SEC CHARGES INVESTMENT ADVISER WITH DEFRAUDING TEACHERS AND LAW ENFORCEMENT OFFICERS

FROM:   U.S. SECURITIES AND EXCHANGE COMMISSION  
06/01/2015 05:55 PM EDT

The Securities and Exchange Commission charged an investment adviser in Miami with siphoning money from his investment fund and defrauding investors, including several local teachers and law enforcement officers.

The SEC alleges that Phil Donnahue Williamson conducted a Ponzi scheme with money he raised for the Sterling Investment Fund, which purportedly invested in mortgages and properties in Florida and Georgia.  Many of Williamson’s investors were public sector retirees such as teachers and law enforcement officers who sought safe investments for their retirement savings.  Williamson assured investors there was no risk involved and they would receive annual returns of 8 to 12 percent.  But rather than invest their money as promised, he used the majority of fund assets to pay his personal expenses and make supposed returns to investors.  Williamson created fictitious valuations that were sent to investors.



“We allege that Williamson lured retired teachers, law enforcement officers, and others into believing that the Sterling Investment Fund was a safe investment generating significant returns,” said Eric I. Bustillo, Director of the SEC’s Miami Regional Office.  “Investors entrusted him with their retirement savings, and he spent it as his own money.”



According to the SEC’s complaint filed in U.S. District Court for the Southern District of Florida, one retired Miami-Dade County school teacher and church pastor invested $125,000 in the fund.  That same day, Williamson transferred himself $10,000 to pay his credit card bill and make a car payment to BMW among other personal expenditures.  Williamson later paid $24,400 to other investors in the fund as purported distributions, and transferred himself another $24,000 to pay additional personal expenses.



In a parallel action, the U.S. Attorney’s Office for the Southern District of Florida today announced criminal charges against Williamson.



Williamson has agreed to settle the SEC’s charges and is liable for $748,050.01 in disgorgement.  He also agreed to be permanently prevented from violating the antifraud provisions of the Investment Advisers Act of 1940, including misleading clients or prospective clients about investment strategies, the use of client funds, or his qualifications to advise clients.  The settlement is subject to court approval.



The SEC’s investigation was conducted by Casey Cohen and Margaret Vizzi in the Miami office, and the case was supervised by Assistant Regional Director Jason R. Berkowitz and Associate Regional Director Glenn S. Gordon.  The litigation will be handled by Andrew O. Schiff.  The SEC appreciates the assistance of the U.S. Attorney’s Office for the Southern District of Florida, the Federal Bureau of Investigation, and the Florida Office of Financial Regulation.

MAN ACCUSED OF OPERATING A $60 MILLION INVESTMENT FUND FRAUD

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., May 24, 2012 – The Securities and Exchange Commission today charged an investment adviser in Scotts Valley, Calif., with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund, used false and misleading marketing materials to lure investors into believing that the fund was earning double-digit annual returns by investing 75 percent of its assets in investments tied to major stock indices. In reality, Geringer’s trading generated consistent losses and he eventually stopped trading entirely. To mask his fraud, Geringer paid millions of dollars in “returns” to investors largely by using money received from newer investors. He also sent investors periodic account statements showing fictitious growth in their investments.

“Geringer painted the picture of a successful fund weathering America’s financial crisis through a diversified, conservative investment strategy,” said Marc Fagel, Director of the SEC’s San Francisco Regional Office. “The reality, however, was the complete opposite. Geringer lost millions of dollars in the market, tied up remaining investor funds in a pair of illiquid private companies, and lied about it in phony account statements.”

According to the SEC’s complaint filed in federal court in San Jose, Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Geringer used fraudulent marketing materials claiming that the fund had between 17 and 25 percent annual returns in every year of the fund’s operation through investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. Although the fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 – before the fund even existed. The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly-traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.

The SEC alleges that Geringer’s actual securities trading was unsuccessful, and by mid-2009 the fund did not invest in publicly-traded securities at all. Instead, the fund invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

According to the SEC’s complaint, Geringer further lied to investors on account statements that falsely claimed “MEMBER NASD AND SEC APPROVED.” The SEC does not “approve” funds or investments in funds, nor was the fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority – FINRA). Geringer also falsely claimed that the fund’s financial statements were audited annually by an independent accountant. No such audits were performed.

The SEC’s complaint alleges Geringer and three related entities violated or aided and abetted violations of the antifraud provisions of the securities laws as well as a statute barring people from claiming that the SEC has passed on the merits of a particular investment. The SEC seeks financial penalties, disgorgement of ill-gotten gains, preliminary and permanent injunctions, and other relief. Geringer, the fund, and two of the related entities consented to the entry of a preliminary injunction and a freeze on the fund’s bank account.

The SEC’s investigation, which is continuing, has been conducted by Robert J. Durham and Robert S. Leach of the San Francisco Regional Office. The SEC’s litigation will be led by Sheila O’Callaghan of the San Francisco Regional Office.

The SEC thanks the U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, and FINRA for their assistance in this matter.

MAN ACCUSED OF RUNNING A $60 MILLION INVESTMENT FUND LIKE A PONZI SCHEME

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

May 24, 2012
On May 24, 2012, the Securities and Exchange Commission charged an investment adviser in Scotts Valley, Calif., with running a $60 million investment fund like a Ponzi scheme and defrauding investors by touting imaginary trading profits instead of reporting the actual trading losses he had incurred.

The SEC alleges that John A. Geringer, who managed the GLR Growth Fund (Fund), used false and misleading marketing materials to lure investors into believing that the Fund was earning double-digit annual returns by investing 75% of its assets in investments tied to well-known stock indices like the S&P 500, NASDAQ, and Dow Jones. In reality, Geringer’s trading generated consistent losses and he eventually stopped trading entirely. To mask his fraud, Geringer paid millions of dollars in “returns” to investors largely by using money received from newer investors. He also sent investors periodic account statements showing fictitious growth in their investments.

According to the SEC’s complaint filed in federal court in San Jose, Geringer raised more than $60 million since 2005, mostly from investors in the Santa Cruz area. Geringer used fraudulent marketing materials claiming that the Fund had between 17 and 25 percent annual returns in every year of the Fund’s operation through investments tied to major stock indices. Although the Fund was started in 2003, marketing materials claimed 25 percent returns in 2001 and 2002 – before the Fund even existed. The marketing materials also falsely indicated a nearly 24 percent return in 2008 from investing mainly in publicly traded securities, options, and commodities, while the S&P 500 Index lost 38.5 percent.
The SEC alleges that Geringer’s actual securities trading was unsuccessful, and by mid-2009 the Fund did not invest in publicly traded securities at all. Instead, the Fund invested heavily in illiquid investments in two private startup technology companies. The rest of the money was paid to investors in Ponzi-like fashion and to three entities Geringer controlled that also are charged in the SEC’s complaint.

According to the SEC’s complaint, Geringer further lied to investors on account statements that falsely claimed “MEMBER NASD AND SEC APPROVED.” The SEC does not “approve” funds or investments in funds, nor was the Fund (or any related entity) a member of the NASD (now called the Financial Industry Regulatory Authority – FINRA). Geringer also falsely claimed that the Fund’s financial statements were audited annually by an independent accountant. No such audits were performed.

The SEC’s complaint alleges Geringer and three related entities violated or aided and abetted violations of Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder, and Section 206(1), (2), and (4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder. The complaint also alleges the defendants violated or aided and abetted violations of Section 26 of the Exchange Act, which bars persons from claiming the SEC has passed on the merits of a particular investment. The SEC’s complaint names the Fund as a relief defendant. The complaint seeks preliminary and permanent injunctions, disgorgement of ill-gotten gains, civil monetary penalties, and other relief. Geringer, the Fund, and two of the GLR entities consented to the entry of a preliminary injunction and a freeze on the Fund’s bank account.

The SEC’s investigation, which is continuing, has been conducted by Robert J. Durham and Robert S. Leach of the San Francisco Regional Office. The SEC’s litigation will be led by Sheila O’Callaghan of the San Francisco Regional Office.
The SEC thanks the U.S. Attorney’s Office for the Northern District of California, Federal Bureau of Investigation, and FINRA for their assistance in this matter.