March 26, 2014 — The financial fraud whistleblower program established in the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act makes tipsters eligible for substantial rewards when they collaborate with the Securities and Exchange Commission (SEC). Insiders who tip off the government when fund managers, also known as investment advisers, or advisory firms misallocate funds may receive as much as thirty percent of the government’s total recovery, provided the proceeds exceed $1 million.
Advisory Firm and Fund Manager Allegedly Misallocated Cash from 19 Funds to Pay Advisory Firm Expenses and Bonuses
Scott A. Brittenham, an Arizona private equity fund manager and Clean Energy Capital LLC (Clean Energy), Brittenham’s investment advisory firm, have been charged by the SEC with paying for the firm’s expenses with assets from 19 private equity funds without disclosing the arrangement to investors. The government alleges that Brittenham and Clean Energy spent over $3 million on expenses that the advisory firm should have paid itself and that the 19 funds could not afford.
When the cash from the equity funds dried up, Brittenham and Clean Energy compounded the situation by loaning money back to the funds at an unfavorable 17 percent rate of interest. This allowed Brittenham and Clean Energy to continue their allegedly improper use of fund assets to pay Clean Energy’s salaries, rent and employee benefits such as tuition costs, retirement, and bonuses. The $3 million misallocated from the funds was on top of the millions of dollars in management fees that the funds had already paid to Clean Energy for its purported advisory services.
Whistleblowers Notify SEC When Advisory Firms Violate Securities Laws by Misallocating Fund Investments
Investment firm insiders may be the first to uncover a misallocation of funds as described in this instance. But informants need to understand their own rights under the rules of the Dodd-Frank whistleblower program before they move to collaborate with the SEC. With whistleblower lawyers in California, Texas and the Washington, D.C. area, Waters & Kraus has what it takes to protect informants’ rights and advance their interests. Contact us by email or call our whistleblower attorneys at 855.784.0268 to discuss how we can work together to do what’s right.
