SEC Enforcement: Advisor’s Deceptive Press Release on Barnes & Noble Halted Trading

According to the agency, William Fretz Jr. and John “Jack” Freeman managed the fraud through their unregistered advisor, Covenant Capital Management Partners L.P., and the private equity fund they managed, Covenant Partners L.P. Fretz and Freeman sold partnership interests in the fund to family and friends, but instead of keeping their promise to invest the money, they used it for their own benefit and to prop up a failing business. Fretz and Freeman funneled more than $1 million to Keystone Equities Group L.P., a failing broker-dealer that they operated and controlled, paid themselves nearly $600,000 in performance fees they had not earned and used fund assets to repay personal obligations. Covenant filed for bankruptcy in September 2014.

Without admitting or denying wrongdoing, Fretz, Freeman and CCMP agreed to settle the agency’s charges and agreed to pay $5.4 million of allegedly ill-gotten gains and prejudgment interest of $353,582. Fretz and Freeman also agreed to be permanently barred from the securities industry and to pay civil penalties of $500,000 each. Covenant’s offer of settlement is subject to bankruptcy court approval.

Executive Coach, Friend Charged by SEC With Insider Trading on P.F. Chang Merger

Richard Condon, a consultant to Panda Restaurant Group, and his friend Jonathan Ross have been charged by the SEC with insider trading after Condon tipped Ross with confidential details about the bidding process for the P.F. Chang’s restaurant chain that he learned while providing executive coaching services to Panda’s top management executives.

According to the agency, Panda, the parent company of the Panda Express Chinese restaurant chain, was involved in the bidding process but did not ultimately make a tender offer for P.F. Chang’s. But Ross purchased risky, out-of-the-money call options for P.F. Chang’s securities, and also tipped his friend Ali Sagheb so he could do the same. Ross, Sagheb, and a third trader who is now deceased immediately sold their options for a combined total of approximately $300,000 following a public announcement about the tender offer by a third party for ownership of P.F. Chang’s.

Sagheb is named as a relief defendant in the SEC’s complaint and has agreed to pay $19,829 — all his trading profits, plus interest. The case continues against Condon and Ross in federal court in Los Angeles.

— Check out NASAA: States Doled Out $579M in Enforcement Penalties in 2014 on ThinkAdvisor.