By Nick Thornton
The founder of Weston Capital Asset Management LLC and its general counsel have settled allegations by the SEC
that they shifted money from one investment to another without informing clients and later pocketing proceeds from the transfer to enrich themselves.
Albert Hallac moved $17 million from a hedge fund his West Palm Beach, Florida, firm managed to an account with Swartz IP Services Group Inc., the SEC said.
Weston Capital’s own stated investment strategy prohibited such undisclosed movements of funds. Also, account statements were issued falsely portraying the performance of the assets, the SEC said.
Keith Wellner, the firm’s general counsel, allegedly assisted in the prohibited transfer. He, Hallac, and the founder’s son, Jeffrey Hallac, collectively received $750,000 from Swartz IP subsequent to the prohibited transaction, the government said.
Hallac also allegedly used $3.5 million to pay down a loan from another fund managed by the firm.
Weston Capital and the accused agreed to settle the SEC’s charges. The U.S. District Court for the southern district of Florida will determine the extent of monetary sanctions against the firm and Hallac at a later date. Wellner, the general counsel, and Jeffrey Hallac, each agreed to give up $120,000 in earnings from the prohibited transactions.
“Investment advisers owe their clients a fiduciary duty of utmost good faith and full disclosure about what they’re doing with their money,” Eric I. Bustillo, director of the SEC’s Miami Regional Office, said in a statement. “Weston and Hallac dishonored that duty with Wellner’s assistance by secretly steering investor proceeds to a third party and then pocketing some of those funds.”
Court papers show that Weston Capital managed more than a dozen funds in early 2011 with total assets of $230 million. One of those funds, Wimbledon Fund SPC, was segregated into five asset classes, one of which was required to invest all of its assets in a diversified, multibillion-dollar hedge fund called Tewksbury Investment Fund, which invests in low-risk, short-term U.S. Treasury bills.
Weston Capital redeemed all of the assets from the Tewksbury fund and moved them to the account with Swartz IP Services, where funds were invested in the financing of various medical-related businesses.
Weston Capital solicited funds from investors, telling them those funds would be allocated in the low-risk T-bill fund, all the while placing the assets in the riskier fund financing private medical companies.
Originally published on BenefitsPro.com