The Securities and Exchange Commission on Tuesday charged an investment advisor with defrauding a high-profile professional athlete and his wife by deceiving them about how much in investment advisory fees they were paying.
Jeremy Drake, formerly of Los Angeles-based HCR Wealth Advisors, deceived the clients for more than three years, telling them that they paid a special “VIP” annual rate of 0.15 to 0.20% of their assets under management when in fact they paid 1%, according to the SEC’s complaint.
Drake’s deception led the clients to pay $1.2 million more in management fees than Drake represented, the SEC said, with Drake personally receiving approximately $900,000 of incentive-based compensation based on the fees paid by the clients during the course of his deception.
Drake met the clients, who are not named in the complaint, in 2008, when he worked for another investment advisory firm.
The clients ultimately placed more than $35 million of their assets under Drake’s management, and Drake was the clients’ sole contact at HCR during the time he acted as their advisor, the complaint states.
“As an investment adviser responsible for the day-to-day management of the clients’ investments, Drake owed the clients a fiduciary duty,” the SEC said.
According to the SEC’s complaint filed in the U.S. District Court for the Central District of California, Drake repeatedly lied to the clients and their representatives and sent false and misleading emails, deceptive fee reports, and other fabricated documents.
The complaint alleges that in June 2016, as one of the clients demanded an explanation about the fees, Drake created the persona of “Ron Stenson,” who purportedly corroborated Drake’s story.
“Upon discovery, the complaint alleges that Drake admitted to one of the clients that he had been lying and warned her that reporting his misconduct could result in bad publicity for her husband,” the complaint states.
Michele Wein Layne, director of the SEC’s Los Angeles Regional Office, said in a statement that as the SEC complaint alleges, “these two clients trusted Drake to manage their investments, but all the while Drake was lying to them and then tried to conceal his lies by fabricating documents and even acting as an imposter to back up his claims.”
The SEC is seeking a permanent injunction, return of Drake’s allegedly ill-gotten gains plus interest and penalties.
The SEC’s investigation is continuing.
— Check out 8 Ex-NFL Stars Worth a Fortune on ThinkAdvisor.