SEC Wins Jury Trial Against Connecticut-Based Fund Manager Who Facilitated Petters Ponzi Scheme
The Securities and Exchange Commission today announced that a jury has found Connecticut-based fund manager Marlon M. Quan and his firms liable for securities fraud in connection with a multi-billion dollar Ponzi scheme operated by Minnesota businessman Thomas Petters.
Following a two-week civil trial before the Hon. Ann D. Montgomery in federal court in Minneapolis, the jury reached a verdict that Quan and his firms Stewardship Investment Advisors LLC, Acorn Capital Group LLC and ACG II LLC violated Sections 17(a)(2) and (3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, and Section 206(4) of the Investment Advisers Act of 1940 and Rule 206-4(8).
Based on the jury verdict, the SEC is seeking an entry of a court order of permanent injunction against Quan and his firms as well as an order of disgorgement, prejudgment interest, and financial penalties.
The SEC filed its complaint against Quan and his firms in March 2011, alleging that he facilitated the Petters fraud and funneled several hundred million dollars of investor money into the scheme. The SEC further alleged that Quan and his firms invested hedge fund assets with Petters while pocketing millions in fees. Quan and his firms falsely assured investors that their money would be protected by use of a number of safeguards including a "lock box account" into which third-party retailers made payments and Quan purportedly monitored against defaults. When Petters was unable to make payments on investments held by the funds that Quan managed, Quan and his firms embarked on a series of convoluted transactions to conceal Petters's defaults from investors.
The SEC's case was litigated by John E. Birkenheier, Charles J. Kerstetter, Timothy S. Leiman and Michael Mueller, assisted by Donald A. Ryba, Sara Renardo, Sally Hewitt, Mark Sabo and Estera Cardos.
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