September 4, 2013 — To protect investors from being duped by misleading marketing information involving mutual funds, the U.S. Congress incorporated a whistleblower program into the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) of 2010. Tipsters who collaborate with the Securities and Exchange Commission (SEC) about fraudulent quarterly reports or misleading marketing materials may receive compensation for notifying the government. Informants may receive up to thirty percent of the total amount the government collects, so long as the recovery is greater than $1 million.
Former Oppenheimer Portfolio Manager Charged with Overstating Fund Returns
The SEC has charged a former portfolio manager with misstating key performance information concerning a group of equity funds. Brian Williamson of Oppenheimer & Co. (Oppenheimer) allegedly prepared financial and marketing reports with misleading information indicating that the funds’ performance was higher than its actual performance. Earlier in 2013, Oppenheimer consented to a fine of $2.8 million to resolve similar charges.
Williamson was an employee of Oppenheimer between 2005 and 2011. One of the Oppenheimer funds managed by Williamson was the Oppenheimer Global Resource Private Equity Fund I, L.P. Williamson allegedly sought high net worth individuals, foundations and pension funds as investors to the fund. In 2009, Williamson allegedly told prospective clients about the returns achieved, but failed to disclose the expenses and fees that reduced the actual return investors would achieve.
In 2009, Williamson allegedly altered Oppenheimer marketing materials to raise the value of Cartesian Investors-A LLC, the largest fund in the portfolio, from $6 million to $9 million, creating a significant misrepresentation of the true value. The SEC alleged that Williamson included fraudulent statements in the marketing literature, claiming that the values shown were based on the individual fund’s approximate value.
Williamson also allegedly created, edited or approved other serious misrepresentations concerning the Oppenheimer Global Resource Private Equity Fund I, L.P., including claims that the fund’s performance was due to the superior performance of the underlying funds. The SEC alleged that Williamson achieved the paper returns by fraudulently inflating the value of the largest fund. In Williamson’s 2009 marketing literature, for example, he increased the Cartesian Investors-A LLC rate of return to 38.3 percent from 3.8 percent, or a ten-fold increase over the actual return.
Whistleblowers Collaborate With the SEC on Mutual Fund Misconduct
Mutual fund insiders with information about fraud in the securities industry should learn how the Dodd-Frank whistleblower program works before they notify the SEC. If you wish to remain anonymous, you must work with an attorney to speak out for you — tipsters cannot notify the government directly. The SEC fraud lawyers at Waters & Kraus are committed to protecting whistleblowers’ interests in securities fraud cases. Contact us by email or call our whistleblower attorneys at 800.226.9880 to learn how we can work together to do the right thing.