The Securities and Exchange Commission has charged an investment advisor representative with stealing approximately $5 million from client accounts by initiating unauthorized wire transfers and issuing checks to third parties to cover personal expenses.
The SEC alleges that Barry Connell, who worked in the New Jersey office of a major financial institution, conducted more than 100 unauthorized transactions by using falsified authorization forms misrepresenting that he received verbal requests from the clients.
Connell allegedly used money from client accounts to rent a home in suburban Las Vegas and pay for a country club membership and private jet service.
“As alleged in our complaint, Connell stole funds from clients who entrusted him their finances, choosing to fund his own lavish lifestyle rather than fulfill the fiduciary duty he owed them,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
The SEC’s investigation is continuing. In a parallel action, the U.S. Attorney’s Office for the Southern District of New York today filed criminal charges against Connell.
PE Advisor Barred for Improper Withdrawals From Funds
The SEC announced that a private equity advisor has been permanently barred from the securities industry and must pay a $1.25 million penalty to settle charges that he withdrew improper fees from two private equity funds he managed.
The SEC’s order finds that Scott M. Landress formed the funds to invest in real estate trusts with underlying investments in properties throughout the U.K.
Landress’ investment advisory firm, SLRA Inc., earned management fees based on the net asset value of the underlying investments. According to the SEC, SLRA’s fees shrank and its management costs increased as real estate property values fell during the financial crisis, and the funds’ limited partners declined several requests by Landress for additional compensation to cover the shortfalls.
According to the SEC’s order, Landress directed SLRA to withdraw 16.25 million pounds from the funds in early 2014, purportedly as payment for several years of services provided by an affiliate. He subsequently transferred the money to his personal account. SLRA and Landress did not disclose the related-party transaction and the resulting conflicts of interest until after the money had been withdrawn.
According to the SEC’s order, Landress and SLRA returned the withdrawn service fees to the funds after the SEC began its investigation.
“Private equity fund advisors have a duty to act in the best interest of their clients, but Landress and SLRA helped themselves to millions of dollars’ worth of fees to which they had no legitimate claim,” Scott W. Friestad, associate director of the SEC’s Division of Enforcement, said in a statement.
Landress and SLRA agreed to the SEC’s cease-and-desist order without admitting or denying the findings. Company and Execs Charged With Financial Reporting Violations
The SEC charged two former executives of a computer network testing company with violations related to their financial reporting obligations to investors.
The SEC’s complaint, filed in federal court in Los Angeles, alleges that Thomas Miller and William Liang, the former CFO and director of accounting at Calabasas, California-based Ixia, participated in a scheme to prematurely recognize certain revenues and concealed the improper revenue recognition practice from the company’s auditors.
The SEC’s complaint seeks financial penalties and permanent injunctive relief against Miller and Liang.
The SEC separately announced settled administrative proceedings against Ixia and Victor Alston, Ixia’s former CEO, arising from the same alleged misconduct.
The SEC’s order finds that Victor Alston, who was elevated to top executive at Ixia in 2012, made changes in the company’s revenue and other financial metrics in an effort to meet market expectations. Alston ordered changes to Ixia’s practice of deferring revenue recognition from its sales of software combined with training and professional services until the customer actually received the training or other services, which often occurred many months after the sale.
Without admitting or denying the findings, Ixia consented to the SEC’s order and agreed to pay a $750,000 penalty. Alston, without admitting or denying the findings, consented to the SEC order and agreed to a five-year officer-and-director bar and payment of a $100,000 penalty.
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