February 26, 2014 — It is a crime for management firms advising public pension funds or private individuals to defraud investors. Under the whistleblower program established in the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010, informants who notify the Securities and Exchange Commission (SEC) about theft from investors may be rewarded for their courage in collaborating with the government. Tipsters are entitled to a reward equivalent to as much as thirty percent of the government’s proceeds, so long as the total recovery exceeds $1 million.
Manhattan Private Equity Manager Claimed to Invest $9 Million in Due Diligence Operation and Instead Spent Funds on High Priced Offices and Big Commissions
Lawrence E. Penn III and his New York management firm, Camelot Acquisitions Secondary Opportunities Management, have been charged with stealing $9 million from investors in Camelot Acquisitions Secondary Opportunities LP, a private equity fund Penn began in 2010.
To raise assets for the fund, the SEC charges, Penn courted a variety of investors, including public pension funds, wealthy individuals and overseas investors. Successfully securing $120 million in capital commitments, Penn invested Camelot in growth-stage private companies seeking to become publicly traded.
Penn and an acquaintance, Altura S. Ewers, allegedly created a phony due diligence operation in which Penn used Camelot fund assets to make sham fee payments to a front company, Ssecurion, run by Ewers. But Ssecurion didn’t use the money to conduct due diligence on behalf of Camelot’s investors. Rather, Ssecurion transferred the funds right back to Penn, who spent the investor funds on luxury office space and generous commissions paid to third parties that brought in pension funds to invest in Camelot.
According to the SEC, Penn misappropriated over $9 million in Camelot investor assets to Ssecurion. Penn and Ewers allegedly misled Camelot’s auditors about the purported due diligence fees until 2013 when the scam began to unravel. At that point, Penn and Ewers allegedly began lying outright to the auditors and feeding them forged documents to conceal the fraud.
The SEC, which has successfully frozen Penn’s assets, is asking that Penn and Ewer disgorge their ill-gotten gains and pay penalties and interest. In addition, A Bighouse Photography and Film Studio LLC, which is owned by Ewers, has been charged as a relief defendant to recover Camelot investor funds that allegedly were transferred to that entity.
Whistleblowers Notify SEC of Theft from Investors
Investment management firm insiders with knowledge of schemes to steal from investors need to understand the Dodd-Frank whistleblower program from the beginning. The SEC fraud lawyers at Waters & Kraus have the experience necessary to safeguard informants’ interests in investment fraud cases. Contact us by email or call our qui tam lawyers at 855.784.0268 to discuss how we can assist you.