Fri, 31/01/2014 - 12:08
The Securities and Exchange Commission (SEC) has charged a Manhattan-based private equity manager and his firm with stealing USD9m from investors in their private equity fund.
The SEC has obtained an emergency court order to freeze the assets of Lawrence E Penn III and his firm Camelot Acquisitions Secondary Opportunities Management as well as another individual and three entities involved in the theft of investor funds.
The SEC alleges that Penn and his longtime acquaintance Altura S Ewers concocted a sham due diligence arrangement where Penn used fund assets to pay fake fees to a front company controlled by Ewers. Instead of conducting any due diligence in connection with potential investments by Penn’s fund, Ewers’ company Ssecurion promptly kicked the money back to companies and accounts controlled by Penn so he could secretly spend investor funds for other purposes. For example, Penn paid hefty commissions to third parties to secure investments from pension funds. Penn also rented luxury office space and used the funds to project the false image that Camelot was a thriving international private equity operation.
“Penn held himself out as an ultra-sophisticated and well-connected investor in the private equity world,” says Andrew M Calamari, director of the SEC’s New York regional office. “Behind the scenes, Penn disregarded his obligations to the fund’s investors and treated their assets as his own personal and professional slush fund.”
According to the SEC’s complaint filed in federal court in Manhattan, Penn tapped into a network of public pension funds, high net worth individuals, and overseas investors to raise assets for his private equity fund Camelot Acquisitions Secondary Opportunities, which he started in early 2010. Penn eventually secured capital commitments of approximately USD120m. The fund is currently invested in growth-stage private companies that are seeking to go public.
The SEC alleges that Penn has diverted approximately USD9.3m in investor assets to Ssecurion. With the assistance of Ewers, who lives in San Francisco, Penn repeatedly misled the fund’s auditors about the nature and purpose of the due diligence fees. However, the scam began to unravel in 2013 when Camelot’s auditors became increasingly sceptical about the fees. In their haste to cover their tracks, Penn and Ewers brazenly lied to the auditors and forged documents as recently as July 2013, pretending the files were generated by Ssecurion.
The SEC’s complaint charges Penn, two Camelot entities, Ewers, and Ssecurion with violating the antifraud, books and records, and registration application provisions of the federal securities laws. The complaint seeks final judgments that would require them to disgorge ill-gotten gains with interest, pay financial penalties, and be barred from future violations of the antifraud provisions of the securities laws. The SEC’s complaint also charges another company owned by Ewers – A Bighouse Photography and Film Studio – as a relief defendant for the purposes of recovering investor funds it allegedly obtained in the scheme.
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Sat, 28 Nov 2015 00:00:00 GMTS/VP Enterprise Risk - Buy Side Firm | Singapore
Sat, 28 Nov 2015 00:00:00 GMTCompliance Officer | Private Bank
Sat, 28 Nov 2015 00:00:00 GMT