The Securities and Exchange Commission recently charged an advisor with cheating three pro athletes out of $30 million; won a settlement from the former chief executive officer of a charter school operator on muni bond fraud charges; charged a medical device manufacturer for violations of the Foreign Corrupt Practices Act; and charged a U.K.-based trader for an account intrusion scheme.
Pro Athletes Mark Sanchez, Jake Peavy and Roy Oswalt Bilked by Advisor: SEC
Investment advisor Ash Narayan of Newport Coast, California, was the target of an SEC asset freeze, after the agency charged Narayan along with The Ticket Reserve Inc., its CEO, Richard Harmon; and Chief Operating Officer John Kaptrosky with a scheme defrauding athletes.
Former New York Jets quarterback Mark Sanchez and Major League Baseball pitchers Jake Peavy and Roy Oswalt were defrauded out of about $30 million, Bloomberg reported.
According to the SEC, Narayan, a managing director in the California office of Dallas-based investment advisory firm RGT Capital Management, transferred more than $33 million from clients’ accounts to The Ticket Reserve, typically without their knowledge or consent and often using forged or unauthorized signatures.
In addition to not telling his clients what he was doing, Narayan also hid the fees he was receiving for the unauthorized transfers and the conflict of interests inherent in the transactions: Not only was Narayan a member of The Ticket Reserve’s board of directors, he owned more than 3 million shares of company stock. Narayan also falsely claimed to be a CPA.
Harmon and Kaptrosky participated in the scheme by making undisclosed finder’s fee payments to Narayan out of his clients’ funds and covertly describing them as “director’s fees” and “loans” in various company documents.
Harmon and Kaptrosky approved and executed Ponzi-like payments, falsified and backdated documents, and created sham promissory notes between The Ticket Reserve and Narayan in attempts to further conceal the scheme.
The Ticket Reserve became dependent on the cash Narayan funneled to it from his unsuspecting clients to stay in business; in exchange, Narayan got nearly $2 million in hidden compensation from the company, most of it directly traceable to funds stolen from his clients.
The Ticket Reserve also made Ponzi-like payments to existing investors using money from new investors. Since being fired from the investment firm where he worked and losing access to the clients’ accounts, Narayan is alleged to have been redirecting to The Ticket Reserve the sham fees he received out of the money taken from client accounts. The SEC secured the court-ordered asset freeze before Narayan could make a planned financial transaction on May 31.
The SEC seeks disgorgement of ill-gotten gains plus interest and penalties as well as preliminary and permanent injunctions.
Former Charter School Operator CEO Settles Muni Bond Fraud Charges
Juan Rangel, the former president of UNO Charter School Network Inc. and former CEO of United Neighborhood Organization of Chicago, has agreed to settle with the SEC for his role in a misleading $37.5 million bond offering to build three charter schools.
According to the agency, Rangel negligently approved and signed a bond offering statement that omitted the charter schools’ multimillion-dollar contracts with two brothers of UNO’s chief operating officer. The latter were conflicted transactions that could have threatened UNO’s ability to repay bond investors.
“We allege that Juan Rangel signed off on the offering document without even reading it,” said David Glockner, regional director of the SEC’s Chicago regional office.
UNO entered into grant agreements with the Illinois Department of Commerce and Economic Opportunity (IDCEO) to build three charter schools. Rangel signed the agreements, which required UNO to certify that no conflict of interest existed and to immediately notify IDCEO in writing if any conflicts subsequently arose. If UNO breached the requirements, IDCEO could suspend the grant payments and recover grant funds already paid to UNO.