages over US$600 million in capital, and its funds have consistently posted some of the highest returns to investors in the alternative asset management industry. Pembridge funds are eligible to accredited non-U.S. institutions only and are currently closed to new investors.”
That same release said that under the terms of the agreement between Pembridge Venture Partners and Imagis, Pembridge would advise the company on topics including mergers, banking advisory and a review of “potential investment banking relationships, strategic alliances, financing or any other capital markets needs of the company.”
Imagis’ chairman is Oliver “Buck” Revell, former counterterrorism chief at the FBI.
Each of the 50,000 warrants Imagis issued to Pembridge could be turned into one common share of stock at a price C$2.20 per share (US$1.82 per share) for up to two years.
According to the SEC in the fall of 2001, prior to the March announcement offering to take Imagis private, Mr. Thomas posed as “Bradford Harrington” to Imagis, and arranged for Indo Sakura Trust, an offshore company, to acquire 105,000 warrants of Imagis stock.
In December 2001, Mr. Thomas again approached Imagis, this time as himself, and made arrangements to provide financial advice and got himself a seat on the Imagis board, according to the SEC.