LawFuel.com – Legal Newswire –
LEV L. DASSIN, Acting United States Attorney for the
Southern District of New York, announced that JAMES NICHOLSON,
42, the President, Senior Portfolio Manager, and sole managing
member of investment firm Westgate Capital Management LLC, was
indicted today on four felony charges, including securities fraud
and investment adviser fraud, involving losses of at least $150
million.
According to the Indictment filed in Manhattan federal
court, as well as an earlier criminal Complaint unsealed against
NICHOLSON upon his arrest on February 25, 2009:
Westgate Capital, a money management firm with offices
in Pearl River, New York, and New York City, was founded in
August 1999. NICHOLSON’s fraud on Westgate Capital investors
commenced in approximately 2004. Among other things, NICHOLSON
represented to investors that Westgate Capital had assets under
management ranging from $600 to $900 million when, in fact, the
true value of its assets was materially less. Westgate Capital
also provided a private offering memorandum to investors in one
of its funds, Westgate Strategic Growth Fund, LP, that falsely
stated that the Fund was audited by an independent accounting
firm located in New York, New York. Marketing brochures for the
Strategic Growth Fund also claimed positive returns for each
month from January 2004 through August 2008, and a similar
brochure for another Westgate fund showed uniformly positive
returns for every month (except September 2001) from October 1999
through December 2007.
In fact, performance of the funds was
materially lower than represented. In addition, from 2006 to
2008, NICHOLSON also withdrew a total of over $400,000 from
various Westgate accounts, structuring the transactions into more
than 50 withdrawals of less than $10,000, spread over three
accounts, to avoid currency transaction reporting requirements.
In December 2008, numerous investors in funds
controlled by Westgate Capital began seeking to redeem their
investments. Nearly two dozen investors thereupon received from
NICHOLSON checks totaling nearly $5 million; however, all of
those checks were returned for insufficient funds. Other
investors have unsuccessfully sought to redeem funds totaling
millions of dollars.
The offenses charged in the Indictment and their
maximum penalties are set forth below:
COUNT OFFENSE MAXIMUM PENALTY
One Securities Fraud 20 years in prison
Fine of greater of $5
million or twice gross gain
or loss from offense
Two Investment Adviser
Fraud
5 years in prison
Fine of $10,000
Three Mail Fraud 30 years in prison
Fine of greater of $1 million or twice gross gain or loss from offense
Four Structuring 10 years in prison
Fine of greater of $500,000 million or twice gross gain or loss from offense
The Indictment also includes allegations seeking
forfeiture of the proceeds of and property involved in the
charged crimes, including at least $150,000,000 in United States
currency and five pieces of property.
Mr. DASSIN praised the investigative work of the
Federal Bureau of Investigation and thanked the United States
Securities and Exchange Commission for its assistance in the
investigation of this case. He added that the investigation is
continuing.
Assistant United States Attorneys MARIA DOUVAS and
JOSHUA KLEIN are in charge of the prosecution.
09-113 ###
