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Blotter: January 2013

Blotter: January 2013

No Skin Off My Back

An Aladdin Capital Management advisor settled Securities and Exchange Commission charges after he falsely told clients that he and his firm had “skin in the game” by investing alongside them in several collateralized debt obligations, the SEC says.

Turns out that neither Aladdin nor its advisor Joseph A. Schlim invested in either CDO. But the firm marketed and collected placement fees based on the pitch that the firm would co-invest, according to orders released Dec. 17.

The firm agreed to pay $1.6 million to settle the charges, while Schlim agreed to individually pay $50,000 to settle claims he failed to properly ensure the accuracy of the marketing material.

Picnic’s Over

For those who consider serving on a company’s board to be a safe, easy gig, think again. The SEC recently charged eight former board members for failing to oversee mutual funds controlled by Morgan Keegan.

The regulator claimed the board members delegated their responsibilities and failed to adequately supervise fund managers who were later charged with overvaluing mortgage-backed securities right before the housing market crash. 

Morgan Keegan—now a unit of Raymond James—paid $200 million to settle the charges against the managers and the firm in June 2011.

Board members have vowed to vigorously contest the charges, saying in a statement the action was a “misguided attempt” to send a message to mutual fund boards.

Financial Fraudsters

One news outlet not only reports on the fraudsters of Wall Street, but now it’s facing fraud charges of its own.

The SEC charged three executives of with accounting fraud on Dec. 18, claiming they falsified revenue reports from the company’s subsidiary.

Co-presidents Gregg Alwine and David Barnett and former Chief Financial Officer Eric Ashman were allegedly involved in a scheme that fabricated and backdated documents to mislead the site’s auditor.

The three agreed to pay a combined $375,000 in penalties to settle the charges. Further, Ashman is barred from serving as head of a company for three years, while Barnett and Alwine are barred for 10 years.

Sneaky Schemes

FINRA slapped a Pennsylvania advisor with a complaint in December after he allegedly forged client signatures to funnel client assets from one account to another, culminating in personal withdrawals of over $250,000.

The regulator claimed James D. Grimes transferred $306,000 from three customer accounts to another client account without authorization between April 2006 and April 2010.  Grimes then allegedly wrote $250,446 worth of checks payable in cash for his personal use.

TAGS: Industry
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