Washington, D.C., April 23, 2009 – The Securities and Exchange Commission has obtained an emergency asset freeze and the appointment of a receiver over a Naples, Fla.-based investment adviser that has been charged with defrauding investors by misrepresenting the nature of $550 million in investments. The receivership and asset freeze also extend to the funds managed by the investment adviser.
The SEC alleges that William L. Gunlicks and his firm, Founding Partners Capital Management Company, made misrepresentations about the risk of investments in loans made by the funds. They also solicited new investors for their largest fund without disclosing that the fund was facing significant redemption requests.
“Investors are entitled to complete and accurate information about their investments and any risks involved,” said David Nelson, Director of the SEC’s Miami Regional Office. “Founding Partners and Gunlicks placed unsuspecting investors’ assets in jeopardy through their fraudulent conduct.”
The SEC’s complaint, filed in federal court in Fort Myers, Fla., alleges that Gunlicks and Founding Partners misrepresented to investors that their primary fund loaned money to two companies that purchased primarily short-term, highly liquid account receivables that fully secured the loans. The companies instead purchased account receivables that were longer-term, less liquid, and much riskier in nature.
The SEC also charged Gunlicks and Founding Partners with misusing fund assets to pay personnel expenses, and misrepresenting that its funds had audited financial statements for 2007 when they did not. Additionally, the SEC alleges that Gunlicks and Founding Partners failed to disclose to all investors and to comply with a prior Commission order entered against them.
The Honorable John E. Steele of the U.S. District Court for the Middle District of Florida granted the SEC’s request for an asset freeze and other emergency relief on April 20, 2009. The court also appointed Leyza F. Blanco, an attorney in the law firm Gray Robinson, P.A. of Miami, Fla., as receiver over Founding Partners and its managed funds. Among other things, the receiver is responsible for marshaling and safeguarding assets held by these entities.
The SEC’s complaint alleges that Gunlicks and Founding Partners violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 206(1), (2), and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The SEC also alleges that they violated a prior Commission order requiring that they cease and desist from committing or causing any violations and any future violations of Section 17(a)(2) of the Securities Act.
In addition to emergency relief, the SEC’s complaint seeks disgorgement of the defendants’ ill-gotten gains, prejudgment interest, and financial penalties.
The SEC’s investigation is continuing.