SEC BRINGS CHARGES IN CASE INVOLVING ALLEGED MISAPPROPRIATION OF MONEY FROM AN INVESTMENT FUND

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION  

Litigation Release No. 23207 / February 26, 2015

Securities and Exchange Commission v. Daniel Thibeault et al., Civil Action No. 1:15-cv-10050 (D. MA)

CEO of Massachusetts-Based Investment Advisory Companies Indicted On Charges of Fraud, Obstruction of Justice

The Securities and Exchange Commission announced that on February 25, 2015, Daniel Thibeault, the CEO of a group of Massachusetts-based investment advisory companies, was criminally charged by a grand jury in the United States District Court for the District of Massachusetts in connection with the alleged misappropriation of more than $15 million from an investment fund. The SEC previously filed a civil enforcement action against Thibeault and others in January 2015. The criminal indictment charges Thibeault with securities fraud, wire fraud, and aggravated identity theft. The indictment also charges Thibeault with obstruction of justice, alleging that Thibeault sought to obstruct the SEC's prior investigation by intentionally misleading SEC examiners.

The allegations in the criminal indictment stem from the same misconduct underlying the SEC's pending civil enforcement action against Thibeault and the associated entities concerning the alleged misappropriation of money from an investment fund. In a complaint filed in federal court on January 9, 2015, the SEC named Thibeault as a defendant, along with the following entities, all believed to be controlled by Thibeault: Graduate Leverage, LLC; GL Capital Partners, LLC; GL Investment Services, LLC; and Taft Financial Services, LLC. The SEC also charged two other parties as relief defendants based on their alleged receipt of investor funds: GL Advisor Solutions, Inc., a corporation based in the Philippines that is controlled by Graduate Leverage, LLC and Thibeault; and Shawnet Thibeault, who is Daniel Thibeault's wife.

The SEC's complaint alleges that GL Capital Partners, LLC and its principal, Daniel Thibeault, were the investment advisers to a fund called the GL Beyond Income Fund, and that they misappropriated money that belonged to this fund. The GL Beyond Income Fund's assets consisted primarily of individual variable rate consumer loans. The SEC alleges that beginning in 2013 or earlier, Thibeault and the other defendants engaged in a scheme to divert investor money from the GL Beyond Income Fund by creating fake loans and reporting those fake loans as assets of the GL Beyond Income Fund, using the names and personal information of individuals who were unaware that loans were being originated. The complaint further alleges that the GL Beyond Income Fund disbursed millions of dollars to fund these fictitious loans, but the borrowed money did not go to the purported borrowers whose names appeared on the documentation; instead, the SEC alleges, it was transferred to Thibeault and the other defendants who used the money for personal expenses and to run businesses other than the GL Beyond Income Fund, and used it to conceal and perpetuate the scheme by making "interest payments" on fake loans.

Thibeault was originally charged by a criminal complaint and was arrested on December 11, 2014. The SEC's action against Thibeault and the other defendants, which is pending, seeks disgorgement of ill-gotten gains plus pre-judgment interest and penalties and permanent injunctions against further violations of the securities laws. On January 21, 2015, the United States District Court for the District of Massachusetts imposed an asset freeze against Thibeault and the other defendants and relief defendants and ordered certain other preliminary relief.

For further information, see Litigation Release No. 23171 (January 9, 2015) [Civil Complaint]; Litigation Release No. 23178 (January 22, 2015).

SEC OBTAINS FREEZE AGAINST ASSETS OF INVESTMENT ADVISERS CHARGED WITH MISAPPROPRIATION

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 23178 / January 22, 2015

Securities and Exchange Commission v. Daniel Thibeault, et al., Civil Action No. 1:15-cv-10050 (D. MA)

SEC Obtains Asset Freeze Against Massachusetts-Based Investment Advisers Charged with Misappropriation of Money from an Investment Fund'

The Securities and Exchange Commission yesterday announced that a federal court has imposed an asset freeze against a group of Massachusetts-based investment advisory companies and their President/CEO, based on the alleged misappropriation of at least $16 million from an investment fund.

Judge Nathaniel Gorton of the United States District Court for the District of Massachusetts granted the SEC's request for an emergency court order to freeze the assets of the following defendants, who are charged in a complaint filed by the SEC on January 9, 2015:

Daniel Thibeault of Framingham, Massachusetts;
Graduate Leverage, LLC, an asset management and financial advisory firm based in Waltham, Massachusetts, of which Thibeault is the principal owner, president and Chief Executive Officer;
GL Capital Partners, LLC, an investment adviser based in Waltham, Massachusetts that is controlled by Thibeault;
GL Investment Services, LLC, an investment adviser based in Waltham, Massachusetts that is indirectly owned by Thibeault;
Taft Financial Services, LLC, which is based in Texas and is believed to be controlled by Thibeault; and
two other parties as relief defendants based on their receipt of investor funds: GL Advisor Solutions, Inc., a corporation based in the Philippines that is controlled by Graduate Leverage, LLC and Thibeault; and Shawnet Thibeault, who is Daniel Thibeault's wife.
In addition to the asset freeze, the court also ordered certain preliminary relief against the defendants, including, variously, preliminary injunctions, an accounting of investor funds and all assets in their possession, a repatriation of all foreign assets that were obtained directly or indirectly from investors, and a prohibition from soliciting or accepting additional investments.

The SEC's complaint alleges that GL Capital Partners, LLC and its principal, Daniel Thibeault, were the investment advisers to a fund called the GL Beyond Income Fund, and that they misappropriated at least $16 million of the money that belonged to this fund. The GL Beyond Income Fund's assets consisted primarily of individual variable rate consumer loans. According to the complaint, Thibeault and other defendants solicited investments in the GL Beyond Income Fund by representing that investors' money would be pooled and used to make or purchase consumer loans. These consumer loans would then constitute assets of the GL Beyond Income Fund, and would provide a return to the investors when interest and principal payments were made on the loans. The SEC alleges that beginning in 2013 or earlier, Thibeault and the other defendants engaged in a scheme to create fictitious loans to divert investor money from the GL Beyond Income Fund, and to report these fake loans as assets of the GL Beyond Income Fund. This scheme was designed to conceal the fact that Thibeault and the other defendants had misappropriated millions of dollars from the GL Beyond Income Fund. According to the SEC's complaint, the scheme involved the fabrication of paperwork purporting to reflect numerous six-figure consumer loans using the names and personal information of individuals who were unaware that loans were being originated in their names. The complaint further alleges that money from the GL Beyond Income Fund was disbursed to fund these fictitious loans, but the borrowed money did not go to the purported borrowers whose names appeared on the documentation. Instead, it went to Thibeault and other defendants. The SEC alleges that Thibeault and other defendants misappropriated the money from the fake loans and used it for personal expenses and to run businesses other than the GL Beyond Income Fund, as well as to perpetuate the scheme by making "interest payments" on fake loans.

The SEC charges that the defendants violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder and Section 17(a) of the Securities Act of 1933 and that Thibeault, GL Capital Partners, LLC, and GL Investment Services, LLC, also violated Sections 206(1) and 206(2) of the Investment Advisers Act of 1940. The SEC seeks permanent injunctions, disgorgement of ill-gotten gains plus prejudgment interest, and civil penalties against each of these defendants. The SEC also seeks disgorgement plus prejudgment interest from relief defendants GL Advisor Solutions, Inc. and Shawnet Thibeault.

INJUNTION ENTERED AGAINST TRANSFER AGENT OWNER WHO ALLEGEDLY MISUSED CLIENT FUNDS

FROM:  U.S. SECURITIES AND EXCHANGE COMMISSION 

Court Enters Permanent Injunction Against Owner of Illinois-Based Transfer Agent

The Securities and Exchange Commission announced today that on July 9, 2014, the Honorable Rebecca R. Pallmeyer of the United States District Court for the Northern District of Illinois entered a judgment against defendant Robert G. Pearson in SEC v. Robert G. Pearson and Illinois Stock Transfer Company (d/b/a/ ist Shareholder Services), Civil Action No. 1:14-cv-03875 (N.D. Ill.). The Court entered the judgment, to which Pearson consented without admitting or denying the allegations in the Commission's Complaint. The judgment permanently enjoins Pearson from violating Sections 10(b) and 17A(d)(1) of the Securities Exchange Act of 1934 and Rules 10b-5(a) and 10b-5(c), 17Ad-12, 17Ad-13, 17Ad-16, and 17f-1 thereunder. The amount of disgorgement and civil penalties to be ordered of Pearson will be addressed in a future motion to be filed by the Commission.

According to the Complaint, ist Shareholder Services, a registered transfer agent with the Commission under the name of Illinois Stock Transfer Company ("IST"), and its owner, Robert G. Pearson, misappropriated more than $1.3 million belonging to their corporate clients and the clients' shareholders beginning in 2012. The defendants misused those funds in order to fund their own payroll and business obligations. Pearson admitted to the scheme during questioning by SEC examiners. The Commission's complaint also alleges that under Pearson's direction, IST committed multiple violations of the SEC's transfer agent rules, including the failure to safeguard funds and securities and to report lost and stolen securities. The firm also did not file an accurate annual study and evaluation of internal accounting controls, and failed to give notice of assumption and termination of transfer agent services. As a result, the Commission subsequently filed an ex parte emergency action and obtained a temporary restraining order, an asset freeze and the appointment of a receiver over the defendants in May 2014.