On June 10, 2013, the SEC charged the CEO of a Detroit-based investment adviser with misappropriating more than $3 million from the Police and Fire Retirement System of the City of Detroit pension fund. The SEC also charged the firm’s CFO, Chief Operating Officer, Chief Investment Officer, and CCO/ General Counsel with assisting the CEO in covering up the theft.
According to the SEC complaint, the CEO stole the money from the pension fund in 2008 to purchase strip malls. The other charged officials allegedly became aware of the theft after the fact and hid it by misleading the pension fund.
The SEC’s complaint alleges that the CEO and the firm violated Sections 206(1) and 206(2) of the Advisers Act and that the other charged officials aided and abetted these violations. In a proposed settlement pending court approval, the CEO and the firm agreed to pay back nearly $3.1 million and be permanently enjoined from future violations. They did not admit or deny the allegations. In a parallel criminal case, the CEO is awaiting sentencing in connection with his participation in a pay-to-play scheme involving the former mayor and treasurer of Detroit.