The SEC filed suit against an Adviser and its five principals which included the Adviser’s General Counsel and Chief Compliance Officer, for stealing money from a public pension plan. According to the SEC, the Adviser managed real estate assets for the Detroit Police and Fire Retirement System. The SEC claims that the Adviser took money from a cash account and purchased two shopping centers in California without obtaining permission from or notifying the plan. The SEC stated that the adviser failed to disclose the purchases for several years despite multiple opportunities to do so (i.e. reporting, Board presentations. The principals of the Adviser did not want to disclose the investment because the properties dropped in value soon after the purchase. The SEC has alleged that the General Counsel and Chief Compliance Officer knew about the unlawful use of funds and assisted in the conspiracy to withhold the information from the pension plan.
One has to wonder whether the DOL will join in prosecuting these principals since their fraud involved ERISA assets. To read the rest of case information, please click here.